Comment 74994

By A Smith (anonymous) | Posted March 04, 2012 at 16:45:45 in reply to Comment 74993

When it comes to our economy, there are 4 main players...

Government, Foreign, Households and Corporations.

When you total their respective surpluses/deficits, they ALWAYS add up to zero.

G + F + H + C = 0

If, for example, corporations increase their savings, the other three sectors must collectively decrease theirs. Similarly, when the government(s) runs a surplus, the three components of the private sector (F,H,C) see their savings fall. Lastly, if we run a large trade deficit, that increases the savings of foreigners and depletes the savings of Canadians.

In the last decade, corporations have run big surpluses. In 2011, it was 3.62%/GDP.

That 3.62% represents cash that could be spent creating jobs, paying down the public deficit, or buying imports. Instead, our governments think the best thing to do is cut corporate tax rates and allow them to hoard cash...

http://www.budget.gc.ca/2009/images/bpa2_1-eng.gif

Apparently, "Canada's tax advantage" refers to draining the savings of households and giving it to corporations.

Here are the (surpluses/deficits)/GDP of Canadian corporations from 1961-2008.

1961 -0.0061
0.0030
0.0023
-0.0095
-0.0298
-0.0405
-0.0197
-0.0065
-0.0189
1970 -0.0193
-0.0176
-0.0180
-0.0248
-0.0429
-0.0315
-0.0193
-0.0205
-0.0168
-0.0320
1980 -0.0256
-0.0634
-0.0367
-0.0031
-0.0036
0.0046
-0.0045
-0.0023
-0.0066
-0.0224
1990 -0.0199
-0.0135
-0.0087
0.0016
0.0143
0.0171
0.0187
-0.0067
-0.0111
-0.0017
2000 0.0103
0.0282
0.0399
0.0453
0.0430
0.0387
0.0291
0.0283
2008 0.0355

In the future, one, or a combination of these three things must happen...

1.) Corporate tax rates must increase (lower corporate savings)
2.) Canada must devalue the dollar to increase exports (lower foreign savings)
3.) Public deficits must go from 5% of GDP to over 10% (lower government savings)

If none of these things happen, Canadian consumers will reach their borrowing limit and our economy WILL tank. Instead of 7.6% unemployment, think over 10%.

Good day.

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