Showing posts with label tax cuts. Show all posts
Showing posts with label tax cuts. Show all posts

Tuesday, September 9, 2008

The Economy: Stephen Harper has cast away any intellectual anchor

One claim that Stephen Harper is making on the campaign trail is that he has, "the 'sensible balance' to handle uncertain economic times", according to the CBC.

On the contrary, I would say that Mr. Harper cannot be trusted to be a good manager for the economy because he has cast away any intellectual anchor in that field.

This should have been obvious in his desire to cut the GST (a consumption tax) in the face of the overwhelming opinion of economists that cutting income tax would be better at stimulating productivity and growth. More recently, Mr. Harper also over-ruled his Finance Minister, Jim Flaherty, (who, wisely, is [was] wary of the government choosing investments and trying to pick winners and lowers, a sentiment I seem to remember that is shared by former Saskatchewan NDP Finance Minister, Janice McKinnon) to dangle an election goodie - $80M for a Ford Motor Co. plant.

But what I want to mention today is that Mr. Harper has even cut his intellectual links with free market titans like Milton Friedman. Friedman said, "The legitimate role for government is, in so far as it can, to control and check negative externalities." Polluting for free, greenhouse gas emissions in particular, is a perfect example of a very serious negative externality that threatens the planet. On this, Friedman continues with, "...government should be involved by setting a fee on the activity concerned. And that is something else that has increasingly developed. You have markets now in pollution abatement."

Now, what did Mr. Harper have to say about Stephane Dion's Green Shift? He simply dismissed the Green Shift (after misrepresenting it by reducing it to a carbon tax) by saying that it would, "screw everybody across the country", in complete opposition to almost all economists, even ones that might be considered libertarian, right-wing, or conservative.

Where is Mr. Harper's intellectual anchor when he's thinking about the economy? What are his terms of reference? Perhaps he's just out to get votes? What else could there be? If economic times are uncertain, a guy like Stephen Harper is not a good person to rely on for sound management of the economy.

Thursday, August 14, 2008

BigCityLib Strikes Back: High Gas Prices As A Natural Carbon Tax, Part Whatever

Big City Lib asks the question (I'm paraphrasing), "Does the recent drop in gasoline prices (over the last 3 weeks) make the Green Shift an easier sell?" in this blog post:
BigCityLib Strikes Back: High Gas Prices As A Natural Carbon Tax, Part Whatever

I think the answer might be very slightly yes. There is a concept from behavioural finance called "anchoring". When gas prices went up over the last few years, people felt that prices were too high because they were used to lower prices in the past, and did not take into consideration how the supply and demand for oil has changed in the past decade.
Now that prices have fallen somewhat, people may feel that gasoline is relatively cheap. Gas prices may not make the news headlines until a new high is reached. A tax on non-gasoline fossil fuels may be more palatable (in combination with the Green Shift's tax cuts)
Of course gas prices are not the full story, especially as the Green Shift proposal does not increase the federal tax on gasoline, consumer electricity and natural gas prices are regulated (and so don't follow global energy prices in the short term), and there hasn't been a winter heating season since the spike in oil prices in the spring and early summer.
Nevertheless, the economic focus of the average consumer might now be on whether or not there is a recession coming, and not so much the price of energy. For that reason the tax cuts and credits of the Green Shift might be appealing to some voters. This is just a suspicion of mine, not a claim of fact.