Tag Archives: Trickle down economics

Responding To Our Responders

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So we here at All Fired Up in the Big Smoke received, if not a deluge of comments to our post from a couple days ago, A Plea to Conservatives Everywhere, let’s call it a handful. A good percentage of which were from almost exclusively well-behaved self-described conservatives taking exception to much of what we’d written. It would’ve been time-consumingly impossible to respond to each one individually. Instead, we’re lumping them together into a single response post which, undoubtedly, will look as if we’re misrepresenting what everyone wrote and deceptively framing the terms of debate in order to make ourselves seem much smarter than we actually are.

Alas, the burden of ultimate editorial control.

There seemed to be four currents of argument running through the anti-comments that came in. When we asked to be shown “…how further corporate tax cuts will kick start our economy,” we got a lesson in the theory of corporate taxes. Yes, we understand the concept. We just weren’t sure where the proof was that cutting them further at this particular time was going to help. Unless you’re one of those anti-Keynesian absolutists, reducing spending along with taxes in such an anemic state of recovery doesn’t make a whole lot of economic sense.

Besides, we’ve been hacking away at corporate tax rates both federally and provincially for a few years now, haven’t we? When should we expect to see positive results? And if corporate tax cuts are such an effective weapon in stimulating the economy, why not lobby for their complete removal? Eliminate them entirely. If 13% is going to help, why not 0? Point to a jurisdiction with significantly lower corporate tax rates than ours are currently and say, see? They work. And if I can’t find one, like say Mexico, that counters your argument, I’ll lay down my sword.

A number of commenters suggested the burden was on me (or the entire Left) to prove that de-regulation and less oversight was the source of the global financial meltdown. I thought they already had. Google Nobel Prize winning Paul Krugman and see what he’s been saying over the last couple years. Or Jeffrey Sachs if he’s more to your economic taste. Check out Matt Taibbi in Rolling Stone for the naked criminality at the very heart of the meltdown. Read Michael Lewis’s The Big Short or Andrew Ross Sorkin’s Too Big To Fail. Watch Charles Ferguson’s documentary, Inside Job. The case has been made quite definitively. You dispute it? You refute it.

And on a couple little side notes. One commenter asked if we wanted to return to the days of the Glass-Steagall Act “…which limited credit growth and therefore slowed down economic growth…” Errr, am I wrong in remembering that the full repeal of Glass-Steagall occurred in 1999, at the height of one of the biggest economic expansions in history? So how exactly did it slow down economic growth? The commenter then went on to point out that no Canadian banks failed due to smart regulations — which, while in opposition, the current Conservative government fought against — and kind of proves my point for me, doesn’t it? We missed the brunt of the financial shitstorm because of government regulation and oversight not because a lack of it. Or am I missing something?

“Prove this whole trickle-down theory to me,” I taunted. “How rising tides raise all boats.” That brought forth a litany of indignation, mostly in two forms. One, things were much better now than they were 100 years ago, owing to the miracle of free market capitalism. OK, sure. But my line of attack wasn’t necessarily directed at the idea of free market capitalism, only how it’s been conducted in the last 30 years or so. Cast your minds back, 50, 60 years ago, to the more immediate post-War era. Where governments taxed the richest of the rich more prodigiously and spent massively on things like infrastructure, established universal health care and sent men to the moon. An era when a single bread winner could buy a house, raise a family, put the kids through college and retire comfortably.

A picture, I’m sure, more idyllic than it actually was but one that is a pipe dream nowadays. Much of our prosperity is built on a mountain of debt. Two income households are the norm. Post-secondary education has grown into an onerous financial burden that is increasingly failing to deliver on its promise of leading to better lives.

Secondly, please, please, please stop bringing up China and India when attempting to defend modern day capitalism. Yes, millions of people are climbing their way out of poverty. And yes, China in particular has turned away from its Maoist past and heartily embraced aspects of the free market. But as another commenter pointed out, both countries remain planned economies, control highly centralized. If our governments here attempted to intrude into the economy the way the Chinese and Indian governments do, conservatives would howl in outrage before soiling themselves and passing out. Witness the reaction to the various stimulus packages.

Finally, conservative commenters took exception to our painting them all with the same brush. There were pro-environmental conservatives who believed in anthropogenic climate change. Conservatives who suspected the War on Drugs was a bust. Pro-choice conservatives. Non-Rob Ford voting conservatives.

Fair enough but that type of red Toryism or socially liberal conservatism is hardly in the ascendancy. Your movement has been hijacked by the radicals under your umbrella and they’ve seized Washington, Ottawa and city hall in Toronto. They’re attacking women’s rights. They’re declaring climate change hokum and maybe even beneficial. The federal Conservative government is trying to close down a safe injection site in Vancouver in the face of overwhelming evidence of its positive contribution. At the same time they’re attempting to roll back drug laws to a Draconian state in order to fill the prisons that they are building. These neocons hate government and everything it stands for.

They don’t believe much of anything you’re claiming to believe. In fact, your views sound much closer to my left wing bias. So why are you fighting me and not those who are doing great damage to your conservative brand and giving you all a bad name?

— respondingly submitted by Cityslikr

Cities In Ruins

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The specter of bankrupt cities begins to hang above us. News from south of our border is unrelentingly grim; the pictures grimmer still. Los Angeles, the second largest city in the U.S., like much of the state it operates within, has apparently run out of money. Detroit looks like it’s in the middle of a war zone.

Such financial contagion has yet to surface here to any degree but the rumblings can definitely be heard. Growing debt. Out-of-control spending. City employees with fat salaries, fat benefits and fat pensions to match their fat asses that they spend all day sitting on. Sound familiar?

These people have had it too good, the reasoning goes, making a better living than we do from our sweat, toil and taxes. But the good times are over. We need to reign in, tighten up and cut back. Stop spending and start being sensible again like we were back in the day.

Trouble with this line of thinking, as we see it, is that it only considers half the economic equation. If you cut spending by cutting salaries, doesn’t that diminish incoming revenue in the form of taxes? If people are making less or are fearful for their futures, don’t they likewise stop spending? Government revenue sources begin to dry up.

So it becomes like the image in Ronald Wright’s ‘A Short History of Progress’ of the Rapanui laying waste to their land to build the Maoi monuments to their gods, pleading for divine intervention in reversing an ecological downturn. The frenzy of building only serves to exacerbate the problem. An almost too perfect example of a self-fulfilling prophecy or the solution being no solution whatsoever.

We’ve been at it now for decades, public sector austerity as part of the trickledown theory of rising tides raising all boats. Hold on, hold on, hold on, I hear you screaming at me. What planet have you been on during the past 7 years? You certainly weren’t living here in Toronto. David Miller fiscally austere? Look at the numbers. Look at the numbers!

Yes well, numbers never lie do they, and always present the cold, hard truth. The fact of the matter is that David Miller’s 7 years were little more than a desperate attempt to staunch the slow bleeding of social spending brought on by cuts and downloads and neglect by senior levels of government since the federal Liberals bought into the Reform playbook in 1993. And trade deals that gutted our manufacturing base. And let’s not forget the megacity’s first mayor, Mel Lastman, and his ill-advised promise not to raise property taxes during his first term.

It was a promise reminiscent of California’s 1978 Proposition 13 that, among other things, “lowered property taxes by rolling back property values to their 1975 value and restricted annual increases in assessed value of real property to an inflation factor, not to exceed 2% per year… the initiative also contained language requiring a two-thirds majority in both legislative houses for future increases in all state tax rates or amounts of revenue collected, including income tax rates. It also requires a two-thirds vote majority in local elections for local governments wishing to raise special taxes.” (Thank you, Wikipedia.)

And look at California now? Blame the mess they find themselves in on illegal immigration or overpaid civil servants or whatever other boogie man you want to summon up but ignoring the price the state has paid for its greedy, self-centred embrace of Prop 13 is simply ignoring reality. Handcuffing (or ignoring) government’s ability to adapt to changing economic landscapes, good or bad, leaves the public susceptible to the mindless vagaries of chance and the market. It is nothing more than a dereliction of duty.

Almost two years ago now, governments the world over infused mind-bogglingly amounts of public money into financial institutions deemed too big to fail. The economic fall out would be irreparable. We were spared that here in Canada but still managed to throw around a lot of money into our deeply troubled automobile industry because it too was too big to fail. While afraid of what massive layoffs would do to our economy, we weren’t too concerned about the effect of wage rollbacks aside from increasing our productivity factor. Again, the argument was put forward that workers were being paid too much as the cause for near insolvency as opposed to management, for the 2nd time in a generation, was caught flat-footed by a sea change in the market.

So if an industry can be too big to fail, what about a city? What are the implications of a Detroit dying, aside from a rush to adopt the Red Wings but not so much the Lions. Can a city, full of people like they are, ever really be considered broke? If 80% of a country’s population live in cities, and people are the generators of wealth, then 80% of a country’s wealth comes from cities. I know it doesn’t work out exactly like that but the point is, if the money and wealth that is created in cities remained in the cities, then it would be hard to imagine how cities could go broke.

So maybe what we’re facing isn’t fiscal bankruptcy but more of a bankruptcy of ideas. The solutions on offer to our problems are exactly what created the problems in the first place. To pursue them would be tantamount to doing the same thing over and over again, expecting a different result. We all know what that is the definition of.

— wistfully submitted by Urban Sophisticat