Andrew Jackson

Budget 2015: Not as balanced as it looks

Budget 2015 is, surprise, primarily a political document that extolls the government’s record and highlights tax cuts, but does almost nothing to deal with rising inequality or to shape the trajectory of the struggling economy.

As expected, annual contributions to Tax Free Savings Accounts are to be almost doubled to $10,000 per year, which will cost over $300 million in lost annual revenues within five years. The increase will eventually all but eliminate taxation of investment income, to the primary benefit of the very affluent earning more than $250,000 per year who collect...

In cutting federal deficit, Harper covers his ears

John Ibbitson / Globe and Mail

Was it wrong for the Harper government to balance the budget this year? That depends on whether we have become as conservative as the Prime Minister thinks we are.

The government promised to eliminate the federal deficit by 2015 and it has, although it took a bit of fiscal legerdemain. But in the opinion of many respected economists, a balanced budget is a mistake.

Growth is sluggish. Interest rates are at historic...

Investment should be the federal budget priority

The federal Budget to be introduced on April 21 should have one clear priority – to boost public and private investment so as to create jobs now and a more productive and sustainable economy tomorrow.

The slowing Canadian economy continues to be mainly driven by household borrowing fuelled by ultra low interest rates. With wages stagnant, families are still going deeper into and deeper into debt to spend more than they earn, setting the stage for a nasty housing crash and a rude shock to family finances down the road.

Meanwhile, investment actually shrank in the fourth...

Financial markets signalling stagnation

Which gives us a better picture of where the economy is headed -- near record low interest rates on government bonds or a stock market that is not far below record highs? 

In Canada as well as the United States, bond yields are just above record lows. The interest rate on 10-year Government of Canada bonds is about 1.4%, meaning that investors are prepared to lock in their money for 10 years for a return well below the official 2% inflation rate target. 

If there is an upturn in the economy and short-term interest rates or inflation rise, these investors will lose a lot of...

Canadian economy suffers from myth of comparative advantage

Economists love to talk about the theory of comparative advantage, which holds (somewhat counter intuitively) that two countries trading with each other will be better off if each specializes in what it does best, even if one country has an absolute competitive advantage in the production of all goods and services traded.

David Ricardo famously argued that it made sense for England to specialize in the production of cloth and Portugal that of wine, even though Portugal could produce both goods more cheaply.

Unfortunately, the theory has limited application to the real world,...

The Unbalanced Thinking Behind A Balanced Budget Law

The Harper government claims to be paragons of fiscal virtue. They have pledged to balance the federal budget this year, notwithstanding a slowing economy, and are likely set to announce details of  the balanced budget legislation promised in the 2013 Speech from the Throne. 

The promised legislation will disallow annual deficits in “normal economic times” (whatever they are) and “set concrete targets for returning to balance in the event of an economic crisis.” 

Balanced budget legislation is a bad idea since it would remove the flexibility which is needed to set fiscal...

Budget 2015: It is Time to Invest, Not Cut

In the run-up to the delayed federal budget, there is a strange disconnect between fiscal policy and our changing economic circumstances. Balancing the budget seems to remain the key political priority, as if nothing had changed.

But the collapse of oil and other resource prices has changed a lot. Most notably, the Bank of Canada has, unexpectedly, cut interest rates to take out “insurance” against a serious slump in our resource-dependent economy. TD Economics forecast slow growth of...

Demonized industrial policy puts corporate tax cuts to shame

The words “industrial policy” have been virtually banned from polite company, and should certainly never be uttered in the presence of small and impressionable children.

Many mainstream economists and conservative think-tanks believe that governments should seek only to create a favourable business climate through low taxes and light regulation, and should not intervene in the investment decisions of private corporations.

And yet, industrial policy (which...

B.C. income growth worst in Canada: analysis

Peter O'Neil / Vancouver Sun

OTTAWA — B.C. experienced the worst income growth — in fact, incomes declined — of any province in Canada during the 2006-12 period, according to an analysis of Statistics Canada data by an Ottawa think-tank.

B.C.’s inflation-adjusted median income fell 2.4 per cent, from $29,917 per tax filer to $29,200, during a period when Canada’s overall employment income grew by 3.5 per cent. Median income is the midway point between the lowest and...

Hamilton workers’ wages shrinking, think tank says

Hamilton Spectator

New research shows that workers across most of Ontario - including Hamilton - are becoming poorer, despite rising income levels across much of Canada.

The study by the Ottawa-based Broadbent Institute and provided to the Star found that Ontario’s median income decreased by 1.7 percent between 2006 and 2012. All other provinces and territories except British Columbia saw median income rise during the same period.

In Hamilton, median employment...


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