Making Canada Relevant Again- The Economic Super-Thread

[a_majoor]

The appearance of this sort of technology is interesting to contemplate, since it essentially replaces "manufacturing" jobs with an entirely new paradigm. How many skilled workers will you need if entire aircraft assemblies, car frames or even buildings can be "printed" from a giant scale 3D print machine?

OTOH, since even large and complex things can be made far faster and for far less cost, there will be a massive deflationary pressure on the economy as well (compare the costs of a titanium part made on a 3D printer at $200,000 in 55 days vs $2,000,000 and two years delivery by conventional means). Canadian business needs to be aware of this, and governments will also have to change many of their assumptions about employment, revenues and finance to deal with the wide scale impact of this technology:

http://nextbigfuture.com/2014/02/3d-printing-huge-objects-will-impact.html

3D printing huge objects will impact the world economy not small hobbyist crap

China is investing heavily in 3D printing, just like those in the U.S. and Europe.

In June, China announced a gigantic 3D printer, which they claimed was the world’s largest at the time, with a 1.8 meter build diameter. Basically the thing could print out a nice sized bathroom vanity if you wanted it to.

Southern Fan Co. (As Translated from Chinese), is completing a printer this month which will be able to print out metal objects approximately 6 meters, or 18 feet in diameter and 10 meters long (33 feet). The metal parts can weigh up to 300 tons.

The company will be able to print out the entire frame of just about any four wheeled automobile on Earth.

There is a 3D printer in China for large titanium parts. They are fabbing the titanium main frame of the windshield of a domestically made C919 passenger aircraft. A Huaming team used 3D printing technology to make the part. It only took 55 days and cost less than $ 200,000. Normally they would order from Europe and it would cost $ 2,000,000 for production by die forging and delivery would take up to two years.

There are already several large scale industrial 3D printers in China, including the one in the image above, in which a team at Beihang University has been able to print out several complex titanium alloy structures. This includes parts used in satellites, rockets, and nuclear power plants. These are actual parts, and not prototypes for parts. Also larger parts such as titanium alloy landing gear for jets, as well as large main force bearing frames of air crafts have been, and continue to be produce by this printer.

Airbus in Europe has a project to develop fabrication of large passenger plane wings. They are needing to develop new materials.

Carbon nanotube reinforced polymers are being developed.

 

[Edward Campbell]

I have commented a few times about the problems of equality of opportunity that are created by unequal education systems and I have posited that the childre of the upper and middle classes attend schools that, for a whole host of reasons, are "better" than the schools available to most poor people and, consequently, do "better" in life.

This 5 minute video which is linked from The Economist web site is a bit shocking. It suggests that the children of middle class and, even more, upper (economic) class parents have a 'built in' advantage that equips them for success (or dooms their 'poor' confreres to failure) before they ever get to pre-school: their parents talk 'to' them!

Makes you think ... I hope.

 

[Edward Campbell]

Here, reproduced under the Fair Dealing provisions of the Copyright Act from the current edition of The Economist, are two articles that point out the problems Canada faces because of our 'special relationship' with the world's greatest ever economic power:

http://www.economist.com/news/finance-and-economics/21596960-avoid-another-crisis-fed-further-fragments-global-finance-inglorious

Inglorious isolation
To avoid another crisis, the Fed further fragments global finance

Feb 22nd 2014 | Washington, DC | From the print edition

THE economics of international banking are straightforward enough: raise funds in countries where they are cheap, lend where they are dear. Done right, this is both lucrative for bankers and good for the world, by channelling savings to their most productive use.

Those economics have begun to come apart over the past five years, battered first by the excesses of profit-seeking bankers and now by regulators. On February 18th the Federal Reserve Board voted to “ring-fence” foreign banks’ American operations, forcing them to meet the same standards for capital and liquidity as American banks, rather than allowing them to rely on their parents’ buffers.

The Fed considers the step essential to insulate America from the cross-border financial contagion that has regularly erupted since 2008. Previously it allowed foreign-owned banks to lean on their parents for support, provided the parents were properly overseen by their own regulators. But over the past 20 years, foreign banks in America have become “more concentrated, more interconnected, and increasingly reliant” on footloose wholesale funding, and now rank among America’s largest securities dealers, notes Dan Tarullo, the Fed governor who oversaw the drafting of the new rules (see chart).

The financial crisis exposed the failings of that set-up. When funding markets froze, foreign-owned banks were among the hardest hit: they accounted for more than half of the emergency loans the Fed made from its discount window in late 2008. Meanwhile, the chaotic consequences of a cross-border failure became all too apparent. When a bank in Iceland failed, the government protected only local depositors; British and Dutch customers had to be bailed out by their governments.

America’s Dodd-Frank Act, passed in 2010, required foreign-owned bank holding companies to meet the same capital standards as their American-owned peers. Barclays and Deutsche Bank responded by moving big American operations out of their holding companies and into more lightly regulated structures.

The Fed’s new rule puts an end to such ruses. Large foreign-owned banks will have to group all American subsidiaries under an intermediate holding company which must then meet the same capital, liquidity and leverage standards as similarly sized American banks. Like American banks, they will have to submit annual capital plans to the Fed demonstrating their ability to meet minimum capital standards even during times of upheaval. In a concession, the rule covers only banks with more than $50 billion in American assets, up from $10 billion in the original proposal. Banks will have until July 2016, instead of July 2015, to comply.

The Fed’s actions will further balkanise global finance. Cross-border lending has plummeted from $5.8 trillion in 2007 to just $323 billion in the first half of 2013, according to McKinsey, a consultant. Most of this reflects economic and business forces, but regulatory actions also play a part. European regulators, for example, have pressed foreign banks to convert branches to separately capitalised subsidiaries and prohibited banks’ local units from repatriating capital to their parents.

By trapping capital and liquidity at the local level, America’s new rule hampers a global bank from deploying money to its most productive destination, in effect undermining the benefits of being global. Luigi De Ghenghi, a partner with Davis Polk, a law firm, notes that stress tests will require many of these banks to exceed capital and liquidity minimums, which makes it “more difficult to repatriate any excess capital from US to non-US operations, or even just to upstream dividends to the foreign parent.” The risk, says one banker, is that “you overcapitalise yourself into complete stagnation”.

The Fed reckons 15-20 foreign banks will have to create holding companies under the new rule. Of the biggest, says Huw Van Steenis of Morgan Stanley, the ownership structures of BNP Paribas and HSBC are already largely in compliance, and Credit Suisse’s soon will be. Deutsche Bank, Barclays and Royal Bank of Scotland have the most work to do. Deutsche may shrink its American balance sheet by $100 billion but would still need to retain $1 billion-$2 billion of additional capital. By shrinking, the three have already each lost a percentage point of market share in bond-trading to their American rivals.

The Fed admits it has thrown sand in the gears of global finance, but argues that the trade-off is worth it. Far worse, says Mr Tarullo, would be another crisis that would cause global capital flows to collapse, leading to “ad-hoc ring-fencing”.

For their part, foreign regulators worry about damage not just to capital markets but to regulatory co-operation. When a draft of the rule was published, Germany condemned the Fed’s “go-it alone” approach, France registered “serious discomfort” and Switzerland bemoaned the “lack of confidence” America had in its peers. Michel Barnier, a European Commissioner, darkly warned of retaliation and said this week: “We will not be able to accept discriminatory measures.”

The Fed has been working with its counterparts on a common approach to restructuring a troubled global bank, something which could have made ring-fencing unnecessary. By blazing its own path before that work was complete, the Fed may encourage others to do the same.

And

http://www.economist.com/news/leaders/21596934-barack-obamas-unwillingness-fight-free-trade-expensive-mistake-how-make-world

How to make the world $600 billion poorer
Barack Obama’s unwillingness to fight for free trade is an expensive mistake

Feb 22nd 2014 | From the print edition

IN JULY 2008 Barack Obama, then a candidate for the presidency, declared before an adoring crowd in Berlin that “true partnership and true progress [require] constant work and sustained sacrifice.” So it is with free trade. If not championed by leaders who understand its broad benefits, it will constantly be eroded by narrow economic nationalism. Mr Obama now appears to be surrendering to protectionists within his own party. If he cannot drag Democrats back to their senses, the world will lose its best opportunity in two decades for a burst of liberalisation. It will also be a signal that America is giving up its role as defender of an open global economy in the same way that Mr Obama has retreated in foreign policy.

Mr Obama did little to promote free trade during his first term, but has seemed bolder in his second. He launched America into ambitious new deals with large Pacific economies and the European Union, breathing new life into global trade talks. Momentum built up; the “constant work and sacrifice” paid dividends. Members of the World Trade Organisation agreed on a package of trade reforms in December—the first truly multilateral deal in the organisation’s 20-year history. Diplomats credit the White House’s new resolve for helping to bring stubborn parties to the table. Progress suddenly seemed possible in other areas, such as liberalising trade in services and information technology, and reducing barriers to the exchange of “environmental goods and services”, which would make it cheaper to curb carbon emissions.

First, shoot yourself in the foot. Then repeat…

The hitch is that Congress must approve trade agreements. Previous presidents had the advantage of “fast-track” trade promotion authority, which let them present deals to Congress for a simple yes or no vote. Without it, lawmakers can wreck carefully negotiated deals with toxic amendments. No country would engage in serious talks with America under such circumstances. Fast-track is therefore essential—and elusive. Congress last granted it in 2002; it expired in 2007. The Obama administration blithely asserted that Congress would renew it, but many lawmakers, primarily Democrats, have signed letters opposing it. Harry Reid, the Senate majority leader, has all but ruled out a vote this year. And on February 14th Joe Biden, the vice-president, told a gathering of Democratic leaders that he understood their opposition. The White House appears to have given up with scarcely a fight. A fast-track vote before November’s mid-term elections seems unlikely (see article).

Why panic about this? Tactically, it could just be another piece of Washington politicking: some optimists claim that Congress will return after the mid-terms ready to back fast-track, providing Mr Obama allows some boilerplate language in the bill chiding China for allegedly manipulating its currency. Others wonder whether the trade deals are really so vital. Indeed, the idea that they will not do much to help the economy is one excuse for Democrats undermining their president.

In fact, the deals on the table are big. Reasonable estimates say that the Transatlantic Trade and Investment Partnership (TTIP) and the Trans-Pacific Partnership (TPP) could boost the world’s annual output by $600 billion—equivalent to adding another Saudi Arabia. Some $200 billion of that would accrue to America. And the actual gains could be even larger. The agreements would clear the way for freer trade in services, which account for most of rich countries’ GDP but only a small share of trade. Opening up trade in services could help reduce the cost of everything from shipping to banking, education and health care. Exposing professional occupations to the same global competition that factory workers have faced for decades could even strike a blow against the income inequality that Mr Obama so often decries.

Tactically, even a short delay could prove fatal to both deals. Pacific negotiations have been extended while America and Japan hammer out compromises on agriculture. Why should Japanese politicians risk infuriating their farmers when any agreement can be torn up on Capitol Hill? The deal with the EU was meant to be done swiftly—perhaps in as little as two years—to keep politics from mucking it up. Europe’s leaders will now doubt America’s commitment, given how feebly Mr Obama has fought for fast-track. Trade sceptics, such as French farmers, are drooling. Angela Merkel, Germany’s chancellor, who is already furious about American spying, may decide that a trade deal is not worth battling for.

The greatest risk of all is that the political momentum in America, having swung against free trade, will be hard to reverse. Some Tea Party Republicans oppose fast-track because they are loth to grant Mr Obama the authority to do anything. Democrats, keen to brand themselves as the anti-inequality party, may find economic nationalism an easy sell on the campaign stump: and, once pledged to that cause in November, candidates will not vote for the opposite in Congress.

And for this Mr Obama deserves some blame. He is far more ardent in bemoaning inequality than in explaining why an American retreat from the world would be the wrong way to address it. He seldom mentions, for example, that cheap imports help the poor by cutting their shopping bills, and so reduce inequality of consumption.

It’s not a zero-sum world

There is nothing inevitable about globalisation. Governments have put up barriers before—with disastrous consequences during the 1930s—and could do so again. So it is alarming when America, the mainstay of an open global economy, gives off isolationist signals. Only recently Congress childishly refused to honour an agreed-upon increase in America’s financial commitment to the International Monetary Fund. The Federal Reserve is pushing forward with new banking regulations that could penalise foreign banks and further Balkanise global finance (see article). Mr Obama continues to delay approval of a critical oil pipeline from Canada, and is slow to grant permits to export American natural gas.

“America cannot turn inward,” the Obama of 2008 said in Berlin. The Obama of 2014 is now responding: “Yes we can.”

We must always remember that American policies do not exist to serve Canada's interests, much less the world's interests. They exist to, at their best, serve America's interests or, just as likely, to serve the narrow interests of one political constituency or another.

So it is with Ms. Yellen's (the Federal Reserve's) banking policies: they are designed to serve American monetary interests.

And so it is with President Obama and Senator Reid: their policies are designed to elect a handful of Democrats in a few hotly contested states or districts where trade matters.

The Fed's understandable, if wrong headed, monetary policy and the Democrat's equally understandable, if self destructive (for America), partisan political policies will hurt Canada ... they will hurt most of you because most of you have pension plans and all pension plans depend upon investments. Canadian banks are a major "earner" for pension plans as Canadian corporations that trade globally.

I remain a committed free trader. My reading of history teaches me that free (freer) trade always leads to greater general prosperity. But trade unions and socialists and nationalists ~ all of whom are, in my considered opinion, terminally f*cking stupid ~ oppose free trade so President Obama and Senator Reid who, as public servants of the highest rank, put their own partisan political interests far ahead of the national interests ... as do Republicans,  by the way.

Both the Fed and the US political leadership (bipartisanly inept) are on the wrong side of history.

 

[a_majoor]

True welfare reform may be to get rid of welfare altogether. Canada has followed the United States far down the Social Welfare State road, and I think the only thing that has kept us from falling into the deeper potholes they created is our smaller population has prevented a "critical mass" of artificially impoverished people from accumulating. Since the outcomes of the Great Society were known in advance of the program's start (and known not from the gut feeling of knowledgable and experienced people but as a result of empirical research), I have a very strong suspicion that the elimination of poverty was not the desired outcome at all....

http://www.independent.org/newsroom/article.asp?id=4923

Why We Lost the War on Poverty
By John C. Goodman  |  Posted: Tue. February 18, 2014, 11:12am PT

Take a look at the graph below. From the end of World War II until 1964 the poverty rate in this country was cut in half. Further, 94% of the change in the poverty rate over this period can be explained by changes in per capita income alone. Economic growth is clearly the most effective antipoverty weapon ever devised by man.

The dotted line shows what would have happened had this trend continued. Economic growth would have reduced the number in poverty to a mere 1.4% of the population today ? a number so low that private charity could probably have taken care of any unmet needs.

But we didn’t continue the trend. In 1965 we launched a War on Poverty. And as the graph shows, in the years that followed the portion of Americans living in poverty barely budged. In 1965, 18% of the population lived in poverty. Today we are at 15%, or 50 million Americans. That’s after spending $15 trillion on antipoverty programs and continuing to spend $1 trillion a year.

Now here is something you may not know. Early on in the first decade of our 50-year experiment with an expanded welfare state carefully controlled experiments funded by the federal government established without question that welfare changes behavior. It leads to the very behavioral changes that keep people in a state of poverty and dependency. Think about that. Any serious social science debate about the effects of welfare on the behavior of the recipients was resolved four decades ago!

We now know a lot about how behavior affects poverty. In fact, if you do these four things, it’s almost impossible to remain poor:

1. Finish high school,

2. Get a job,

3. Get married, and

4. Don’t have children until you get married.

So how does welfare affect behavior? In the late 1960s the federal government sought to find that out in what Charles Murray calls “the most ambitious social science experiment in history.”

The experiments were all conducted by social scientists who believed in the welfare state and had no doubt about its capacity to be successful. In other words, they were confident of the answers before the experiments ever began. Their goal was to prove that popular wisdom was all wrong that welfare would not cause people to reduce their work effort, to get married less often, divorce more quickly or engage in other dysfunctional behavior.

The experiments were all controlled. Randomly selected people were assigned to a “control group” and an “experimental group.” The latter received a guaranteed income, and the program even used Milton Friedman’s term for it: a negative income tax. The largest, longest and best-evaluated of these experiments was SIME/DIME (Seattle Income Maintenance Experiment/Denver Income Maintenance Experiment) in Seattle and Denver. And the results were not pretty. To the dismay of the researchers, they largely confirmed what conventional wisdom had thought all along. As I reported in “Privatizing the Welfare State”:

The number of hours worked dropped 9% for husbands and 20% for wives, relative to the control group. For young male adults it dropped 43% more.

The length of unemployment increased 27% among husbands and 42% for wives, relative to the control group. For single female heads of households it increased 60% more.

Divorce increased 36% more among whites and 42% more among blacks. (In a New Jersey experiment, the divorce rate was 84% higher among Hispanics.)

BTW, these results have been studied and studied over and over again and there is a large literature on them almost all of it written by researchers who detested the outcomes. Good summaries are provided by Charles Murray and Martin Anderson.

Both authors point out that the results are even worse than they at first appear. For one thing, the “control group” had access to conventional welfare available in the 60s and 70s. So this was by no means a pure (welfare free) control group. Also the enrollees were given different instructions about how long they could expect their guaranteed income to last. It turns out that the longer the guarantee, the worse the negative effects.

So far as I can tell there was no marriage penalty in these experiments ? certainly nothing like we have today ? and little or no penalty for earning a higher income. With the passage of time all these incentives have become increasingly more perverse. For example, over the past 50 years we have added one marriage penalty after another to welfare benefits. There is a very strong marriage penalty in ObamaCare, for example. And even Paul Krugman concedes that the marginal tax rate faced by low-income families is in excess of 80% today. (It actually goes above 100% in many cases.) And ObamaCare will make the penalty for working and earning even higher.

So here is the important public policy question: If it is well established that self-sufficiency is closely related to working and being married why are we “fighting poverty” by doing things that social scientists have known for decades lead to less work and fewer marriages?

And here is a public discourse question: why are New York Times columnists Paul Krugman and Nicholas Kristof declaring the War on Poverty a success when it is so obviously a failure? Both columnists claim that if we count goods-in-kind (Food Stamps, housing, Medicaid, etc.), the actual poverty rate would be lower by one-third. Of course, if we give people enough stuff and count it as income, we could declare victory and claim that there is no more poverty.

Dylan Matthews makes much the same point that Krugman and Kristof make. After citing a Columbia University study on the different ways of measuring poverty, he zeroes in on the key point (how much difference does government make?) and says this:

...[T]he most noticeable trend here is that the gap between before-government and after-government poverty just keeps growing. In fact, without government programs, poverty would have actually increased over the period in question. Government action is literally the only reason we have less poverty in 2012 than we did in 1967.

Reviewing some of the early literature, I find it very difficult to determine what Lyndon Johnson would have called “success” in the war on poverty. But there is no doubt in my mind what the average citizen thinks success is. The goal is to have people earning enough and saving enough to support themselves above a poverty level income without any help from government.

So by that measure, there has been no progress at all despite spending $1 trillion a year on the effort.

 

[Edward Campbell]

Those who follow my ramblings will not be surprised to know that I agree with the advice being offered to Finance Minister Jim Flaherty according to this article which is reproduced under the Fair Dealing provisions of the Copyright Act from the Globe and Mail:

http://www.theglobeandmail.com/news/politics/globe-politics-insider/what-finance-is-telling-flaherty-about-cutting-taxes/article17415336/#dashboard/follows/
My emphasis added

What Finance is telling Flaherty about cutting taxes

SUBSCRIBERS ONLY

Bill Curry
OTTAWA — The Globe and Mail

Published Tuesday, Mar. 11 2014

Tax cuts are coming. But does Canada have the right mix when it comes to deciding which taxes to cut?

The Conservative benches are agreed that part of next year’s surplus will go to tax cuts, but there is no consensus on the details.

Finance Minister Jim Flaherty has questioned the merits of an income splitting pledge that could cost nearly $3-billion in lost personal income tax revenue a year. Prime Minister Stephen Harper seems to be standing by the idea.

Enter Finance Canada’s briefing book.

After a cabinet shuffle, departments prepare thick briefing books for all ministers regardless of whether or not they are new to the position. Via an Access to Information request, The Globe obtained a copy of the briefing book presented to Mr. Flaherty following the July 2013 cabinet shuffle.

Under a section focused on tax policy, Mr. Flaherty’s officials outline how Canada’s current tax mix compares internationally with the 34 nations of the Organization for Economic Co-operation and Development.

“Recent evidence from the OECD suggests that growth-oriented tax policy should shift the burden of taxation toward sales (i.e., consumption) and property taxes, and away from personal and corporate income taxes,” officials state in the briefing book.

In practice, the Conservative government has reduced consumption taxes, by cutting the GST from 7 per cent to 5 per cent. It has also cut personal income taxes slightly, while the corporate tax rate has dropped from 22.12 per cent in 2007 to 15 per cent in 2012.

Many economists have criticized the Conservatives for favouring sales tax cuts over personal income tax cuts, but the decision has proved to be good politics. In contrast, Manitoba’s NDP government has seen a sharp drop in public opinion support since it raised the PST from 7 to 8 per cent.

Manitoba’s recent 2014 budget attempts to sell the unpopular sales tax hike by highlighting the new infrastructure that will be built in the province thanks to the added revenue.

In Ontario, provincial transit agency Metrolix recommended measures, including a one-point PST hike, to help raise about $2-billion a year for transit expansion. The Globe has reported that Premier Kathleen Wynne’s government rejected the idea as one that would be too hard to sell politically.

Diving deeper into Finance Canada’s briefing book, the minister was informed that Canada’s tax burden is below the OECD average and above the United States. It also describes the federal tax burden as being at its lowest level in 50 years.

Data tables break down how Ottawa compares in terms of its use of personal, payroll, corporate, consumption and other forms of taxation.

The figures show that when tax revenue is measured as a percentage of Gross Domestic Product, Canada’s personal income taxes are at 10.8 per cent, which is above both the OECD at 8.4 per cent and the U.S. at 8.1 per cent. Payroll taxes – such as Employment Insurance – are at 5.4 per cent in Canada, well below the OECD average of 9.5 per cent and below the U.S. at 6.4 per cent.

The figures are for all levels of government and are from 2010, which the document says is the last year for which estimates are available for all OECD countries.

Canada’s revenue from corporate taxes is at 2.2 per cent, which is slightly above the OECD and U.S. averages, even though the corporate tax rate in Canada has dropped significantly below the U.S. rate in recent years.

Bill Curry covers finance in Ottawa.

I would like to see corporate taxes and individual income taxes lowered further. I think two groups need lower income taxes: high income earners ~ those earning above $136,270 (I'm not one), and low income earners ~ those earning less than  $43,953.00 (I'm not one of those, either).

I think the employer's share of EI and CPP should be lowered for small businesses ~ those with less than, say, 10 full time employees.

How to raise new revenue to replace that which is "lost?" Do not increase the HST! Keeping the HST low restricts the growth of government. But we can afford a green/carbon tax IF it is very like the HST: it "flows through" all the middlemen and is, eventually and visibly paid by the end user, you and me every time we fill the car's gas tank, turn on our big screen TVs, buy groceries (which have to have been shipped from go alone knows where to the grocery store shelves) or heat/cool our homes. How big a tax? I have no idea ~ that's why we have smart bureaucrats in Finance.

 

[Rifleman62]

BC Carbon Tax per liter goes into general revenue. The government states it has worked. Not many believe that. Just a tax grab. Are we not still paying a temporary levy per liter just to be used to reduce the deficit?

The more governments tax, the more they spend, and a lot is not wise spending. Most Manitobans don't realize that they live in a have not province and the NDP government is spending millions more than is coming in. There is no incentive to become a have province. Just take government welfare and spend.

http://www.fin.gov.bc.ca/tbs/tp/climate/carbon_tax.htm

The revenue-neutral carbon tax was implemented on July 1, 2008, and the final scheduled increase took effect on July 1, 2012.

The tax puts a price on carbon to

    encourage individuals, businesses, industry and others to use less fossil fuel and reduce their greenhouse gas emissions;
    send a consistent price signal;
    ensure those who produce emissions pay for them; and
    make clean energy alternatives more attractive.

 

[Brad Sallows]

I'm not sure "lost" revenue need be replaced, but if so, remove some of the miscellany of tax credits.  Simpler is better.  Regardless, I prefer to keep tax rates where they are and use every conceivable bit of surplus to retire debt obligations.  The lower the accumulated deficit, the more the room for deficit spending when the next recession arrives.

 

[a_majoor]

As experience around the globe has shown, it is always and absolutely a SPENDING problem. If Ontario has raised spending to match the growth of population and inflation during the McGuinty years while raising the same amounts of revenue as it did, then the province would be in a surplus position instead of adding $100 billion in debt. Just to confirm it, the Drummond report laid out the need for a 17% spending cut by the Ontario government in order to stabilize the economy, eliminate the deficit and stop adding to the debt.

http://www.torontosun.com/2013/11/03/liberals-refuse-to-make-needed-spending-cuts to see how Ontarians are hurting, but like I said, this is world wide (look at the US or the EUzone for glaring examples).

On the Federal level, the Canadian government spends over $30 billion/year on subsidies to business, $30 billion/year on interest payments to the debt, @ $40 billion/year on transfers to other levels of government and something like $60 billion/year on transfers to individuals. Just changing the rules to tighten eligibility for these transfer payments would cut federal government spending by billions to tens of billions per year, and paying down the debt would also eliminate a huge cost to the taxpayer.

So no nattering about "lost" revenues please and more discussion and action to reduce spending in real terms, and at all levels of government.

 

[a_majoor]

And a message for anyone who (against all evidence) still wants to promote Keynesian economics:

http://pjmedia.com/vodkapundit/2014/03/10/how-do-you-say-keynesian-failure-in-japanese/

How Do You Say Keynesian Failure” in Japanese?
Posted By Stephen Green On March 10, 2014 @ 12:36 pm In Uncategorized | 9 Comments

Remember how Japanese PM Shinzō Abe was going to be the guy to really, truly, and finally spend his country into prosperity? Well:

Japan just printed its worst current account deficit on record and its worst GDP growth since Abenomics was unveiled – both missing by the proverbial garden mile and both confirming that all is not well in Asia. As for the perpetual hope of a J-curve (or miracle hockey-stick reversal)? There won’t be one!

Tyler Durden has the whole story, accompanied by some Doom & Gloom-worthy charts. (http://www.zerohedge.com/news/2014-03-09/abenomics-crucified-lowest-gdp-abe-worst-current-account-deficit-record)

Deregulate. Simplify the tax code. Protect the value of your currency. Those three steps are all it takes to achieve prosperity, but as Glenn Reynolds like to say, politicians don’t like them because they provide too few opportunities for graft.

Article printed from VodkaPundit: http://pjmedia.com/vodkapundit

URL to article: http://pjmedia.com/vodkapundit/2014/03/10/how-do-you-say-keynesian-failure-in-japanese/

How do you say Keynesian failure in Japanese? ケインズ主義の失敗.

 

[Edward Campbell]

Almost everyone who argues against Keynes (like almost everyone who argues for him) never finished the damned book.

There can be no doubt that one aspect of Keynes theory works: you can, do, reduce the deleterious human costs of recessions by spending. But that, spend your way out of a recession, is not what Keynes said, and even the part that he did say (public spending can mitigate some of the worst human costs of recessions) was only half of what he said.

Keynes also said that stimulus spending must be limited to recessions. When the economy turns around we have to save: we have to cut spending.

Keynes' theory can work if, but only if all, every red cent, of stimulus is spent in temporary ways, on projects that can be started and finished within the time frame of the recessions. By definition, social spending cannot, ever, be used a stimulus because it never ends. Good, productive, stimulus spending includes things like repairing roads and bridges, building ferries (even warships, although they are less productive), adding laboratories to universities ~ all sorts of "bricks and mortar" and "metal bending" projects, in other words, that have finite durations (and costs). It is OK, for stimulus to build a school, but it is not OK to hire teachers; it's OK to build a hospital but it's not OK to hire nurses. It is, clearly, OK to hire teachers and nurses when there is a demand ~ just not ever, not under any circumstance, as a stimulus measure ... not unless you are terminally f_ucking stupid and have, therefore, been elected to political office.

If people would only, just read Keynes, please just one of you, I wouldn't get so bloody angry.

 

[McG]

Originally titled “Canada's voice in the world muted by an increasingly ineffective military,” this piece concludes that we need more military investment to establish our place in the world.  Smarter investment may be more important that more investment (what with heritage and nostalgia often receiving more effort that operational kit and removal of waste).  I am happy to see the title was changed.

Making Canada matter in the world
National Post
Conrad Black
22 March 2014

We’ve got a diaspora-driven foreign policy,” Christopher Westdal, former Canadian ambassador to both Ukraine and Russia, told The Globe and Mail last month. “It might work at the polls, but it doesn’t do much good in the world.”

The word “diaspora,” of course, refers to our large Ukrainian-Canadian population. And a similar argument has been trotted out by critics to impugn Stephen Harper’s foreign policy with respect to Israel, which is alleged to be a ploy for attracting Jewish votes. The Prime Minister and Foreign Minister John Baird’s strenuous support of Israel, and now Ukraine, are alleged to have demolished Canada’s long-pursued status as a moderate, median country in international organizations in Middle Eastern issues.

Canada is now, with the Czechs, practically the only country unambiguously in Israel’s corner. In Ukraine, the claim cannot be made that Canada has broken ranks with its traditional allies in NATO, which is speaking in one voice of condemnation of Moscow’s incitements to partition by the ethnic Russians in Crimea. But many external affairs veterans suspect the government’s motives in both cases.

Canadian foreign policy has evolved through five phases: lock-step with Britain up to the Second World War, lock-step with Britain and America from Roosevelt’s guaranty of Canada at Kingston in 1938 (“We will not stand idly by” etc.), to a role, sometimes real but usually imaginary, of bridging between those powers when they differed through the collective security post-war era; Pearsonian enthusiasm for international organizations and the aspiration to proactive peacekeeping; Mulroney’s enhanced intimacy with Reagan’s America, in between Trudeau’s and Chrétien’s reversion to Pearsonism with the affected flourishes of “soft power” and intermittently energetic truckling to Russian puppet leaders in East Europe and “Papa Castro” in Cuba. 

No one can accuse Harper and Baird of being overly deferential to Washington, and Harper has commendably kept his distance from, and avoided even the usual self-abnegating pleasantries with, U.S. President Barack Obama and his predecessor, George W. Bush. They have both been unsuccessful presidents, and not since the goofy twenties of isolation and Prohibition and the Great Depression of the Twenties, if not the unhallowed days of Fillmore, Pierce and Buchanan who conducted America into the agony of the Civil War, have U.S. leaders been accorded so little esteem in the world. With these administrations, Harper has shown normal courtesy and no more, and even his critics on the left cannot accuse him of grovelling to Washington.

That charge was unjustly laid against Brian Mulroney, who worked closely with Ronald Reagan and George Bush Sr., at a time when the United States did not have a large current account deficit, and was pursuing policies that led directly to the satisfactory end of the Cold War. The Soviet Union completely disintegrated and the countries of Eastern Europe that had been occupied for 40 years by the Soviet Red Army, contrary to the Declarations on Poland and Liberated Europe agreed by Stalin, Churchill and Roosevelt at the Yalta Conference of 1945, were liberated. Reagan was a strong, popular, and effective leader, however that fact caused the Canadian and international left to gag in horrified denial, and Mulroney was right that Canada’s influence was magnified by Mulroney being surpassed in Washington’s official regard only by Britain’s Margaret Thatcher. Canada benefited from that relationship, although Mulroney and Reagan differed over aid to the Nicaraguan Contras and sanctions on South Africa. (Reagan, like Thatcher, denounced the apartheid regime but, shared Thatcher’s view of sanctions that “We will not make things better by making them worse.”) Mulroney went on to play a formative role in transforming the Ottawa Open Skies conference in 1990 into a German reunification agreement.

Nostalgic External Affairs traditionalists resent Canada’s departure from the ranks of peacekeeping median powers. But the role was illusory; the original peacekeeping effort was a face-saver for the British and French after the Suez fiasco in 1956 that the American ambassador to the United Nations, Henry Cabot Lodge, gave to Lester Pearson because he knew the Soviet Union would veto an American proposal. After Egypt had seized the British-owned Suez Canal, Israel agreed with Britain and France to invade the Sinai, and the British and French, having deployed forces to Cyprus, then invaded Egypt supposedly to separate the Israeli and Egyptian forces.

It was an insane and completely dishonest enterprise; the Americans opposed it, and the disengagement and peacekeeping initiative were just window-dressing to cover the Anglo-French withdrawal. But Pearson won the Nobel Peace Prize and the Liberal leadership and, in 1963, became prime minister. Canada spent the next 40 years providing United Nations peacekeeping forces, despite the failures of those missions in Bosnia and in Somalia, where there was some Canadian force misconduct. Much of these UN activities were just underdeveloped countries lending their forces out as mercenaries to factions in tribal and civil wars such as in the Congo, while receiving hard currency payments from the UN. But it all provided cover for successive Canadian governments to scale back the defence budget and placate domestic opinion by posing as contributing to the furtherance of world peace.

In fact, all real defence of Canada was in the hands of the United States, and in non-NATO matters, Canada took a studiously thoughtful median position, straddling and finessing everything in unheroic harmony with the Afro-Asian anti-Israel and generally anti-Western bloc in international organizations. Lloyd Axworthy’s invocation of soft power was just a lift from U.S. national security adviser (to President Clinton), Joe Nye, who devised it as an alternative to military action. But in Canadian usage, it was a masquerade, as Canada had no hard power option, but it ticked all the boxes: solidarity with most of the UN, Commonwealth, French Community, shrinking defence costs and avoidance of subservience to the U.S. Paul Martin started a review of traditional total reliance on the U.S. for Canada’s defence, but got no farther than declining North American ballistic missile defence integration (which was a mistake) before he was evicted from office.

Stephen Harper has played an independent game opposite the Americans and the international organization and steered his own course in the Middle East and elsewhere. But he has also allowed the country’s defence capability to erode while floundering around and dissembling about the acquisition of F-35 warplanes and endlessly postponing any renovation of the navy (whose only resupply ship available for operations in the entire Pacific Ocean had to be towed hundreds of miles by the U.S. Navy to Pearl Harbor earlier this month after losing power after a fire).

Harper is right on Israel, as I have had occasion to write here before; the Palestinians have not acknowledged Israel’s right to exist as a Jewish state and until they do they have no entitlement to a state of their own carved from territory Israel occupied in wars initiated, and lost, by the Arab powers. Ukraine is more complicated. The ethnic Russians have a right to secede from Ukraine and join Russia if they wish, as the Sudetenlanders had the right to join Germany in 1938. The mistake of Neville Chamberlain in 1938 at Munich was in not achieving a reasonable deadline or a serious guaranty of the continuing Czechoslovak state, (Hungary and Poland attacked it as soon as the Germans had finished), and in representing it as the triumph of “peace with honour.” (It was the triumph of neither.)

In Crimea today we have the opposite problem: Harper is wrong to claim the inviolability of Ukraine as most of our allies have ineffectually done, and right to pledge support for a Ukrainian Ukraine. But Canada’s military credibility has so deteriorated that this country’s voice in the world is of negligible importance since we have no ability to affect events. There is no point being independent of the U.S. and NATO if we have no material or moral authority. Harper should take up the study of an independent defence policy that Martin began. Hillary Clinton said this week that the U.S. and Canada should work together to prevent Russian penetration of our side of the Arctic. It was a diplomatic formulation of American protection of the North American side of the Arctic, as Canada isn’t going its part. Obama’s America is not a reliable ally or a consistent power, and Harper would do better with his traditional conservative supporters building up the armed forces and defence industries, than in his imbecilic campaign of mindless drug enforcement, harsher criminal penalties, and the construction of redundant prisons. Draco is no more worthy of emulation, politically or otherwise, than Neville Chamberlain.[/quote]
http://fullcomment.nationalpost.com/2014/03/22/conrad-black-making-canada-matter-in-the-world/

 

[a_majoor]

Probably unwelcome news in view of the current Quebec election and a possible near term election in Ontario, but the FP nails why Canada's traditional engines of economic power are not pulling confederation, but are being towed behind. Dumping the current governments and reversing their agendas will do wonders for the provinces and for Canada as a whole:

http://business.financialpost.com/2014/03/26/whats-wrong-with-central-canada-outside-quebec-and-ontario-investment-in-canada-is-booming/

What’s wrong with Central Canada? Outside Quebec and Ontario, investment is booming

Philip Cross, Special to Financial Post | March 26, 2014 9:16 AM ET

For Canada to break out of its persistent slow growth, the Bank of Canada has emphasized the need for higher exports and business investment. More exports are likely once the U.S. economy emerges from its winter hibernation. However, business investment in Canada remains stuck in neutral, according to Statistics Canada’s recent annual survey of investment intentions. Planned outlays are up only 1.6% for 2014, slightly below last year’s microscopic growth.

Investment is booming in many regions and sectors of our economy, showing it is not an aversion to investing in Canada that is holding back capital spending. Excluding Ontario and Quebec, investment in the rest of Canada is up a heady 65% since 2009. Energy investment continues to be spectacular, nearly doubling in just five years to $116-billion, rivalling investment in all other industries combined (see the nearby graph). Capital spending on oil and gas extraction has spearheaded this surge, with the oilsands more than tripling. To carry the tsunami of crude oil requires more investment in pipelines, which has tripled in three years to $9.2-billion (pipelines have displaced urban transit as the largest part of our investment in transportation). Add in sustained high levels of spending by utilities, and Canada’s investment in the energy sector continues to redefine our economy.

Related
Philip Cross: Dutch Disease in Canada a myth
The High Wage Fairy
Philip Cross: Let’s celebrate risk

So why is overall business investment in Canada lacklustre? The provincial breakdown of investment growth clearly points to a reluctance to invest in Central Canada. Business cut planned investment in both Ontario and Quebec. This is not a new trend; business investment has fallen in both provinces since 2012. Since the recovery began in 2009, investment in these two provinces is up only 12%, one-fifth the gain in the rest of Canada.

It is not hard to see why firms are hesitant to invest in Central Canada. Political uncertainty certainly creates a poor investment climate. The election of a separatist anti-business minority government in Quebec in 2012 led to two years of falling investment, and now the prospect of another referendum. Over the same period, Ontario’s minority Liberal government has struggled to hang on to power.

However, the problem in Central Canada extends beyond political uncertainty. Both governments have openly embraced policies that discourage business. While preaching fiscal discipline, neither has made any progress in tackling the massive debt problems that cloud their long-term outlook. Both provinces pursue trendy environmentalism, ignoring the harm rising costs impose on economic growth.

Each province has adopted specific legislation injurious to business investment. In Quebec, this was most obvious in its increase in the regulation and taxation of mining, which helped lower its ranking from the most attractive jurisdiction in the world to 21st place in just four years, according to the Fraser Institute. This change in legislation coincided with a marked downturn in metals prices—in other words, it couldn’t have happened at a worse time. Quebec’s moratorium on shale gas production also helped strangle its mining industry, although there are some signs the government is easing its anti-fossil fuel rhetoric, recognizing how new supplies from Alberta could revitalize its large oil refineries.

Not to be outdone, Ontario has adopted a raft of measures designed to raise business costs in a weak economy. These include increasing the minimum wage and threatening higher corporate income taxes and a hike in pension costs to finance an ill-considered expansion to the CPP. These are just the latest in a long string of measures that demonstrate a complete lack of understanding of how to create a positive business environment. They include everything from the highest electricity costs in North America as a result of its green energy policies to imposing an extra paid “Family Day” vacation starting in 2008, saddling firms with higher costs just in time for the recession later that year.

Surging investment in the rest of Canada is not just the luck of geography. The oil sands boom in the late 1990s was triggered by both new technologies and a new royalty scheme. Instead of approaching their ample natural resource base as an asset, Quebec and Ontario have openly discouraged its development, apparently buying into the erroneous Dutch Disease philosophy that natural resources and manufacturing have an adversarial relationship.Besides changing mining royalties, the PQ scrapped the Liberal government’s symbolic Plan Nord to foster the development of its rich natural resource base. Ontario was unable to provide basic infrastructure to keep the main “Ring of Fire” mining proposals alive. As a result, mining investment in Central Canada has fallen from $9.3-billion to $5.4-billion.

The wonder is not that business investment is weak in the People’s Republics of Central Canada. The wonder is that falling investment in Ontario and Quebec has not caused their economies to relapse into recession, given the central and determinant role investment plays in economic growth. Only surging investment in resources elsewhere in Canada is sustaining growth at even a moderate pace. One benefit of political uncertainty is that the possibility of new regimes in Quebec and Ontario offers the best hope that these provinces will adopt policies allowing them to join the investment boom the rest of Canada is enjoying.

Philip Cross is a Fellow at the Macdonald-Laurier Institute and the former Chief Economic Analyst at Statistics Canada.

 

[a_majoor]

This could also go into the "Libertarians" thread, since this is an expression of unfettered use of property and evading "gatekeepers", which are major Libertarian ideas and ideals. Since the vast majority of people wo will purchase or use 3D printers will not be doing so with any political ideals in mind, but rather to get low cost, quality goods, this has more implications for the future of the Canadian economy and our standard of living (see highlighted paragraphs).

http://reason.com/archives/2014/03/24/the-3d-economy

The 3D Economy

Greg Beato|Mar. 24, 2014 9:30 am

Last May, Cody Wilson produced an ingeniously brief but nuanced manifesto about individual liberty in the age of the ever-encroaching techno-state-a single shot fired by a plastic pistol fabricated on a leased 3D printer. While Wilson dubbed his gun The Liberator, his interests and concerns are broader than merely protecting the Second Amendment. As Senior Editor Brian Doherty documented in a December reason profile, Wilson is ultimately aiming for the "transcendence of the state." And yet because of the nature of his invention, many observers reacted to his message as reductively as can be: "OMG, guns!"

Local legislators were especially prone to this response. In California, New York, and Washington, D.C., officials all floated proposals to regulate 3D printed guns. In Philadelphia, the city council successfully passed a measure prohibiting their unlicensed manufacture, with a maximum fine of $2,000.

But if armies of Davids really want to transcend the state, there are even stronger weapons at their disposal: toothbrush holders, wall vases, bottle openers, shower caddies, and tape dispensers. All these consumer goods and more you either can or will soon be able to produce using 3D printers.

Imagine what will happen when millions of people start using the tools that produced The Liberator to make, copy, swap, barter, buy, and sell all the quotidian stuff with which they furnish their lives. Rest in peace, Bed, Bath & Beyond. Thanks for all the stuff, Foxconn, but we get our gadgets from Pirate Bay and MEGA now.

Once the retail and manufacturing carnage starts to scale, the government carnage will soon follow. How can it not, when only old people pay sales tax, fewer citizens obtain their incomes from traditional easy-to-tax jobs, and large corporate taxpayers start folding like daily newspapers? Without big business, big government can't function.

3D printing is a painstaking process, with extruders or lasers methodically building up objects one layer at a time. Most consumer-level devices currently only print in plastic, and only in one color. At online platforms such as Thingiverse.com, where 3D printing enthusiasts share open-source design files and post photos of their wares, the final products often look a little rough around the edges, without the spectacular gloss and streamlining we've come to expect from, say, a Dollar General toilet bowl scrubber.

In many ways, 3D printing barely seems ready to disrupt the monochromatic knick-knacks industry, much less the world. When it takes hours to produce a pencil cup, transcending the state may prove to be a tall order.

And yet in the industrial realm, where 3D printing has been around for decades and goes by the name "additive manufacturing," companies such as Boeing and General Electric are using much more sophisticated machines to produce parts for jet engines. Medical device companies use them to custom-manufacture hearing aids, replacement knees, and designer prosthetics. In time, Cornell University professor Hod Lipson predicts in the 2013 bookFabricated: The New World of 3D Printing(Wiley), 3D printers will be capable of constructing houses with plumbing and wiring in place, and printing "vanity organs" for people who want new or improved athletic abilities.

Inevitably, such technologies and capabilities will trickle down, and probably faster and more radically than many people anticipate. While MakerBot Replicators may still look a little too DIY for those of us who have yet to fully exploit the capacities of our microwave ovens, ease of use is evolving rapidly.

In January, Adobe announced that it is adding 3D printing capabilities to Photoshop, giving users the ability to design three-dimensional objects and send them to their own printers or 3D printers in the cloud. A California startup called AIO Robotics is developing a machine that points the way toward a future where the goods in the picture frame aisle at Target become just as easy to duplicate and manipulate as Metallica's back catalog. It's called Zeus. It looks like an unusually stylish kitchen appliance, and its creators, who met as students at the University of Southern California, describe it as the "world's first 3D copy machine."

Place an object in its central chamber, then push a button. Zeus scans the object in 3D. Push another button, and Zeus uses the 3D file it has created to reproduce an exact plastic replica of your object. In essence, Zeus makes "making" even easier than consuming. If you decide you really, really like the pasta bowl your mom gave you for Christmas, you don't even have to go to the mall, or surf Amazon.com to get another. Just throw it in Zeus and push a button!

In almost all visions of the3D printed future, manufacturing changes dramatically. If a high-end 3D printer can fabricate a pistol or a panini press on demand, why bother with huge production runs, global distribution networks, warehoused inventories, and the cheap human labor that only under-regulated developing nations can provide? While it will still make sense to produce some goods in large quantities using traditional methods, manufacturing is poised to become a far more local, just-in-time, customized endeavor.

But if the nature of manufacturing is poised to change dramatically, what about the nature of consumption? In many ways, it's even harder to imagine a city of, say, 50,000 without big-box retailers than it is to imagine it without a daily newspaper. So perhaps 3D printing won't alter our old habits that substantially. We'll demand locally made kitchen mops, but we'll still get them at Target. We'll acquire a taste for craft automobile tires, but we'll obtain them from some third party that specializes in their production. Commercial transactions will still occur.

But if history is any guide, more and more of us will soon be engaging in all sorts of other behaviors too. Making our own goods. Sharing, swapping, and engaging in peer-to-peer commerce. Appropriating the ideas and designs of others and applying them to our own ends. Combining resources and collaborating on extremely large and ambitious projects we couldn't hope to accomplish alone. And over time these new behaviors will have consequential impacts on scores of products, companies, and industries.

Already, according to a study authored by Michigan Technological University engineering professor Joshua Pearce and six others, there are significant economic incentives for consumers to pursue 3D printing. According to Pearce's calculations, a person who constructs an open-source 3D printer called the RepRap at a cost of around $575 for parts can theoretically avoid paying between $290 and $1,920 a year to retailers simply by using the device to print 20 common items (iPhone case, shower curtain rings, shoe orthotics, etc.).

If you are willing to invest some time in its construction-Pearce estimates that the RepRap takes around 24 hours to build-the printer can quickly pay for itself, even if you don't use it all that often. If you start making orthotics for your neighbors, who knows, it could even turn into a profit center.

Soon, we'll begin to see the rise of manufacturing Matt Drudges and printer-sharing Reddits. So many different producers will be producing so many different products that it will become harder and harder for even well-established and trusted brands to charge for anything but the scarcest and most coveted goods. In a bid to survive, places like Walmart and Best Buy will begin to offer stuff as a subscription-you'll get 200 lbs. of goods per year for a monthly fee of $19.99.

But maybe even that will seem too steep to you, or just not as autonomous as you'd like. Ultimately, 3D printers and the distributed manufacturing they enable will democratize and mainstream survivalism. You won't need five remote acres, heavy equipment, and a lot of practical know-how to live off the grid. In the realm of your commercial life, at least, you'll be able to DIY in New York City.

Be prepared, however, to expect some pushback from your local regulators. Over the past decade or so, as newer technologies and fewer opportunities for traditional employment have prompted more people to act in entrepreneurially innovative ways, government's response has been the same: Consumers must be protected against strawberry balsamic jam made in home kitchens. Tourists must be protected against immaculately maintained carriage houses that can be rented on a daily basis for below-hotel rates. Travelers must be protected from cheap rides from the airport.

When government realizes that self-produced plastic shower curtain rings are far more potentially disruptive than self-produced plastic pistols, it'll be more than libertarian entrepreneur-iconoclasts at risk.

 

[McG]

... So, what does that tell us about making Canada relevant?

 

[a_majoor]

... So, what does that tell us about making Canada relevant?

It means that all the time, money and resources that governments are putting into economic action plans, subsidization of industry, trying to attract new manufacturing jobs etc. is going to be wasted in the medium and long term, since the very foundation of the manufacturing economy is going to come apart. It also means the vast amounts of government spending will be even less sustainable, since many of the sources of tax income will evaporate.

It also means that *we* will still be fortunate, since the feedstocks of much of the new manufacturing processes (3D printing and related technologies) are available here from our own resource industry, and (so long as we don't fall into the Green energy trap) also have large energy resources to power these things.

There will be one other huge change, which is deflation. If people can get by with a 3D printer, electrical energy and bags of raw materials picked up from the Home Depot or WalMart (I doubt commercial grade 3D printers will be able to use a shovel full of dirt), then their need for cash and desire to bid for goods and services in the market place will be reduced by a large fraction. As there will be needs that cannot be fulfilled by a "home" 3D printer, there will still be commerical transactions, but even they may be built around 3D printing (you send your design file to a larger, specialized fab), so costs will be much reduced.

So the bottom line is our economic foundations will change radically, which will also change the political institutions as well.

 

[Edward Campbell]

The Shanghai Daily is reporting that "China and Australia yesterday voiced hopes of hastening negotiations on a Free Trade Agreement and striking a deal as soon as possible ... Meeting with visiting Australian Prime Minister Tony Abbott and entrepreneurs in Beijing, Chinese Vice Premier Wang Yang said economic and trade cooperation between the countries is now on the fast track."

According to the article "bilateral trade reached US$136.4 billion in 2013, up 11.5 percent on 2012."

Canada's trade with China is in the order of $70 Billion per year and it, like Australia's trade with China, has been growing at a steady rate.

But, we and Australia are similar in trade terms, and better access to Australia's resources will make Canada's resources less attractive, exacerbating our growing trade deficit with China.

China needs to be Canada's primary target for a trade agreement.

 

[a_majoor]

Rather than putting all my trade eggs into a single (and potentially unfriendly) basket, I would focus more on the TPP process if I was responsible for this file. Still, we did sign a free trade deal with the ROK, so Canada isn't being left out in the cold.

 

[Edward Campbell]

Here are links to two useful articles that explain, lucidly, the counter argument; both are by Alex Himelfarb, former Clerk of the Privy Council and Jordan Himelfarb, the Star’s opinion page editor and co-editors of Tax Is Not a Four-Letter Word:

    1. Canada’s dangerously distorted tax conversation published in the Toronto Star in Oct 13; and

    2. Without a tax debate, we risk sleepwalking into the future, published, also in the Toronto Star, today.

Both are worth a read because both Himelfarbs are very smart people and both have a lot of influence, especially in the Liberal Party of Canada and amongst the Laurentian elites.

The Himelfarbs deserve credit for defining us, those of us favouring smaller, less intrusive and less costly governments, as neo-liberals. (We are not neo-cons, as that term is used in the USA; in fact, I suspect most of us neo-liberals look down our noses at the bumptious, ill educated American neo-cons with their silly, Grover Norquist, no new taxes mantra coupled with big spending plans.)

I also agree with the Himelfarbs that we do need a coherent national debate on taxes. Such a debate must begin with a debate on the appropriate roles and, therefore, size of government. My guess is that most (75%+) of Canadians are big government people; they believe that government spending, funded by taxes, creates jobs, for example - and they believe that because, sometimes, it's partially true ... it's not true that it creates jobs but properly focused, Keynesian spending in economic hard times can and does prevent unemployment.

I think (hope?) we all agree that taxes are necessary - not a necessary evil, just necessary to civilized society. The issue is: how do we (our elected governments) spend the money? Look at this list. Are you sure that every single one of them is necessary and productive? I am absolutely certain that we could cut 10% of them and actually improve the productivity of government; a cut of 15% would be better and I think cuts would have to exceed 25% before we saw any real, measurable ill effects. The Himelfarbs would, I'm equally sure, disagree ~ it's not that they would oppose every single cut, but they are committed to the notion of a big, active, intrusive government that manages almost every aspect of society. I favour a small, somewhat remote government that, in large measure, leaves people (and their property) alone to make the best of their own lives, intruding, of course, when people need some help. (I'm not totally heartless and I do not advocate a wholesale attack on the welfare state.)

 

[Brad Sallows]

>bumptious, ill educated American neo-cons with their silly, Grover Norquist, no new taxes mantra coupled with big spending plans.

I think you might be confusing American neo-conservatives with some other faction.  Agree or disagree with their foreign policy (democracy promotion) principles, they can boast of some heavyweight thinkers, and their fiscal policy tends to reflect their origins: Democrats disaffected with Democratic foreign and fiscal policy.  They are not overzealous deficit fighters or spenders.

 

[Edward Campbell]

>bumptious, ill educated American neo-cons with their silly, Grover Norquist, no new taxes mantra coupled with big spending plans.

I think you might be confusing American neo-conservatives with some other faction.  Agree or disagree with their foreign policy (democracy promotion) principles, they can boast of some heavyweight thinkers, and their fiscal policy tends to reflect their origins: Democrats disaffected with Democratic foreign and fiscal policy.  They are not overzealous deficit fighters or spenders.

Look at this graph:

Source: http://cbo.gov/sites/default/files/cbofiles/attachments/44521-LTBO2013_0.pdf

It can be argued that, in the early 1940s, America, indeed the whole US led West faced an existential threat, one might even argue the same for the 1960s when the US debt declined, when measured as a percentage of GDP, but that was not the case from 2005 until now. Anyone who a) signed Grover Norquist's pledge (that's many, many US legislators and candidates, and there's nothing wrong with not raising taxes) and b) doesn't campaign for massive, across the board spending cuts, including for the Pentagon, is a "bumptious, ill educated" fool. The problem is you cannot hold the line on taxes and propose sustaining anything like the current levels of government activity.

The US public debt now exceeds $17 Trillion, which is more than 100% of GDP. Foreigners, including China, are owed more than $5 Trillion of that debt. That's too much. The biggest threat to America's future is America's present. American legislators ~ exactly like their Canadian counterparts ~ are guilty of listening to their constituents, of giving them what they want, rather than of leading.