Monday, January 5, 2009

Odd timing for tax-free saving accounts

This is from the Saskatoon Star-Phoenix. While tax free savings accounts may not help the economy they do help remove tax revenue from the govt. So do the tax cuts that we will probably see in the Flaherty budget. Less revenue for the govt. means less to pay for social programs and thus an excuse to cut them back a prime aim of Conservative ideoløgy. The provocative poison pill mentioned in the article that resulted in the proprogation of parliament contained precisely the sorts of Conservative ideologically oriented programs that the core Conervative constituency desires: curbing power of public sector unions, getting rid of crown assets etc. etc. Flaherty is trying to advance the Conservative agenda at the same time as conditions force him to make some moves that are contradictory to his free market and Conservative agenda, so he tries to do both at once.

It's odd timing for tax-free saving accounts

January 3, 2009

According to the Boston Consulting Group, consumer confidence in North America has all but disappeared.
Economists worry this will cause an economic death spiral. People stop spending for fear they won't have money to spend, manufacturers stop producing because they have no market and those people who were hoarding their money now find themselves out of a job.
To stop the spiral, governments from London to Washington to Beijing have struggled to convince consumers to dig into their stash of cash or borrow what they can in order to get things moving again.
But not here in Canada. On Friday, federal Finance Minister Jim Flaherty had a special ceremony to launch a new scheme designed to convince Canadians -- already a species particularly inclined to sock away their extra cash -- to lock whatever money they can beg, borrow or steal into special savings accounts.
This ceremony took place soon after his government announced it will participate in a $4-billion bailout package for the auto sector in order to convince the North American auto companies to keep building the 20 per cent share of their vehicles in Canada.
Mr. Flaherty apparently sees little contradiction in having the government help pay to build cars, while actively discouraging consumers from buying them.
But one shouldn't be surprised by his inability to connect these simple dots.
When the time came to table a financial statement designed to establish confidence in Canada's ability to manage through the global economic crisis, the minister missed on almost all accounts.
Rather than getting consumers to open up their wallets, he told government workers he would deprive them of their right to collective bargaining. Rather than announcing his intention to enhance one-time government spending to create jobs and improve Canada's productivity, he announced cuts to spending.
Rather than offering assurances that he had his eye on what was happening in the world's markets, he promised a sale of federally owned properties just as they would bring the lowest possible returns for the taxpayers.
And rather than offering Canadians the kind of open-eye government they were expecting, Mr. Flaherty served up a poison pill resulting in the prorogation of government until the Conservatives could get their act together, leaving Canadian effectively without Parliament for all but a few hours during seven months of the worst economic crisis in a century.
It isn't the first time, however, that the minister has misunderstood how the world works. With the world's economy falling around his ears, he suggested that the Tory decision two years ago to permanently pare the GST by two points was somehow similar to London's decision late last year to cut that country's consumption tax by 1.5 per cent.
The big difference was that the Gordon Brown government's cuts are for a limited time -- to be removed in 2010 when the country hopes its economy is on a more even keel. British consumers know they have to go out and spend before the tax holiday ends if they are to take advantage of it.
Prime Minister Stephen Harper's cuts, however, are permanent and will cost the treasury forever, and there is no incentive to get people to spend now, when the economic activity is needed most.
It doesn't inspire confidence that Mr. Flaherty, no doubt with the help of the equally obtuse PM, is in the final stages of preparing a budget Canadians have to hope will not only help mitigate the impact of the worst financial crisis of nearly a century, but also satisfy a power-hungry, ad-hoc coalition that has threatened to take over should the Jan. 27 budget be too little, too late or too mean.
Worse, when it comes to confidence, is that the people who should be holding the government's feet to the fire seem to have an even sketchier grasp of the world.
Michael Ignatieff has been head of the Liberal party for less than a month, and already he has dropped three major opportunities to make an impression.
When Mr. Harper telegraphed he was going to appoint an astounding 18 Tory senators, the Grit leader should have made it clear that even if he would lead a coalition government, he wouldn't make a Senate appointment until after the next general election.
That would have taken away the PM's stated reason for the rushed appointments, forcing either a backtrack or, more likely, completely exposed the cynicism with which the appointments were being made.
And Mr. Ignatieff, having seen the reaction from the West to the proposed coalition deal, should have immediately distanced his party and the deal from any perception it provided the Bloc Québécois with a veto of Canadian affairs, including insisting on a rewording of the deal to drop the specific mention of Quebec.
If the Bloc refused, it would be held responsible for killing the coalition and could be accused of supporting the Harper government.
Mr. Ignatieff should also have pre-empted Mr. Flaherty's Friday celebration by pushing for such big-picture ideas as a complete tax holiday on the GST, for 18 months, incentives to business to retool and modernize, or short-term cuts to income tax, on condition the money is re-invested or used to upgrade homes.
While Mr. Flaherty seems incapable of grasping what is happening, Mr. Ignatieff appears to be missing in action. It's difficult to figure which is worse.
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