A distinguishing characteristic between right and left wing thought is the importance given to the income or wealth gap (or however rich and poor is defined) between the rich and poor. The left places more importance on this statistic than do those on the right.
I am on the right and therefore feel the statistic is given too much importance. A thought experiment illustrates why. Say all the rich earn $100,000 per year and all the poor earn $25,000 per year. The gap between the rich and poor is $75,000 per year. Say I have magical power and can halve or double everyone's income. If I halve everyone's income, the gap between the rich and poor falls to ($50,000 - $12,500) = $37,500. If I double everyone's income, the gap between the rich and poor increases to $150,000.
Which group is happy if I halve their income? The rich sure aren't and neither are the poor. The poor may acquire a degree of psychological happiness due to greater income equality but not enough to offset their drop in income. Greater income equality in this extreme thought experiment results in greater unhappiness for both groups. Income equality can be undesirable.
Those on the left say take from the rich and give to the poor to reduce income equality. Income for the rich declines and income for the poor increases by the amount of redistribution. This is what our society does and is valid to a certain extent. A social safety net is desirable. However, redistribution has limits, especially at the margin. Taking from those who produce results in less incentive for them to produce. They therefore produce less. This helps no one.
There are limits to redistribution. Going beyond the limit harms everyone. Placing too great an importance on the gap statistic leads to a redistribution beyond point of harm.
Right on
Saturday, September 19, 2009
Friday, September 18, 2009
The Most Powerful Special Interest Group
Politicians, especially those on the left, are feeling the power of the most powerful special interest group.
The most powerful special interest group consists of citizens who do not belong to a special interest group. Piss them off and you are gone.
Right on!
The most powerful special interest group consists of citizens who do not belong to a special interest group. Piss them off and you are gone.
Right on!
Tuesday, September 8, 2009
The U.S. and disabled children from a Canadian's perspective
I spent last week in the U.S. and was struck by something. This is purely anecdotal but it seemed to me that there are many more disabled children in the U.S. compared to Canada. How could this be, I asked myself, for such a wealthy society. Then it dawned on me.
We abort ours.
God bless America!
We abort ours.
God bless America!
Tuesday, August 18, 2009
Full Day Learning ffor Four & Five Year Olds in Ontario
The Ontario Liberal government will be pushing full day learning for 4 and 5 year olds. They plan implementation in Sept. 2010. There are so many things wrong with this that it is hard to know where to start the criticism.
Four and five year olds are probably best off with a parent. If this isn't possible, let the parents decide which day care is best. The premise that I accept, and apparently our provincial government doesn't, is that parents will make the best choice for their children.
When my wife and I decided to place our daughter in daycare we researched and visited a number of establishments. We chose the one we thought was right that suited our budget. Our decision proved to be correct. We were confident that the daycare knew who the client was: my wife and myself. We were confident that they knew that if we grew displeased with their service that we would replace them. The bottom line is that choice kept our private daycare, and others, honest, responsible, and incented to do good work. Choice worked. They provided a great service. (Peekaboo daycare in Brampton off Kennedy and Sandalwood for anyone interested)
My daughter finished grade one. The experience we as parents had was less than praiseworthy. We were informed significantly less than daycare. The teachers were not their when we dropped off our child (at 7:45) and were long gone by the time we picked her up. We got to see her daily work periodically, not weekly as in daycare. The attitude of the teachers and staff was what you would expect from someone with union backing and very little competition. (Private schools are out of our price range).
Choice is the key. Government run schools crowd out choice except for the top earners of society. Without choice, we have no power.
On a side note, it is very interesting that private establishments such as Kumon, Oxford Learning Center, and others are popping up all over. There is a market for establishments that will supplement your child's education. If our school system was doing a good job, this wouldn't be happening.
I know how full day learning for four and five year olds will go. The Toronto garbage strike provides a strong clue. The staff will have great compensation packages, great benefits, and a Cadillac pension plan and they will still strike or threaten to strike every three or four years.
Full day learning for four and five year olds is a bad idea the deserves to be stopped. Write to your provincial government representative and tell them so.
Right On
Four and five year olds are probably best off with a parent. If this isn't possible, let the parents decide which day care is best. The premise that I accept, and apparently our provincial government doesn't, is that parents will make the best choice for their children.
When my wife and I decided to place our daughter in daycare we researched and visited a number of establishments. We chose the one we thought was right that suited our budget. Our decision proved to be correct. We were confident that the daycare knew who the client was: my wife and myself. We were confident that they knew that if we grew displeased with their service that we would replace them. The bottom line is that choice kept our private daycare, and others, honest, responsible, and incented to do good work. Choice worked. They provided a great service. (Peekaboo daycare in Brampton off Kennedy and Sandalwood for anyone interested)
My daughter finished grade one. The experience we as parents had was less than praiseworthy. We were informed significantly less than daycare. The teachers were not their when we dropped off our child (at 7:45) and were long gone by the time we picked her up. We got to see her daily work periodically, not weekly as in daycare. The attitude of the teachers and staff was what you would expect from someone with union backing and very little competition. (Private schools are out of our price range).
Choice is the key. Government run schools crowd out choice except for the top earners of society. Without choice, we have no power.
On a side note, it is very interesting that private establishments such as Kumon, Oxford Learning Center, and others are popping up all over. There is a market for establishments that will supplement your child's education. If our school system was doing a good job, this wouldn't be happening.
I know how full day learning for four and five year olds will go. The Toronto garbage strike provides a strong clue. The staff will have great compensation packages, great benefits, and a Cadillac pension plan and they will still strike or threaten to strike every three or four years.
Full day learning for four and five year olds is a bad idea the deserves to be stopped. Write to your provincial government representative and tell them so.
Right On
Saturday, August 15, 2009
History of the World
The history of the world is one of tyranny and misery. People throughout history have lived under tyranny of an all powerful leader or state. The grandest exception to this is the United States for the last 233 years. The United States has been a pond of freedom and prosperity in an ocean of tyranny and misery.
Why? The DNA of the American is no different than others. Look no further than the constitution and the bill of rights. The right to Life, Liberty and The Pursuit of Happiness is the foundation. The bill of rights lists the protections that the citizens have from their own government. How profound. Freedom is unleashed. With freedom, citizens are unshackled to pursue their interests. And pursue they do. This pursuit leads to achievement and effort and individual betterment.
Do not muck this up. Allow the individual to pursue, achieve, and advance and you have a better citizenry and country.
Right On
Why? The DNA of the American is no different than others. Look no further than the constitution and the bill of rights. The right to Life, Liberty and The Pursuit of Happiness is the foundation. The bill of rights lists the protections that the citizens have from their own government. How profound. Freedom is unleashed. With freedom, citizens are unshackled to pursue their interests. And pursue they do. This pursuit leads to achievement and effort and individual betterment.
Do not muck this up. Allow the individual to pursue, achieve, and advance and you have a better citizenry and country.
Right On
Wednesday, July 1, 2009
Nationalized Healthcare - To Our American Friends
You are in the middle of the great debate. Which mode of health care delivers health care most efficiently; public, private, or a combination of the two. Many have pointed to Canada's system to argue that public delivery is the "best". Maybe it is, maybe it isn't. This I don't want to argue. But, you should have an idea about the difference in what we pay in tax compared to what you pay in tax.
We have roughly similar societies. We don't have to finance a per capita defense budget as large as yours but everything else is similar. There is a great Canadian income tax calculator at http://www.ey.com/CA/en/Services/Tax/Tax-Calculators. This provides the amount of tax on income owed to the federal and provincial governments on various levels of taxable income. Taxable income is a close proxy to salary.
At $50,000 of taxable income, $9,497 of tax is owed in the province of Ontario.
At $100,000, $28,036 is owed.
At $150,000, $50,453 is owed.
Canadian's can use RSP contributions (similar to IRA contributions) to lower taxable income by $20,000 and defer tax to retirement years but there aren't many other methods to lower tax.
This doesn't include federal and provincial sales tax of roughly 14% on non-staple items nor property tax of roughly 1% of the value our homes nor many other nuisance taxes and tariffs.
Dear Americans, calculate your total tax and add your insurance premium to it and I will bet that the sum doesn't come close to what our total tax bill adds up to. It may if you choose the public health care delivery method.
Good luck.
Right on
We have roughly similar societies. We don't have to finance a per capita defense budget as large as yours but everything else is similar. There is a great Canadian income tax calculator at http://www.ey.com/CA/en/Services/Tax/Tax-Calculators. This provides the amount of tax on income owed to the federal and provincial governments on various levels of taxable income. Taxable income is a close proxy to salary.
At $50,000 of taxable income, $9,497 of tax is owed in the province of Ontario.
At $100,000, $28,036 is owed.
At $150,000, $50,453 is owed.
Canadian's can use RSP contributions (similar to IRA contributions) to lower taxable income by $20,000 and defer tax to retirement years but there aren't many other methods to lower tax.
This doesn't include federal and provincial sales tax of roughly 14% on non-staple items nor property tax of roughly 1% of the value our homes nor many other nuisance taxes and tariffs.
Dear Americans, calculate your total tax and add your insurance premium to it and I will bet that the sum doesn't come close to what our total tax bill adds up to. It may if you choose the public health care delivery method.
Good luck.
Right on
Saturday, June 27, 2009
Why I don't want a public daycare service
The Toronto garbage strike. Garbage collectors earn between $45 and $60K per year, have a great pension, bank up to 18 sick days per year and have other benefits. They still strike. Doesn't everyone see the connection.
Public daycare workers will be offered overly generous compensation and benefits and with time will push for more. The push will never end. They will hold parents hostage with strikes or threatened strikes.
The system as it stands is a vast transfer of wealth from those working in the private sector to those working in the public sector. Public daycare only adds to the problem.
Right On
Public daycare workers will be offered overly generous compensation and benefits and with time will push for more. The push will never end. They will hold parents hostage with strikes or threatened strikes.
The system as it stands is a vast transfer of wealth from those working in the private sector to those working in the public sector. Public daycare only adds to the problem.
Right On
Friday, June 26, 2009
Iran, Iraq, & exporting democracy and freedom
Interesting this uprising in Iran. Could it be that they look at Iraqis without Saddam H. with envy. They see Iraqis' upcoming freedom and want some for themselves. I hope they succeed.
Is this the Bush doctrine in effect? Bring democracy to a region and eventually all tyrannical governments in that region will succumb.
Who says you can't export democracy. And who says you especially can't export it by force. Japan and Germany beg to differ; and are thankful.
Freedom is the natural yearning of the human heart and unleashes the human spirit. Democracy and capitalism are the natural extension of freedom. A free nation is a better nation. The proof is in.
Right on
Is this the Bush doctrine in effect? Bring democracy to a region and eventually all tyrannical governments in that region will succumb.
Who says you can't export democracy. And who says you especially can't export it by force. Japan and Germany beg to differ; and are thankful.
Freedom is the natural yearning of the human heart and unleashes the human spirit. Democracy and capitalism are the natural extension of freedom. A free nation is a better nation. The proof is in.
Right on
Wednesday, June 24, 2009
Conservatism taught to my children
Why are there wars daddy?
Well, because countries, like people, have differences.
My teacher says that these countries should just talk and not go to war.
I agree to a certain extent. All options should be explored and exhausted before going to war. However, once all options are exhausted, there are two paths; appeasement or war. What is appeasement daddy? It is giving the enemy what it wants. Appeasement never works. It leads only to further demands. It delays the inevitable war or leads to surrender. It is like the bully at school who demands a dollar. If you give him a dollar to make him go away, I promise you he will demand another dollar tomorrow.
Your teacher says we should talk to our enemies. There is one truism son: When good negotiates with bad, good loses every time. Son, we believe in freedom, democracy, and capitalism for everyone. It is a system that has proven itself to produce the most human happiness where ever it has been tried. All other systems fail in comparison. If the enemy rejects freedom, democracy , and capitalism, we have nothing to negotiate.
To often those who want to negotiate to promote peace just want to be left in peace. Peace can be had instantly through surrender but this is no way to live. Our system is the best and we will have to sometimes fight to keep it.
Thanks for the question son.
Right on
Saturday, June 20, 2009
Conservatism taught to my children
How was the game son? Great dad. I played well. Did you win? Well, they don't keep score. Why don't they keep score dad? Yes, that's right. I forgot about that.
They don't keep score because they want to protect the self esteem of the players on the losing side. When you lose you don't feel good do you? No, I feel bad when we lose. But dad, the Toronto Maple Leafs keep score. The players must feel really bad all the time. That's funny son. Yes, they keep score. They aren't children so they don't need to protect their self esteem. Is it good that we don't keep score. No son, it's bad.
They want to protect your self esteem. In other words, they want your self esteem to develop and grow. But they misunderstand how self esteem develops. A positive self esteem comes from accomplishment. When you can look in the mirror and say "I did a good job" you are developing positive self esteem. If you know you didn't do a good job but someone tells you that you did your self esteem doesn't grow. You know they aren't being truthful but simply want you to feel better.
When you win; rejoice, but also ask yourself what you did well and what could use improvement. When you lose, ask yourself why you lost. Try to correct it. True self esteem will come when you beat the team that beat you. This is accomplishment. You improved yourself and the proof is that you beat the team that could once beat you.
By not keeping score the league is robbing you of this process. But do you know what the dirty little secret is son? No dad. The kids are keeping score in their heads. I bet you know what the score was don't you son. Yes dad. We won 3 -2. Atta' boy son. Thanks dad.
That's a lesson for you. Accomplishment and overcoming obstacles will make you a better person.
They don't keep score because they want to protect the self esteem of the players on the losing side. When you lose you don't feel good do you? No, I feel bad when we lose. But dad, the Toronto Maple Leafs keep score. The players must feel really bad all the time. That's funny son. Yes, they keep score. They aren't children so they don't need to protect their self esteem. Is it good that we don't keep score. No son, it's bad.
They want to protect your self esteem. In other words, they want your self esteem to develop and grow. But they misunderstand how self esteem develops. A positive self esteem comes from accomplishment. When you can look in the mirror and say "I did a good job" you are developing positive self esteem. If you know you didn't do a good job but someone tells you that you did your self esteem doesn't grow. You know they aren't being truthful but simply want you to feel better.
When you win; rejoice, but also ask yourself what you did well and what could use improvement. When you lose, ask yourself why you lost. Try to correct it. True self esteem will come when you beat the team that beat you. This is accomplishment. You improved yourself and the proof is that you beat the team that could once beat you.
By not keeping score the league is robbing you of this process. But do you know what the dirty little secret is son? No dad. The kids are keeping score in their heads. I bet you know what the score was don't you son. Yes dad. We won 3 -2. Atta' boy son. Thanks dad.
That's a lesson for you. Accomplishment and overcoming obstacles will make you a better person.
Friday, June 19, 2009
Conservatism taught to my children
Thank you for helping me mow the lawn. What kind of chocolate bar do you want? The reason I am buying you a chocolate bar is you assisted me with my tasks. You earned the chocolate bar. The reason I am not buying your brother or your sister a chocolate bar is that they didn’t help. This is an important lesson in life. If you want something, you must earn it.
Here comes mommy. Mommy is a liberal. Mommy wants you to share your chocolate bar equally with your brother and your sister. Now that she is gone, I want to reiterate, it is your chocolate bar and you decide what to do with it. Any decision is fine with me. Let me point out one thing. Your sister has a broken leg and I believe she wanted to help but couldn’t. She hung around the whole time. I agree, I think you should give her a piece. This is an important lesson in life. It is noble to help those who can’t help themselves.
We’ll continue tomorrow.
Right on
Here comes mommy. Mommy is a liberal. Mommy wants you to share your chocolate bar equally with your brother and your sister. Now that she is gone, I want to reiterate, it is your chocolate bar and you decide what to do with it. Any decision is fine with me. Let me point out one thing. Your sister has a broken leg and I believe she wanted to help but couldn’t. She hung around the whole time. I agree, I think you should give her a piece. This is an important lesson in life. It is noble to help those who can’t help themselves.
We’ll continue tomorrow.
Right on
Sunday, June 14, 2009
Obscene profits
There is only one number quoted when the charge is obscene profit. That is the profit number. One billion dollars, for example. That is a big number. Any business that has one billion dollars of profit must be regulated.
It is a big number. But, what if $10 billion was invested. The return is then 10%. Not too obscene. If $20 billion was invested, people are getting fired if profit is one billion.
The profit number doesn't tell the whole story.
It is a big number. But, what if $10 billion was invested. The return is then 10%. Not too obscene. If $20 billion was invested, people are getting fired if profit is one billion.
The profit number doesn't tell the whole story.
Saturday, June 6, 2009
The Canadian Dollar
I love it when our dollar rises. I am richer when our Canadian dollar rises. I can buy more lettuce and golf balls and gas per dollar when our Canadian dollar rises. Some get hurt when our Canadian dollar rises (vs. the US dollar). Manufacturers who export to the US get hurt. Their product becomes more expensive to Americans and less will be bought. This is somewhat mitigated if inputs needed to manufacture the product are bought from the US.
There is an attitude in Canada that a rising Canadian dollar is bad for Canadians. It isn't. It is nothing but a positive except for exporters. As there are more Canadians than Canadian exporters, a rising Canadian dollar is a net positive for Canada.
Let it rise Bank of Canada!
Right On.
There is an attitude in Canada that a rising Canadian dollar is bad for Canadians. It isn't. It is nothing but a positive except for exporters. As there are more Canadians than Canadian exporters, a rising Canadian dollar is a net positive for Canada.
Let it rise Bank of Canada!
Right On.
Saturday, May 30, 2009
LCBO & profit
Again I heard on the radio that the LCBO (liquor control board of Ontario) was great for Ontarians because it generates a profit. This is hogwash.
The LCBO is a pure monopoly with a product that is relatively price inelastic. Inelastic means that if the price changes, sales do not change by much. If the price of a 6 pack goes up by 1$, I will still by the six pack (my name is not Joe).
The LCBO generates a profit by inflating prices with the full knowledge that sales won't decline by much. Who pays the bill? Me the consumer and other business. If I have $100 of disposable income per week and I pay $13 for a 6 pack, I have $87 to spend elsewhere. If the price was $7, I would have $93 to spend elsewhere. I lose by not being able to buy an additional $6 of other goods and other business loses by not selling me an additional $6 worth of goods. Should I decide to save the $6, the banks have more money to lend to a budding entrepreneur.
Government should not be in business. Government business reduces disposable income and crowds out other business.
Right On
The LCBO is a pure monopoly with a product that is relatively price inelastic. Inelastic means that if the price changes, sales do not change by much. If the price of a 6 pack goes up by 1$, I will still by the six pack (my name is not Joe).
The LCBO generates a profit by inflating prices with the full knowledge that sales won't decline by much. Who pays the bill? Me the consumer and other business. If I have $100 of disposable income per week and I pay $13 for a 6 pack, I have $87 to spend elsewhere. If the price was $7, I would have $93 to spend elsewhere. I lose by not being able to buy an additional $6 of other goods and other business loses by not selling me an additional $6 worth of goods. Should I decide to save the $6, the banks have more money to lend to a budding entrepreneur.
Government should not be in business. Government business reduces disposable income and crowds out other business.
Right On
Thursday, May 28, 2009
Pension payments to public servants is where we get taken
I sat down with a 55 year old lady who is contemplating retirement. She works for the federal government and earns $90,000. She has been with them for 30 years. Because she has been there 30 years she is entitled to full pension. She will get $55,000 per year plus inflation starting now. I did a present value calculation. If inflation averages 2.5% and she lives to 85, the present value of her payment stream is over $1,000,000. The RRSP account of someone her age without a pension would have to be over $1,000,000 to be in a similar situation. I have never seen an RRSP account over $1,000,000.
You can argue that her salary of $90,000 is too much. But, her pension is definitely too generous. This is where the tax payer gets shafted.
Unions inflate pensions rather than wages because they know that this draws little attention from the taxpayer.
Right On
You can argue that her salary of $90,000 is too much. But, her pension is definitely too generous. This is where the tax payer gets shafted.
Unions inflate pensions rather than wages because they know that this draws little attention from the taxpayer.
Right On
Saturday, April 11, 2009
http://www.economist.com/debate/overview/142&sa_campaign=debateseries/debate21/ads/house/125
This is scary. This is the byproduct of a leftwing dominated eduction for two generations.
Individual income has a direct correlation with productivity. There is no disputing this. People rarely get paid big bucks unless they earn them (unless they are union protected or work for the government).
If you take from the most productive and give to the least productive you get less productivity.
Teach your children about the beneficence of capitalism and freedom. Our schools and universities won't.
Right On
This is scary. This is the byproduct of a leftwing dominated eduction for two generations.
Individual income has a direct correlation with productivity. There is no disputing this. People rarely get paid big bucks unless they earn them (unless they are union protected or work for the government).
If you take from the most productive and give to the least productive you get less productivity.
Teach your children about the beneficence of capitalism and freedom. Our schools and universities won't.
Right On
Tuesday, March 31, 2009
Do you dream of peace?
I've got a daughter in grade 1. Cute as a button and pretty darn smart (I fear the comparison may be self relative). Swinging on the right side of the political / philosophical spectrum, I am well aware of the left wing bias in our school system. Although I haven't seen much (except for my post "It's all about the children"), I have a friend with a daughter in grade 5.
My friend went to his daughter's school concert recently and was wee bit annoyed with the content. They sang a song where the chorus was "Do you dream of peace"? The chorus was repeated ad nauseam. The message was loud and clear and I don't want my daughter learning it. War is always wrong, never justified and we should resolve our conflicts by dialogue.
As I watched the movie Saving Private Ryan I was thinking what would happen to the teacher who produced this concert in 1942. The parents would have shouted "we dream of victory" and beat the daylights out of the teacher. I would ask the current teacher do you dream of peace or do you want to be left in peace. Peace can come instantly through surrender.
Will my daughter be taught that nothing in life is worth dying for? If so, when did this begin? As Reagan said in his 1964 speech, "should Christ have refused the cross, did the fallen allies in WW2 die in vain, should slaves accept slave masters.
I will teach my daughter that the concept of peace at any price is wrong. The world has a history of war and we have and will have enemies. If we can avoid war great; but there are some lines the enemy can't cross.
Right on
My friend went to his daughter's school concert recently and was wee bit annoyed with the content. They sang a song where the chorus was "Do you dream of peace"? The chorus was repeated ad nauseam. The message was loud and clear and I don't want my daughter learning it. War is always wrong, never justified and we should resolve our conflicts by dialogue.
As I watched the movie Saving Private Ryan I was thinking what would happen to the teacher who produced this concert in 1942. The parents would have shouted "we dream of victory" and beat the daylights out of the teacher. I would ask the current teacher do you dream of peace or do you want to be left in peace. Peace can come instantly through surrender.
Will my daughter be taught that nothing in life is worth dying for? If so, when did this begin? As Reagan said in his 1964 speech, "should Christ have refused the cross, did the fallen allies in WW2 die in vain, should slaves accept slave masters.
I will teach my daughter that the concept of peace at any price is wrong. The world has a history of war and we have and will have enemies. If we can avoid war great; but there are some lines the enemy can't cross.
Right on
Thursday, March 26, 2009
Ontario Budget
"•Cutting personal income tax rate from 6.05% to 5.05% on the first $36,848. Rates for next two categories ($36,848 - $73,698 and greater than $73,698) stay the same, at 9.15% and 11.16%."
I love the rich. One day I hope to be one. The rich pay most of the tax. The top 10% of income earners pay something like 40% of total tax revenue. The bottom 50% pay something like 10%. Hug the rich; they pay the bills!
Why are the rich rich? Because they work hard and smart. They are highly productive people. Sure some inherit their wealth but most earn it.
The Ontario government is cutting tax the typical way. They are lowering tax rates at the bottom of the income spectrum and leaving rates at the top as is. (I am pleasantly surprised they didn't raise them). If the goal is to reignite an economy, the opposite should be done. Or, cut tax rates accross the income spectrum by the same percentage amount. For example, cut all rates by 10%.
Income tax is a disincentive to earn income. The higher the tax the greater the disincentive. A progressive tax increases the disincentive as income rises. In Ontario, income over approximately $126,000 is taxed at 46%. Talk about disincentive! Why not decrease the disincentive (increase the incentive) to work and invest for the most productive in society. Long live supply side economics!
Right On
I love the rich. One day I hope to be one. The rich pay most of the tax. The top 10% of income earners pay something like 40% of total tax revenue. The bottom 50% pay something like 10%. Hug the rich; they pay the bills!
Why are the rich rich? Because they work hard and smart. They are highly productive people. Sure some inherit their wealth but most earn it.
The Ontario government is cutting tax the typical way. They are lowering tax rates at the bottom of the income spectrum and leaving rates at the top as is. (I am pleasantly surprised they didn't raise them). If the goal is to reignite an economy, the opposite should be done. Or, cut tax rates accross the income spectrum by the same percentage amount. For example, cut all rates by 10%.
Income tax is a disincentive to earn income. The higher the tax the greater the disincentive. A progressive tax increases the disincentive as income rises. In Ontario, income over approximately $126,000 is taxed at 46%. Talk about disincentive! Why not decrease the disincentive (increase the incentive) to work and invest for the most productive in society. Long live supply side economics!
Right On
Tuesday, March 24, 2009
Let's Create Jobs
I have a plan that will create jobs and a new industry in Canada.
We in Canada produce very little sugar. We should change this and develop an industry that will create home grown sugar for domestic and foreign consumption and provide well paying jobs for Canadians.
Canada has never had the climate to grow sugar cane and have therefore never had a sugar industry. But, with technology we can circumvent our climate constraints. We have the technology to build greenhouses that can house the climate necessary to grow sugar cane.
The government should embark upon a program that pays for the construction of sugar cane growing ready greenhouses and to hire staff necessary to grow it. This creates construction, administration, marketing, and executive jobs and creates demand for feeder industry and expertise.
Of course, a new industry will need some help to produce a competitive product. Foreign producers have a climate advantage that we can't compete against. For this reason, I suggest a series of subsidies and tarriffs. Subsidies will have the effect of paying some of the cost thereby allowing our sugar company to sell product profitably at a lower price than possible without the subsidy. Tarriffs increase the price of foreign sugar sold in Canada. This increases the competitive position of our greenhouse sugar to Canadians. Canadian sugar on Canadian tables!
There is very little downside to my plan. The upside is obvious. More jobs and a new industry.
Oh yes, that is correct...subsidies come from the tax Canadians pay. We may have to raise tax to finance the subsidies. Tarriffs raise the price of foreign sugar for all Canadians and allows our company to raise its price. Yes, Canadians will be poorer and be paying more for sugar but don't be a downer. We have created a new industry. Yes, it is possible that the nations that export sugar may be unhappy with what we propose. And it is possible that they may retaliate with tarriffs on our exported products. And they may try to create industries that we excel at thereby harming us.
Come to think of it...my plan is CRAP!
Right On
We in Canada produce very little sugar. We should change this and develop an industry that will create home grown sugar for domestic and foreign consumption and provide well paying jobs for Canadians.
Canada has never had the climate to grow sugar cane and have therefore never had a sugar industry. But, with technology we can circumvent our climate constraints. We have the technology to build greenhouses that can house the climate necessary to grow sugar cane.
The government should embark upon a program that pays for the construction of sugar cane growing ready greenhouses and to hire staff necessary to grow it. This creates construction, administration, marketing, and executive jobs and creates demand for feeder industry and expertise.
Of course, a new industry will need some help to produce a competitive product. Foreign producers have a climate advantage that we can't compete against. For this reason, I suggest a series of subsidies and tarriffs. Subsidies will have the effect of paying some of the cost thereby allowing our sugar company to sell product profitably at a lower price than possible without the subsidy. Tarriffs increase the price of foreign sugar sold in Canada. This increases the competitive position of our greenhouse sugar to Canadians. Canadian sugar on Canadian tables!
There is very little downside to my plan. The upside is obvious. More jobs and a new industry.
Oh yes, that is correct...subsidies come from the tax Canadians pay. We may have to raise tax to finance the subsidies. Tarriffs raise the price of foreign sugar for all Canadians and allows our company to raise its price. Yes, Canadians will be poorer and be paying more for sugar but don't be a downer. We have created a new industry. Yes, it is possible that the nations that export sugar may be unhappy with what we propose. And it is possible that they may retaliate with tarriffs on our exported products. And they may try to create industries that we excel at thereby harming us.
Come to think of it...my plan is CRAP!
Right On
Sunday, March 22, 2009
My favorite movie Starring Ronald Reagan.
I think this is his best work. Sit back, relax, and enjoy the next half hour. It is remarkably relevant today.
www.youtube.com/watch?v=yt1fYSAChxs
Right On
www.youtube.com/watch?v=yt1fYSAChxs
Right On
The Tyranny of the Special Interest Group
The strongest influence on a politician is exercised by the lobbying of special interest groups. The goal of a special interest group is to confer substantial benefits to its membership and have the cost of these benefits spread thinly accross the population. The goal of the politician is to secure the block of voters who comprise the special interest group without losing votes from the rest of the population. Both the politician and the members of the special interest group gain from the relationship at the expense of the population. It is a relationship without much of natuaral check or balance. The result is a poorer population.
Both the special interest group and the politician rely on the rational apathy of the population. The key word is rational. I'll use milk farmers as a an example. If the government mandates a 5% increase in the price of milk and the proceeds given to milk farmers, milk farmers gain a 5% increase in their revenue (I am ignoring the fact that some consumers will choose to substitute other products for milk as a result of the price hike). I am out a only small sum as milk comprises a small portion of my expenses. Let's pretend that a 5% increase in the price of milk raises my total expenses by .1% The milk farmer gains substantially more than I have to lose. What is my rational response to a 5% increase in the price of milk? Not much because it doesn't affect me greatly. The politician relies on this.
Rational apathy is at work. I can devote time and resources lobbying the government to remove the mandated hike, but this is irrational. My gain with a successful lobbying effort is small. My time and resources are better spent on other things. Compare this to the milk farmer. His lobbying efforts brought him a 5% increase in revenue. The return from his lobbying effort is substantial. His lobbying effort is rational. The politician acts rationally by conferring benefits to milk farmers. He gains or secures their vote without much risk of losing mine.
The problem is that there are many special interest groups. Each has as its goal confering benefits on its members while spreading the costs thinly accross the population. These costs add up! The members who don't belong to a special interest group (largely T4 income earners who work outside of the public sector) pay dearly for these benefits. We pay through high taxes and higher prices due to tarrifs and subsidies. As an example, read my previous post "It's About The Children" and consider how and who pays these salaries and benefits.
There is only one solution. We who don't belong to a special interest group must group and act like one. Politicians who succumb to the desires of other special interest groups will lose our vote. The Canadian Taxpayers Federation would be a good grouping mechanism.
Right On
Both the special interest group and the politician rely on the rational apathy of the population. The key word is rational. I'll use milk farmers as a an example. If the government mandates a 5% increase in the price of milk and the proceeds given to milk farmers, milk farmers gain a 5% increase in their revenue (I am ignoring the fact that some consumers will choose to substitute other products for milk as a result of the price hike). I am out a only small sum as milk comprises a small portion of my expenses. Let's pretend that a 5% increase in the price of milk raises my total expenses by .1% The milk farmer gains substantially more than I have to lose. What is my rational response to a 5% increase in the price of milk? Not much because it doesn't affect me greatly. The politician relies on this.
Rational apathy is at work. I can devote time and resources lobbying the government to remove the mandated hike, but this is irrational. My gain with a successful lobbying effort is small. My time and resources are better spent on other things. Compare this to the milk farmer. His lobbying efforts brought him a 5% increase in revenue. The return from his lobbying effort is substantial. His lobbying effort is rational. The politician acts rationally by conferring benefits to milk farmers. He gains or secures their vote without much risk of losing mine.
The problem is that there are many special interest groups. Each has as its goal confering benefits on its members while spreading the costs thinly accross the population. These costs add up! The members who don't belong to a special interest group (largely T4 income earners who work outside of the public sector) pay dearly for these benefits. We pay through high taxes and higher prices due to tarrifs and subsidies. As an example, read my previous post "It's About The Children" and consider how and who pays these salaries and benefits.
There is only one solution. We who don't belong to a special interest group must group and act like one. Politicians who succumb to the desires of other special interest groups will lose our vote. The Canadian Taxpayers Federation would be a good grouping mechanism.
Right On
Saturday, March 14, 2009
It's About The Children
In 2004 an income of $89,000 was enough to place an individual in the top 5% of our country's income earners. www.statcan.gc.ca/daily-quotidien/070924/dq070924a-eng.htm. Inflating that figure by 2.5%, a rough proxy for inflation for the last 5 years, gives a threshold of $100,700 to join the top 5% club in 2009.
Thanks to the website of the Elementary Teachers Federation of Ontario, we find this http://www.etfo.ca/BargainingandAgreements/comparingagreements/Pages/default.aspx. Currently a teacher with 11 years of experience in Peel region (a 'burb of Toronto) earns $84,088. I estimate that a teacher has 3 months off. I'll give them one month of holiday and the rest is non-work. $84,088 for 10 months of work equates to $100,900 for 12 months of work.
A teacher's starting salary is $45,744 and grows each year until they reach the maximum of $84,088 11 years later. Every year the grid moves higher with inflation and gains from collective bargaining. For example, the starting - maximum amounts for 2005/2006 were $43,467 -$79,073 and for 2006/2007 were $44,315 - 81,461. I am not sure what their pension benefit is but I bet it is generous. I know it is a defined benefit pension plan meaning they get a percentage of their ending salary for the rest of their life.
I don't begrudge anyone for making a nice salary, especially if I am not paying for it. But, there is too much wrong with the structure of a teacher's remuneration in Ontario that it is worth commenting. Firstly, should teachers earn at the top 5% of income earners? I have a problem with that. It is a tough job with responsibility but so is every job that pays in the top 5% bracket. Secondly, they need to realize the extent of their remuneration. Many teachers complain. This needs to stop. Thirdly, 11 years to maximum salary is a massive benefit. At some point, I will reach my maximum salary. I would have been substantially better off if I reached the maximum 11 years after starting my career. The average teacher will reach maximum earnings at the age of 36. Forthly, they get the two best weather months off.
The power of their union is immense and it amounts to a large special interest group (more on the evils of special interest groups to come in another post). Politicians battle the teacher's union at consederable risk. Ask Mike Harris. There are roughly 170,000 teachers in Ontario out of 12,000,000 Ontarians of all ages. When teacher's say "We need smaller classes" I hear "we want more teachers to make our union even stronger". The politician who secures the blessing of the teacher's union drastically enhances the chance of winning the election and vice versa. But, who has my back?
Teachers and their union are responsible for a large transfer of wealth from the private sector to the (psudo) public sector. This eventually has to be dealt with and scaled back.
RIGHT ON
Thanks to the website of the Elementary Teachers Federation of Ontario, we find this http://www.etfo.ca/BargainingandAgreements/comparingagreements/Pages/default.aspx. Currently a teacher with 11 years of experience in Peel region (a 'burb of Toronto) earns $84,088. I estimate that a teacher has 3 months off. I'll give them one month of holiday and the rest is non-work. $84,088 for 10 months of work equates to $100,900 for 12 months of work.
A teacher's starting salary is $45,744 and grows each year until they reach the maximum of $84,088 11 years later. Every year the grid moves higher with inflation and gains from collective bargaining. For example, the starting - maximum amounts for 2005/2006 were $43,467 -$79,073 and for 2006/2007 were $44,315 - 81,461. I am not sure what their pension benefit is but I bet it is generous. I know it is a defined benefit pension plan meaning they get a percentage of their ending salary for the rest of their life.
I don't begrudge anyone for making a nice salary, especially if I am not paying for it. But, there is too much wrong with the structure of a teacher's remuneration in Ontario that it is worth commenting. Firstly, should teachers earn at the top 5% of income earners? I have a problem with that. It is a tough job with responsibility but so is every job that pays in the top 5% bracket. Secondly, they need to realize the extent of their remuneration. Many teachers complain. This needs to stop. Thirdly, 11 years to maximum salary is a massive benefit. At some point, I will reach my maximum salary. I would have been substantially better off if I reached the maximum 11 years after starting my career. The average teacher will reach maximum earnings at the age of 36. Forthly, they get the two best weather months off.
The power of their union is immense and it amounts to a large special interest group (more on the evils of special interest groups to come in another post). Politicians battle the teacher's union at consederable risk. Ask Mike Harris. There are roughly 170,000 teachers in Ontario out of 12,000,000 Ontarians of all ages. When teacher's say "We need smaller classes" I hear "we want more teachers to make our union even stronger". The politician who secures the blessing of the teacher's union drastically enhances the chance of winning the election and vice versa. But, who has my back?
Teachers and their union are responsible for a large transfer of wealth from the private sector to the (psudo) public sector. This eventually has to be dealt with and scaled back.
RIGHT ON
Tuesday, March 10, 2009
Supply Side Economics - The Free Lunch
Canada has yet to have a meaningful discussion about Supply Side Economics and we are poorer as a result. There is a free lunch and it is called supply side economics.
Supply side economics has as its foundation that individuals are rational and incentives and disincentives matter and affect behaviour on the margin. Out of this arose the famous Laffer curve.
The Laffer curve simply makes sense. At a 0% tax rate the government has no revenue. If tax rates rise, government revenue rises but only to a certain point. Once that point is reached, increases in tax rates actually reduce government revenue. At a 100% tax rate the government has no revenue. Who would work if after-tax income is $0? The Laffer curve states that at high (marginal) tax rates, a reduction in the tax rate actually increases government revenue.
Why? Taxes are a disincentive to earn employment income (or interest income, or dividends, or capital gains). Lower the disincentive to earn income and you get more people who want earn income (work). Lower the disincentive to invest and you get more business, savings (earning interest income), and investment. The two add up to a greater desire to work and a greater demand for workers (more people working harder and more people working).
The criticism about supply side economics is that it is tax cuts for the rich and that this creates a greater inequity between the rich and the poor. The response is ask a poor person what they want, greater equality or more money, and they rationally choose more money every time.
Every time it has been tried (both Kennedy and Reagan slashed taxes, Ireland, New Zealand,…) it has worked. “Worked” is defined as an increase in government revenue after tax cuts. With Ontario’s high marginal tax rates (46% federal and provincial combined rate on income over $126,000), Ontario is a prime candidate for a supply side tax cut. Let's eat the free lunch.
Right On(tario)
Supply side economics has as its foundation that individuals are rational and incentives and disincentives matter and affect behaviour on the margin. Out of this arose the famous Laffer curve.
The Laffer curve simply makes sense. At a 0% tax rate the government has no revenue. If tax rates rise, government revenue rises but only to a certain point. Once that point is reached, increases in tax rates actually reduce government revenue. At a 100% tax rate the government has no revenue. Who would work if after-tax income is $0? The Laffer curve states that at high (marginal) tax rates, a reduction in the tax rate actually increases government revenue.
Why? Taxes are a disincentive to earn employment income (or interest income, or dividends, or capital gains). Lower the disincentive to earn income and you get more people who want earn income (work). Lower the disincentive to invest and you get more business, savings (earning interest income), and investment. The two add up to a greater desire to work and a greater demand for workers (more people working harder and more people working).
The criticism about supply side economics is that it is tax cuts for the rich and that this creates a greater inequity between the rich and the poor. The response is ask a poor person what they want, greater equality or more money, and they rationally choose more money every time.
Every time it has been tried (both Kennedy and Reagan slashed taxes, Ireland, New Zealand,…) it has worked. “Worked” is defined as an increase in government revenue after tax cuts. With Ontario’s high marginal tax rates (46% federal and provincial combined rate on income over $126,000), Ontario is a prime candidate for a supply side tax cut. Let's eat the free lunch.
Right On(tario)
Thursday, March 5, 2009
Why socialism doesn't work.
Socialism does not work. Why not? The average wage in society is lower due to socialism and everyone has to make do. Socialism destroys wealth. Socialism has many definitions but the one I am using is a redistribution of income from those who have it to those who don't. Ultimate socialism would be determining the average wage, taxing those who make over it down to the average wage, and subsidizing those who earn below it up to the average wage. The problem with ultimate socialism is that those who earn over the average wage have no incentive to keep earning if it will be taxed away. Once they earn up to the average wage they will choose leisure over work. The average wage then falls. Incentives matter and greatly. Socialism does reduce the gap between the rich and the poor. Unfortunately, it does so by making everyone poorer. Socialism is a scaled down version of ultimate socialism. It doesn't work either but collapses slower.
The bottom line is that if you take away more from people who work and give more to people who don't work the result will be less work. For both rich and poor the incentive is to work less.
Right on
The bottom line is that if you take away more from people who work and give more to people who don't work the result will be less work. For both rich and poor the incentive is to work less.
Right on
Wednesday, March 4, 2009
Who Pays For Cap & Trade?
Who pays for Cap and Trade? I work for a non-unionized company in Canada. I receive employment income. Who is going to pay for Cap and Trade or any of the carbon reducing initiatives? Me, and the vast majority of people who work for non-unionized profit-motivated companies.
Business has predominantly one goal and that is to create profit. This is as it should be. Competition keeps them honest. Business has revenue and cost with the difference being profit. It is universally agreed that any carbon reducing initiative is going to increase the cost of energy. Most businesses have an energy cost. Some are large and some small but all have the cost. What will business do if the cost of energy rises substantially? Due to the profit motive, business will pass on at least a portion of the added cost to the consumer. They have no choice. As an example, if revenue remains stable but cost rises 10% the business generates less profit. Assuming that competition is fierce, which it always is in a free market, there is little room to absorb the reduction in profit. The competition has to do the same.
Why do I pay for it? A hike in price of a good or service due to hike in cost is a one-time inflationary event. A hike in the price of all goods and services is a big-time one-time event. If prices for everything go up 10%, inflation goes up 10%. My employer and most employers will be reluctant to increase my wage, which is another cost to my employer. This is especially true if profit is falling. What about the unionized worker and the public service worker? They will bargain for a cost of living increase. Cost of living increases may already be written in their contract. If prices rise 10% they will get a 10% raise (and probably something on top of that). They are no worse off after the inflationary event. I am. I won't get the raise. My company will be in no position to offer CPI offsetting raises. If inflation jumps 10% and my salary doesn't, I am 10% worse off. I pay for the carbon reduction initiative.
I have a proposal. I will agree to the situation if public sector employees and unionized employees forgo cost of living increases for a certain period after the carbon reduction initiative is implemented. If so, they may not be so welcoming of its implementation. This levels the playing field.
Right On
Business has predominantly one goal and that is to create profit. This is as it should be. Competition keeps them honest. Business has revenue and cost with the difference being profit. It is universally agreed that any carbon reducing initiative is going to increase the cost of energy. Most businesses have an energy cost. Some are large and some small but all have the cost. What will business do if the cost of energy rises substantially? Due to the profit motive, business will pass on at least a portion of the added cost to the consumer. They have no choice. As an example, if revenue remains stable but cost rises 10% the business generates less profit. Assuming that competition is fierce, which it always is in a free market, there is little room to absorb the reduction in profit. The competition has to do the same.
Why do I pay for it? A hike in price of a good or service due to hike in cost is a one-time inflationary event. A hike in the price of all goods and services is a big-time one-time event. If prices for everything go up 10%, inflation goes up 10%. My employer and most employers will be reluctant to increase my wage, which is another cost to my employer. This is especially true if profit is falling. What about the unionized worker and the public service worker? They will bargain for a cost of living increase. Cost of living increases may already be written in their contract. If prices rise 10% they will get a 10% raise (and probably something on top of that). They are no worse off after the inflationary event. I am. I won't get the raise. My company will be in no position to offer CPI offsetting raises. If inflation jumps 10% and my salary doesn't, I am 10% worse off. I pay for the carbon reduction initiative.
I have a proposal. I will agree to the situation if public sector employees and unionized employees forgo cost of living increases for a certain period after the carbon reduction initiative is implemented. If so, they may not be so welcoming of its implementation. This levels the playing field.
Right On
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