In my previous post on how to eliminate the federal debt, Natalka brings up an interesting point I’d like to expand on.
Modern governments almost always lower taxes for “economic stimulus”, following Ranty’s logic. Why is Harper talking about lowering taxes when the economy’s the hottest it’s been in decades?
Conservatives believe that lowering taxes will stimulate the economy. It’s something they’ve been preaching for a decade even though they have yet to offer up credible evidence to suggest this is the case. But let’s assume this is true for a moment and examine what it will mean to the economy when Harper introduces his budget full of tax cuts tomorrow.
As Natalka rightly points out, our economy is already experiencing healthy growth. Unemployment is at its lowest levels in thirty years and in the province of Alberta–where unemployment levels are at unheard of levels–this has already caused wages to rise out of proportion to the rest of the country. This growth along with the growing skilled labour shortage is working to hasten us toward an overall labour shortage in Canada.
Stimulating the economy as Harper is about to do with his tax cuts will only exacerbate this labour problem and wages will rise across the entire country just as they have done in Alberta. Combine that with the already rising costs of energy and commodities along with the growing asset bubble and you create the ideal conditions for a rapid rise in inflation.
Now given this is basic economics 101, it’s only reasonable to argue that Stephen Harper is knowingly working to cause a rise in inflation with his tax cut policies. Either that or he knows the conservative belief that tax cuts stimulate economic growth is pure bunk.
It’s all about getting an majority govt. That’s the short-term goal, so he wants to get the vote. This is not about good govt policy; it is purely about power. If the govt goes into deficit, well, guess what we just have to cut those social programs, can’t afford those. We all know this dance….
Tax cuts cause inflation? As I’ve posted elsewhere, that’s Keynesian bullshit. (OK, now someone please make the obvious point that it’s “Economics 101 - tax cuts stimulate the economy, and if the economy is already sizzling, tax cuts will be inflationary.” I’ve noticed that most people who’ve never gone beyond Economics 101 are fond of trumpeting that little tenet.) Now let me point out that nowhere, at any time in history, have tax cuts ever caused inflation. And No government, anywhere in the world, uses fiscal policy to control inflation and/or growth anymore. It’s all up to the central bank. And I’m sure you’ve noticed, David Dodge is an inflation hawk. He won’t let inflation out of the bag. Monetary policy is the tool to curb inflation. Fiscal policy is a term you seldom see used anymore.
I was gonna comment, but thought I would post on it instead…..
“Conservatives believe that lowering taxes will stimulate the economy.” No kidding.
It’s something they’ve been preaching for a decade
I would say even before the Boston Tea Party…
Even though they have yet to offer up credible evidence to suggest this is the case.
Isn’t America’s low tax rate, and it’s subsequent success “credible evidence” enough??? Democrats will never admit that the tax cuts George W. Bush was elected on in 2000, HELPED the American economy.
I think one would have a hard time convincing the common person that Canada’s government needs to be bigger.
That’s cuz the American economy is in the craphole. Which dollar is sinking like a stone again? And which country is racking up massive debts?
Oh… That’s right…
Pretty easy to see who has never taken an elementary economics class.
Tax Cuts = Inflation.
Brilliant, really. Right out of the center of the cesspool of hateful leftist thought.
Where’s all the Jewish posters around here??
Well I seem to remember Rublican fools down south spouting about how tax cuts would stimulate the econ and make it grow. So right now when we have a very healthy economy, very low un-employment any further stimulous would trigger greater inflation, unless PMSH is hoping that interest rate will be increase to counter this effect.
Soo all those lovely tax cuts will in the end be eaten up by increased interest rates or if the interest rates don’t cool the economy then inflation will increase, and the tax cuts get eaten that way.
Now what I find so very funny is that all of a sudden, people who once crowed that tax cuts would stimulate the economy are now saying that this is not the case. The rulez they are a changing, LOL