In the Financial Post, Tuesday March 1, 2005 - FP Comment.

Jason Clemens (director of fiscal studies – Fraser Institute) and Niels Veldhuis (senior research economist – Fraser Institute), suggest tax cuts for the poor are not a good thing.

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The first two budgets of 2005 (B.C. and federal) have had a number of similarities including targeted tax relief for low-income individuals and families.

...While both policies are intuitively appealing and politically rewarding, they do little to improve Canada’s competitiveness and productivity.

...The litmus test for tax relief should be whether or not it improves the incentives to work, save, invest, innovate and undertake entrepreneurial activities; the backbone of a strong economy.

...Tax reductions for low-income workers do little to improve these incentives.

...Given that individuals earning low levels of income tend to spend most of their income, tax cuts aimed (at) these individuals are likely to be spent in their entirety (no shit, sherlock – maestro).

...When individuals no longer pay income tax, the price they pay for government services decreases and inevitably, they end up demanding more government programs and services.

...Thus it is important to recognize that tax cuts for low-income individuals come at the expense of more productive tax relief.

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Following this logic through, raising taxes on the poor would cut down the amount of government services they demand, so realistically they should have their taxes raised, probably quite a bit.

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Fraser Institute - burial ground for intelligence.

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By 1999, almost 4.9 million Canadians were poor.

In 1989, about 14 percent of all Canadians were poor.

By 1999, it was 16.2 percent.

Only the USA, Russia, Mexico and three more nations have worse rates of child poverty.

Viva la revolucion!.Child Poverty in Canada

Both Statistics Canada and the US Census Bureau are still using guidelines for poverty defined in the 1960's. Both are said to be outdated, so we can't know the real levels of poverty that exists in Canada or the States.

[ 01 March 2005: Message edited by: Fidel ]

Here's another interesting bit from the article:

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Simply put, targeted tax cuts for low-income individuals transfer resources (income) from middle- and upper-income families to lower- income families without increasing the total income of the nation or province.

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For example, the maximize-economic-efficiency-at-all-costs standpoint would have those who become disabled (or simply get too old to work) quickly liquidated as a drag on the economy. Of course such things are evil, and alotgether inhuman, but economic terms are not necessarily based on humanity.

As far as the logic behind the inherence of a greater demand and cost for services when a certain economic stratum is exempt from any taxation, the only thing I could postulate is that they're refering to the perceived lack of economic incentive for those whose incomes are near the tax cut-off line. The idea is that people slightly above it would have no reason to work hard to stay above it; those who are slightly below it would have litle incentive to take heroic steps to rise above it.

I know what the bastards are thinking - a head tax on the poor courtesy of Maggie Thatcher.

[ 02 March 2005: Message edited by: Fidel ]

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Originally posted by Tape_342:
[QB]I think the reason this idea comes off as so counter-intuitive is because these economists are speaking purely in terms of economic efficiency, and omitting any notions of 'quality of life' or social justice. It's a view of creative destruction absent any moral concerns whatsoever.

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What's wrong with people who "advocate" using reasoning like this?

Do we build roads with only a single concern of moving cars from point a to point b? Do we build health systems with the only concerned with giving each patient an asprin and having them out the door in less than 2 minutes?

If a phyisist determines that energy if a more efficient form than matter, do they then go out and advocate that all humanity be thrown in the incinerator in order to bring us closer to the more efficient form?

Fine, if they want to study theoretical models deviod of all consideration that the models deal with the workings or real human beings, they can knock themselves out, but when they start advocating such inconsiderate, immoral fascistic crap, they become little more than greedy suicide bombers with too little courage to actually take themselves out in their stupid little anti-human schemes.

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Of course such things are evil, and alotgether inhuman, but economic terms are not necessarily based on humanity.

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The Fraser Institute may be pleased to make headlines with a bold, contrarian analysis, and it may please people to bash the FI, but this stuff isn’t new, and has been hashed out many, many times before.

For the record:

Income taxes (personal and corporate) reduce the rates of return on savings, and so they have the effect of reducing savings, investment and growth. I’ve made this point several times here; it’s not an invention of the Fraser Institute.

If your policy goal is to obtain the growth effects of lower income taxes, reducing tax rates only for poor families won’t do it – they have little or no savings, and they pay little income tax as it is. Reducing their tax rates won’t generate much of an increase in personal savings, so there won’t be any effect on economic growth.

This point is entirely separate from redistribution policy. If the policy goal is to make poor families better off, then the effectiveness of targeted income tax reductions is also limited. Poor families don’t pay much in income taxes as it is – and the poorest don’t pay any at all – so lowering tax rates won’t do much for them. Increasing tax credits or some other sort of direct transfer would be more effective.

So why bother? The short answer is that it’s cheap PR. They get the vote-winning ‘tax cuts for poor families’ headline for very little cost. The fact that the policy doesn’t actually do anything doesn’t seem to matter.

Here’s a list of things I did not say, so please don’t pretend I did:

[ 03 March 2005: Message edited by: thorin_bane ]

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They certainly have killed far more poeple than the average serial killer.

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Uh, ya. Right. Whatever.

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Who has killed more people The guy Pickton BC or the guy Walker from BC.

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I'll go with Pickton, who actually killed people.

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This isn't a slander of advocating that having the poor become more poor is sentancing them to death by starvation.

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Could you please provide some links that describe these deaths by starvation? Or retract your nonsense?

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How do they come by this logic???

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Pscyhopath or sociopath, both have an innate disregard for human life.

Now, what the Fraser Institute peddles is pretty obvious poison, IMO, and I shudder at the influence they seem to have over some political officials. But just what sort of regard do "serious economists" hold for the Fraser Institute, anyway? When I was studying Econ a few years ago, most of my professors dismissed the FI as ideological hacks.

[ 03 March 2005: Message edited by: robbie_dee ]

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Originally posted by ronb:
How the hell does saving equal economic growth? I thought spending spurred growth.

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Either saving or spending can, theorectically, spur growth depending on the circumstances. For example, if interest rates are high, increasing the marginal rate of savings can put more money in the pool of cash that can be loaned out for capital investment. Lower the scarcity of money on deposit, and interest rates, theortetically decline.

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Originally posted by No Yards:

The only thing good I can see out of this, is that it looks like some Right Whing knobs have finally decided to try to fool us by actually telling us the truth behind their greedy schemes, hoping to catch us off guard with a bit of honesty I guess.

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Canada is a huge country with a relatively small population. There's room for growth.

[ 03 March 2005: Message edited by: Fidel ]

Thanks for reminding us of the importance of spending in the economy. I've been thinking that there might be something to Oliver's talk about distortions to investment brought about by income taxes, corporate taxes.

... actually (changing mind in mid-typing) Oliver isn't pooh-poohing .... actually, yes he is. There will be some growth from more spending on the part of the majority of the population (the lower-middle class and the poor), so low-income tax breaks have some merits.

Still, i see there might be something to Oliver's calls for consumption taxes replacing taxes on incomes and savings, provided [as Oliver always says] that lower-income people receive rebates and a GAI.

But:
1. You can't trust the fuckers for anything. Whose to say we won't move to a consumption tax regime and then the government takes away our rebates? Then again, whose to say the government ain't ripping us off already. [edited to add that "whose" is totally fucking stupid, it oughta be "who's."]

2. Consumption tax rebates only come periodically. Will there be a dampening effect on the economy as us lower-income folks trim our day-to-day spending, because we don't have the rebates in our pockets?

I just want to say, ... and I know that Oliver wasn't saying this, ... but whenever somebody justifies Fraser Institute generalities and bullshit by saying "Incentives Matter," .. I reach for my revolver.

[ 04 March 2005: Message edited by: thwap ]

Lower interest rates and a slow growth economy benefit people with smaller income, and small to mid-sized business (they still employ the most people), so long as they aren't taxed to their eyeballs. What benefits these lower and middle income people benefits the economy as a whole, unless you're one of the fatuous greedy 2% at the top ... it doesn't get you a whole lot of anything.

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But just what sort of regard do "serious economists" hold for the Fraser Institute, anyway? When I was studying Econ a few years ago, most of my professors dismissed the FI as ideological hacks.

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Originally posted by Tommy_Paine:
I gather it's just a matter of the odds. 99% of all economists are ideological hacks.

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We don't hold them in serious regard. If they were doing anything worth spending time on, they'd be sending it to our journals and/or presenting it at our conferences.

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Originally posted by Oliver Cromwell:
We don't hold them in serious regard. If they were doing anything worth spending time on, they'd be sending it to our journals and/or presenting it at our conferences.

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[ 04 March 2005: Message edited by: Contrarian ]

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Originally posted by Oliver Cromwell:

Unless you have something to back this up - that is, something more substantive than the fact that you might disagree with something an economist has said - this isn't a particularly helpful remark.

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I don't know ... economics is an ideology as much as any other "science" that can only give "answers" in the most general of terms ... it just uses more complicated math and impressively named theories to prove that the earth sits on the back of a giant turtle.

I really don't see where there is much difference between economists trying to convice the layman that we should be working towards a USA style GDP per capita, and Randy White trying to convince us that homosexuality should be criminalized ... both cases take a dogma and try to push it on us for the sake of the "correctness" of the ideology.

There are too many economists that take economic indicators and use them as an end unto themselves that we should all strive to reach, rather than taking a vision of society and using their ecomomist toolkits to help us reach these more humanistic goals.

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Originally posted by thwap:
Well Gir,

Thanks for reminding us of the importance of spending in the economy.

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Originally posted by Contrarian:

So you're saying they don't get published in peer-reviewed journals. Do they try? Is their work substandard, or are they just not interested in risking a peer-review?

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I don't think they're interested. Their goal isn't to increase our understanding of economics or to provide balanced analyses. They're an advocacy group - they cherry-pick arguments and statistics to support their pre-existing point of view.

[ 04 March 2005: Message edited by: Oliver Cromwell ]

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Originally posted by Oliver Cromwell:
Which economist said that?

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You mean which economists compare our GDP per capita against the USA and rate the USA "better"?

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Originally posted by No Yards:

You mean which economists compare our GDP per capita against the USA and rate the USA "better"?

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Originally posted by Oliver Cromwell:
...And we teach them to people who want to learn about economics.

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[ 04 March 2005: Message edited by: Contrarian ]

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Originally posted by Oliver Cromwell:

Yes. It's one thing to say that US GDP is higher. It's quite another to conclude that this means they're better off. Remember all those warnings about using GDP as a measure of 'well-being'? Economists wrote them. And we teach them to people who want to learn about economics.

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That must be why whenever I open a GDP table it is always sorted by country name, and has tons of warning lables telling everyone how the actual numbers mean nothing on their own?

Look, I'm not saying that they are meaninless indicators, and I don't believe you are trying to say that they are the only meaningful indicators ... but let's not pretend that 99 times out of 100 the way these numbers are commonly used aren't anything less than a dishonest attempt to trick the common citizen into slaving harder for less reward for their corporate masters.

[ 04 March 2005: Message edited by: No Yards ]

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No-one listens to us, remember?

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Originally posted by No Yards:
... but let's not pretend that 99 times out of 100 the way these numbers are commonly used aren't anything less than a dishonest attempt to trick the common citizen into slaving harder for less reward for their corporate masters.

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The other philosophical difference is the debate between supply side economics and demand side. The Bush administration and its Canadian cheerleaders like Harper and F.I. subscribe to supply side economics, otherwise known as Reagenomics, or trick-down economics. They believe that by putting more money in the hands of wealthy individuals and corporations jobs will be created leading to prosperity for all. The wealthy will build businesses and provide capital for investment. This will eventually "trickle down" to all levels of society. Supposedly, as an added side benefit, individuals will be highly motivated to move up the economic ladder thereby improving productivity. I don't buy supply side economics.

I believe the same economic growth can be attained by giving the same total amount of tax relief to the lowest income individuals. They will in turn spend this additional income in order to improve their standard of living. Local businesses will grow and be able to invest in their companies stimulating a multipier effect on the economy. In this case the nice side effect is that the lowest individuals on the economic scale now have an improved standard of living. The non-monetary benefits of that to society are endless.

Isn't the best argument against the supply-siders the fact that, while North American economies have grown over the last two decades, middle and lower incomes have not kept pace with that growth? Dim though I am on this subject, that reality seems convincing to me.

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Originally posted by skdadl:

Oliver: I've written this elsewhere before, but I felt I should repeat: if you are feeling lonesome on babble as a whipping-boy for economists, you should see what happens to those of us who sometimes try squeaking up for literary theory and poetics.

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Political Economy Instructional

In fact, they've got a bunch of online instructionals on economic issues "for the rest of us":