Another rant about fiscal conservatism

[sabotabby]

This link, brought to my attention via ed_rex, is worth a read. It's a comparison between the spending patterns of ostensibly "conservative" versus "liberal"* governments that gives lie to the popular conception of thrifty conservatives and tax-and-spend liberals.

Check out those bar graphs being essentially the same. Now, granted, there is not much difference between the Liberal Party and the CCRAP Party. We're not talking about a vast, insurmountable canyon between left and right. Stephen Harper consumes more kittens and Justin Trudeau had better hair until he cut it off, but those are social differences, not economic ones. Their economic policy was more or less the same last time I checked. If your average Canadian understood the slightest thing about economics** we could stay warm during polar vortex season with the sheer heat of all the collective anger that it would generate. But. Math is hard, let's go shopping, only we can't go shopping because the minimum wage hasn't kept up with the cost of living and the only jobs available now are minimum wage retail and food service that you were told you need to go to university if you didn't want to do all your life, and if you want them, prepare to stand in line to apply along with everyone else with a Masters degree.

Anyway.

So-called moderate Canadians love to think of themselves as socially liberal and fiscally conservative, with absolutely no clue as to why they want to be fiscally conservative. (Hint: It comes down to a fundamental misunderstanding about economics wherein the model of a private family that must budget and avoid falling into debt is expanded to somehow apply to a city, or a province, or a country, or even an entire planet. But it does not actually work that way. While no one likes the idea of wasting money, thriftiness is not necessarily a virtue when one is trying to, say, maintain highway infrastructure.)

The great lie at the heart of the austerity agenda is that it works. Tighten your belt, don't buy that big screen TV, and later on you can afford to buy a nice car. It might be tolerable to cause suffering, to siphon wealth from the poorest people to the richest, if in the end everyone benefited. (Just kidding. It wouldn't. Bear with me for a second, though.) If slashing environmental regulations and corporate tax actually created jobs, though, would we not have full employment by now? Because governments have been pursuing these policies for practically my entire lifetime, and yet the unemployment rate keeps increasing. We've "recovered" from the Great Recession but the vast majority of people I know—who are among the most privileged people—are still economically precarious. And, surprise surprise, after all that, all of the wealth has still ended up at the top. It's like someone planned it this way.

Which is basically why I want to scream every time someone promotes the myth of fiscal conservatism, because it's just not true. It's just that conservative governments waste money on different things, things that don't actually benefit anyone other than their cronies. Fiscal conservatives like to think of themselves as high-minded, tough but fair, without any sort of understanding or comprehension of the violence brought about by a cut-cut-cut mentality (or the fact that, in the end, absolutely no money is saved, and wealth is just transferred along to the elites).

One of my FB friends loves mayoral candidate John Tory. Like, loves him. Makes borderline homoerotic posts about him every day. It's weird. I see nothing in John Tory to inspire any sort of passion—he's run-of-the-mill fiscal conservative who comes off as more sensible than Ford, but that doesn't say much. You can at least get passionate about Ford, even if, as in my case, it's passionate hatred. Tory's milquetoast, but the harm that such a man can do when given power, when it comes to vital social services relied upon by the most vulnerable populations, is immeasurable. And yet he appeals to moderates because moderates have never thought about why they're moderates.

When you take the food out of the mouths of poor people, you create a cycle of poverty that, as class stratification increases, becomes impossible to escape. When you cut transit, you kill cities. When you drain the lifeblood from schools and libraries, you condemn generations to ignorance. When you gut environmental, labour, and safety regulation, you trash the earth and destroy lives. This is not a moderate position, nor is it "tough but fair." It's extremist. Brutal. Today, I woke up to a story about a fire in a seniors' home in Quebec that killed 32 people. There were no sprinklers in the home, but it still passed provincial safety inspections. They were comparing this tragedy to the train derailment in Lac-Mégantic, which killed 47 people and is still under investigation. Again, cutbacks and lax regulation may have been a factor. There is actually a reason we pay taxes and have governments.

And that is the triumph of conservatism, as it's convinced most of the world (at least the bit that votes) that this constant squeeze, for no payoff for you or anyone you know, is normal. You shouldn't think about it. Be grateful if you save a few pennies in taxes, even as you earn less and spend more for everything else. There Is No Alternative.

* Scare quotes because the economic policies of every mainstream party in North America (I can't speak for other regions) is what we might have, in previous generations, considered conservative. Even the NDP's leadership, if not its rank-and-file, has swallowed the Washington Consensus Kool-Aid with the enthusiasm of a porn star in a bukkake video, despite its myriad observable failures.

** Disclaimer: Beyond having a dilettante's interest in these matters and having slogged through Volume 1 of Das Kapital, I have no background in economics.

Comments

[smhwpf.livejournal.com]

The 1990s saw 'liberal' governments in both the US and Canada that had totally bought the conservative agenda of the 80s. But the picture for these governments isn't quite as bad as it looks. The 90s, after the first couple of years, was a period of quite strong growth, so public spending could potentially go up but fall as a share of GDP. Then as unemployment was falling, the amount being paid out in unemployment benefit and some other poverty-related benefits would have been falling too. Finally, you can put 0.8 percentage points of the fall in Canada and 1.8 percentage points in the US down to the fall in military spending as a share of GDP. That's actually at least half the fall under Clinton. But the ideological Neo-liberalism is still a major factor of course. Then with the Bush government, the increase in the share up to 2008 is entirely accounted for by military spending, and the huge increase afterwards is, first, the fall in GDP (which increases the share), and then the Obama stimulus (they've somehow put 2009 under Bush).

None of this detracts from the main point which is that fiscal conservatism sucks, and it is unbelievably stupid how many people have bought into it. Problem is, Keynesianism is counter-intuitive, so when you've got so much propaganda behind the austerity argument, it's very hard to get its fallacies through to people.

I think the point you make, about how Tories still want to spend your money, just on their cronies and pet interests, is one of the ways to go. Like wars and tax cuts for the rich (which is not spending as such, but still is a revenue losing move), and so on.

Then again, the austerity vs Keynesianism argument and the size of government argument are actually in theory two separate ones; you could have austerity purely by raising taxes, or Keynesian stimulus (though a less effective one) through cutting them. But in practice of course, when they talk about austerity it's almost always about cutting spending. And raising taxes in general has become almost a total taboo. (Though mild increases on the rich does seem to have come back into the debate a bit at least in some parts, including the UK).

[sabotabby]

I think the point you make, about how Tories still want to spend your money, just on their cronies and pet interests, is one of the ways to go. Like wars and tax cuts for the rich (which is not spending as such, but still is a revenue losing move), and so on.

But then you sound like a socialist. :)

There's definitely a broadening of debate, but, at least here, not by people who have any hope of being listened to.

[apperception.livejournal.com]

It's unfair, and it makes no economic sense when you have depressed demand. Thankfully the world appears to be coming out of the Lesser Depression, despite the incompetent policies of nations' leaders.

Well said, sabotabbius.

[sabotabby]

Thanks.

What worries me most is that there's no way to even return to the not-great status quo. Everything's become so entrenched, and people's memory is so short-term, that I'd be surprised if we ever returned to a period of high social spending and a strong safety net.

[fengi.livejournal.com]

I'm currently reading Peter Bagge's cartoon bio of Margaret Sanger and one thing that strikes me is despite (or perhaps because of) all the power dynamics of thar era someone could make a tiny bit of headway with the argument "what the fuck, this doesn't have to be this way and ultimately it costs you nothing, so it should change". And it distresses me greatly that people are essentially worse than fucking Comstock because they are rolling things back to his era and they don't have the excuse of being immersed in the time of god-partriarch being the default.

[sabotabby]

Yes. In some ways, we've progressed a great deal, but there's been substantial backsliding in less obvious ways.

[kryss-labryn.livejournal.com]

I always get really angry when I hear politicians promising tax cuts like it's a good thing. I mean, seriously? Have you seen the fucking roads out here in Nova Scotia? They're crap. And the other day I had to take Alvena to the hospital in the middle of the night (she's fine) and, in a completely empty waiting room, we still had to wait something like two and a half hours for the nurse because they had an emergency with another patient, and, so far as I could tell, it was just the one nurse and the one doctor there. And I was hearing on the CBC the other day that they'd really like to get training as a Sexual Assault Nurse Examiner (a nurse who's been trained in all aspects of dealing with a rape victim, from how to deal with them emotionally and what anti-viral drugs to provide, to how to correctly collect forensic evidence, none of which is covered by the standard nurse training) to at least one person in each and every hospital in the province, so anyone who is raped can get immediate treatment in their own community, and so investigations aren't botched by the incorrect collection of evidence (if it gets collected at all), and the cost for that is ridiculously cheap (something along the lines of four million dollars)--except they can't, because they don't have that four million to spare in the budget. Four million. For something as important as that! But the money's not there, just like the money to pay for highway improvements doesn't seem to be there. But oh yes, let's cut taxes even further, because everyone knows that taxes are Bad with a capital B and that is an absolute. Grr!!

How about--I know this is an unlikely thought, and probably bordering on the seditious--but how about, instead of cutting taxes, and budgets for front-line workers and operating costs, instead we see if we can't re-organize the budget a bit, and, say, move a little cash from things like the salaries of various boards of directors (and especially their office-redecorating budgets--I could tell you stories, hah, like that one time in BC, I think in either a Kamloops or Kelowna hospital, where the outgoing director of the hospital had paid a thoroughly ridiculous amount of money--out of the hospital's budget, of course, not his own pocket--to completely redo his office all in like teak or something, only to leave the post the next year for whatever reason, and for the incoming replacement guy to again redecorate the office, this time in marble, at an even higher cost. Meanwhile they have patients in hallways and janitorial closets, because they took over a bunch of the hospital rooms for management offices, so now there's no room for them, but I guess that's fine because they didn't have enough staff to look after them, anyways)--gah, run-on sentence, sorry--how about instead of crap like that we cut some extra, recently-bloated middle management, and raise taxes a percentage point or two, and get these front-line services properly funded so when people need them, they're actually there.

If it was me and I actually got elected somehow, I would pull something I learned in Sim City waaaay back when, which is, if you want to raise taxes by three percent, what you actually do is raise it by five percent, then drop it by a percentage point say a year later, and then drop it again by another point. And then you've got your 3% raise, and everyone who would have been all mad about the tax raise (and who would be just as mad if it were a simple 3% raise as with the 5% raise) gets happy because the taxes have been dropped. Twice. And on top of that you have that wee bit of extra income before you cut it.

[Cut because verbiage]

[kryss-labryn.livejournal.com]

[Continued]

I also remember an MP or someone, about 20 years ago, proposing a flat tax rate of 17%, right across the board. Fine, you earn below a certain amount, then it's no tax; but above that point, it's 17% no matter how small or great your income. And that would do a few things: First, it would simplify the system; second, it would stop that tax bracket jump where, as happened to a coworker of my Mum's, you get a raise but it bumps you into the next tax bracket, so you actually end up taking home less than before the raise; it would feel a lot fairer, I think, to the general population; and, when you got up to the very high income levels, it would ensure they were actually paying their share. Man, when I was at the wheat pool I was making really good money (yay for danger pay!!), but it was annoying as fuck to see such a large percentage going to taxes. I didn't mind paying into the CCP or EI, but fuck income tax. I'd lose close to 40% of my income to taxes, which didn't feel at all fair, especially not when, okay, I'm paying my fair share into the infrastructure of my country, fine, but guys making double what I did paid like half what I did in taxes. How is that fair?

Let's all pay our fair share, and pay a reasonable amount, and put the money where it should be going, into infrastructure and maintaining the things our society holds dear, such as free health care, and good schools; and waste less of it on nonsense like more managers instead of more nurses, or replacing perfectly good desks because teak is so yesterday. You know?

Gah, this is going to be too long to post in one chunk, isn't it? XD I just want people to realize the money doesn't magically fall out of the sky; that taxes are there to pay for the things we collectively need; and that while fiscal waste is a bad thing, taxes, in and of themselves, are actually good. Sheesh.

[sabotabby]

It's always funny when people talk about "entitlement" in regards to government spending, because they're almost always the most entitled people. Like, do roads appear from nowhere? Who pays for them, magical unicorns?

Argh.

[wlach.livejournal.com]

A flat tax would actually be hugely advantageous to the rich. The whole reason we have a progressive income tax system is so that people who are able to pay more, do pay more. If everyone is taxed the same, you would wind up needing to tax the poorest people that much more to generate the same amount of revenue.

Further, in a proper progressive system (like the one we have in Canada), there are no cases where getting a raise would actually result in you getting less, since it is only the additional income that you generate in the higher tax bracket that is taxed at the higher rate. E.g. let's say you made 60,000$ in Nova Scotia. The tax brackets for that province look like this:

8.79% on the first $29,590 of taxable income, +
14.95% on the next $29,590, +
16.67% on the next $33,820, +
17.5% on the next $57,000, +
21% on the amount over $150,000

In this case you'd pay 0.0879*29590 (2600.96) on the first 29950, 0.1495*29590 (4423.71) on the next 29950. That leaves 100 leftover, taxed at the rate of 16.67% (so 16.67). Note how even though we are (just barely) in the 3rd highest tax bracket, only a small portion of income is taxed at that higher rate.

[kryss-labryn.livejournal.com]

You make a good argument; I'm not familiar enough with the tax system/rates to be able to debate it. All I know is that when I was earning about $65,000 a year, I'd be seeing gross pay cheques of about $2,400 but be taking home $1,200 - $1,600; I was losing roughly a thousand dollars off each cheque (which was no end irritating). I do realize that included CPP/EI payments, but the vast bulk of it was income tax.

And this was at least 20 years ago now, but my Mum's friend got a fifty cent raise at work, and saw her biweekly pay cheque drop because she now got taxed at the next income level, having been just below the line dividing the two brackets.

My understanding of taxes in Canada (which is admittedly shaky) was that one's income as a whole got taxed at whatever the rate for that annual income was, so if you earned say $20,000 that $20,000 would be taxed, as a whole, at that one rate, whereas if one made $60,000, you'd pay whatever the tax percentage for earning $60,000 a year was on the whole thing. And then, if you made say $150,000 in a year, you'd be taxed effectively a much lower rate than those earning a "mere" $60,000, although I'm not sure if that's because the actual rate was lower or because of being able to write things off.

Under that kind of a system, then a flat rate across the board for everyone above the poverty line makes sense. I don't know what percentage I was paying in income tax in that job; but I do know no one minded going on worker's compensation, because while it only paid you 75% of the wage you would normally be earning, it wasn't taxed, so you ended up with more take-home pay. So I was definitely losing more than 25% to deductions; I think at one point I worked it out at about 40% difference between my gross and net bi-weekly amounts.

[kryss-labryn.livejournal.com]

I should add the caveat too that all this was in BC; no idea how the tax systems vary in the two provinces. Haven't paid taxes in Nova Scotia yet; only just moved here last March. :-)

[wlach.livejournal.com]

> And this was at least 20 years ago now, but my Mum's friend got a fifty cent raise at work, and saw her biweekly pay
> cheque drop because she now got taxed at the next income level, having been just below the line dividing the two
> brackets."

That can't possibly be due to the way the income tax system works in Canada. Perhaps she had to start to start paying some new insurance premium or something because of an arbitrary cut-off or something -- but that would be an issue with her employer, not the tax system.

I've never been on worker's comp before, but if you're taking home about the same I would imagine it is because you're not paying for (but are correspondingly unable to benefit from) things like CPP and EI.

The tax system is pretty complex as a whole but the way it applies to employment earnings on payroll is pretty straightforward and fair IMO -- those who can pay more, do pay more on their extra income.

[lienne.livejournal.com]

graaaaaaargh

[sabotabby]

That sums it up.

[ironed_orchid]

There was a great article about a year ago about how Australia didn't suffer so much during the GFC because the then Labor govt. gave most people $700 "handouts" and asked them to spend it. The radical idea was that people spending money boosts the economy. They also introduced a Carbon Tax, which resulted in most individual wage earners paying less tax out of their wages. Again, more people with more money to spend.

Unfortunately, the Labor govt went on to have not one but two internal power struggles, and everyone got sick of not knowing who would stab who in the back next. (Also some voters genuinely are afraid of boats, and believe that what is good for big business is good for the rest of us.)

[sabotabby]

It's weird that Keynesian economics is considered radical now. It seems pretty intuitive.

It's a pity about Australian politics.

[rinue.livejournal.com]

My background is economics and this is pretty accurate.

[sabotabby]

Heh. It's pure chance, really. I'm awful at math so I never took any proper courses or anything. But it's just one of those things where reality seems to contradict the accepted wisdom.

[rinue.livejournal.com]

Macroeconomics and microeconomics are different diciplines with different "rules," as you observe. Trying to fund infrastructure based on how you run a small business is something like trying to do your biology homework by using physics.

[the-siobhan.livejournal.com]

I think when people are financially tight they look at the idea of lower taxes and think somehow that will mean more money in their pockets to deal with other bills. Of course it just means "other bills" get bigger because it leads to user fees, and user fees paid for by a few are always going to be higher than a pooled tax cost to everybody.

[sabotabby]

Exactly. It's like how Americans think they're somehow saving by having a for-profit healthcare system.

[wlach.livejournal.com]

I completely agree, though I think in many cases the relatively poor quality of public service we're receiving for our money makes it more difficult than it should be to argue against these ideas. :( I have been wondering lately if there has been an almost willful trashing of the public service lately by the Conservative elements in our society, since it just provides them more ammunition/argument to cut them further. The recent cuts to Canada Post delivery (along with an increase in fees) is a case in point.

[sabotabby]

It's a vicious cycle. Money leaves the system, forcing cutbacks, causing everything to suck for users, who then grumble about why their taxes are going to support this shit.