NDP vs. NDP on Deficit Spending

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Mighty Middle
NDP vs. NDP on Deficit Spending

So in 2015 Peggy Nash was the NDP Industry Critic who went after Justin Trudeau for pledging to go into deficit saying

"Justin Trudeau’s economic plan has a hole so big it could be a tourist attraction. His deficits keep growing faster than the Bay of Fundy tides come in and out."

Fast forward 3 years and Ontario NDP Leader Andrea Horwath has pledged to go into deficit if elected, but she would not provide any further details.

And to add irony to the situaton, Peggy Nash is part of Andrea Horwath policy team who crafted her platform. And Nash will be pitching Horwath deficit spending plan as an NDP pundit on political panel. Touting the virtues of deficit spending. Already she was on Power and Politics last night talking about dental care.

In fairness Jagmeet Singh has come out in favor of deficit spending, saying he doesn't believe in austerity.  So is there anybody here who opposes deficit spending? I doubt it but would interested to see if anyone is.

Mr. Magoo

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So is there anybody here who opposes deficit spending? I doubt it but would interested to see if anyone is.

It's not the rock on which I make my stand, but I have suggested in the past that a balanced budget is not some tool of the right wing.  Sooner or later, any government needs to only spend what they have (or, less than what they have, in order to pay the bills for the last round of deficit spending).

There will ALWAYS be things that want funding.  There will never, ever be a budget year where everyone says "we can make do with nothing this year... everyone who wants funding wants it now.

At the same time, we can't say "but their wish for funding is important, so we have to borrow AGAIN, darn it!" every year.  Someone tell me how that's sustainable?  Someone tell me which specific year we'll say "OK, this is the year to pay the bills"?  Next year?  Year after?  "Some" year, but not this one or the next??

JKR

It seems to me that if the rate of growth of the economy is greater than the rate of growth of deficits, the government could run deficits continuously and still reduce their overall debt. So what's important is not the nominal amount of the deficit but ratios like debt to GDP and deficit to GDP.

Mr. Magoo

Seems reasonable, but is that how it is right now?  I'm not throwing down here, just asking.

Sean in Ottawa

JKR wrote:
It seems to me that if the rate of growth of the economy is greater than the rate of growth of deficits, the government could run deficits continuously and still reduce their overall debt. So what's important is not the nominal amount of the deficit but ratios like debt to GDP and deficit to GDP.

Actually this is not true.

The resaon running a deficit for a period can allow repayment is the growth allows a surplus in the future. If not surplus, it does not get paid.

The reason a deficit lower than the growth of the economy can work is the debt to GDP goes down. But this does not pay back the debt or reduce overall debt. It only reduces the debt to GDP ratio only -- both increase.

JKR

Sean in Ottawa wrote:

JKR wrote:
It seems to me that if the rate of growth of the economy is greater than the rate of growth of deficits, the government could run deficits continuously and still reduce their overall debt. So what's important is not the nominal amount of the deficit but ratios like debt to GDP and deficit to GDP.

Actually this is not true.

The resaon running a deficit for a period can allow repayment is the growth allows a surplus in the future. If not surplus, it does not get paid.

The reason a deficit lower than the growth of the economy can work is the debt to GDP goes down. But this does not pay back the debt or reduce overall debt. It only reduces the debt to GDP ratio only -- both increase.

I agree. I should have wrote "debt to GDP ratio" instead of "debt." It is possible for the debt to increase while the debt to GDP ratio decreases. It seems to me that was is most important for economic growth is that the economy becomes more productive. It should be remembered that social programs increase productivity which increases economic growth and reduces debt to GDP. Social democratic governments seem to have figured this out.

JKR

Mr. Magoo wrote:

Seems reasonable, but is that how it is right now?  I'm not throwing down here, just asking.

Our debt to GDP ratio has been creeping up. I think modest tax increases would fix this. Canada would be in much better fiscal shape if Harper had not cut the GST by 2 percentage points. With those two extra pointd we could have had a lower debt to GDP ratio and more social programs. The social democratic countries have higher rates of value added taxes and income taxes.

Mr. Magoo

Well, "woulda, shoulda, coulda".  I was only asking whether we are, in fact, ahead of our debt.

Are we ahead of our debt?

JKR

Mr. Magoo wrote:

Well, "woulda, shoulda, coulda".  I was only asking whether we are, in fact, ahead of our debt.

Are we ahead of our debt?

According to chart 3a, the federal debt to GDP ratio is currently at 30.1% and projected to go down to 28.4% by 2022.

https://www.budget.gc.ca/2018/docs/plan/overview-apercu-txt-en.html

Mr. Magoo

OK.  So that means we're taking in more than our debt?

Or the amount by which we're taking in less than our debt might decrease?  Which?

JKR

Roughly speaking, I think it means that Canada's federal debt should be a smaller portion of Canada's overall income in 2022 than it is now. It should be noted that this statistic does not include Canada's provincial governments debts.

Sean in Ottawa

The problem with this debt to GDP idea is that it creates an economy addicted to consumption and inevitable corrections. It means that people have to consume more and more or break the economy. Of course this breaks the environment.

The reasons governments run deficits is not becuase of social programs, it is due to an unwillingness to make the people with the money pay for the government. It is also caused by significant military spending in some countries, out of balance with the economy.

Now have a look at social democratic countries -- they generally do not have a high debt to GDP compared with other countries.

You can have an economy and spending more in balance if you have the political will to do so. Countries that have less of a problem taxing to pay for themselves tend to get to this place. You will also notice that social democratic countries lead in this - perhaps becuase they deliver much more to the people who do not resent the taxes as much due to the value they get. Countries that offer some social democratic characteristics without actucally being social democratic by tradition, like Canada tend to do badly because they generate this spending without a culture willing to pay for it. 

The key to getting this culture is often found in providing more rather than less to citizens in order to satisfy them rather than provide next to nothing, when the state will still need to tax.

It is also true that some countries have low debt to GDP becuase they cannot get credit -- that is another matter.

JKR

I agree that emulating the social democratic model of many northern European countries would be in the best interest of Canada. That is basically my political philosophy. Almost everything the NDP aspires to do has already been done in social democratic countries like Denmark, Finland, Sweden, Austria, Germany, Norway, the Netherlands, Belgium, Iceland, etc....

Sean in Ottawa

JKR wrote:
I agree that emulating the social democratic model of many northern European countries would be in the best interest of Canada. That is basically my political philosophy. Almost everything the NDP aspires to do has already been done in social democratic countries like Denmark, Finland, Sweden, Austria, Germany, Norway, the Netherlands, Belgium, Iceland, etc....

As much as people fight here, I think this is the position of most people here. There are good reasons why those countries do so much better given what they have.

Pondering

Unlike people governments don't die and the economy is designed to require perpetual growth. Immigrants help to achieve that goal. 

Like people, there is wasteful spending and there is investment spending.

On a personal level buying a house and borrowing to pay for higher education are expected to produce financial gain over the long term.

For government useful infrastructure programs and a healthy educated population are ideally an investment in the future.

As pointed out elsewhere we wouldn't even need to run a deficit if corporations and the wealthy were paying taxes at the levels of the 70s.

Massive tax reductions not overspending is at the root of our deficits. 

Surely you have not missed the pattern of cutting taxes then complaining there is too little money to sustain programs, then cutting taxes again. 

Mr. Magoo

Quote:
Massive tax reductions not overspending is at the root of our deficits.

Overspending means spending more than you have, or can afford.

If your hours at work are cut, that will mean you earn less money.  If you continue to spend the way you did when you worked more hours, you'll probably be overspending.  It can be the same exact amount, but now it's "over"spending because you have less money.

Quote:
Surely you have not missed the pattern of cutting taxes then complaining there is too little money to sustain programs, then cutting taxes again.

Doesn't this imply that the electorate would rather pay less to the government and get less from the government than the other way around?  It's not like tax cuts have to be forced on Canadians.

 

JKR

Sean in Ottawa wrote:

JKR wrote:
I agree that emulating the social democratic model of many northern European countries would be in the best interest of Canada. That is basically my political philosophy. Almost everything the NDP aspires to do has already been done in social democratic countries like Denmark, Finland, Sweden, Austria, Germany, Norway, the Netherlands, Belgium, Iceland, etc....

As much as people fight here, I think this is the position of most people here. There are good reasons why those countries do so much better given what they have.

It seems to me that naturally there is a lot more infighting within the left than within the right because the left supports political pluralism. This is especially problematic within an FPTP system like ours that rewards loyalty to a big tent political party. I think the primary reason the right loves FPTP is that they suppprt top-down politics. FPTP is tailor made for top-down politics. That being said, NDP party insiders like Bob Tieleman also support top-down FPTP politics.

Mr. Magoo

Quote:
It seems to me naturally there is a lot more infighting within the left than within the right because the left supports pluralism.

That does seem a bit contradictory.  How can the left both fight pluralism and also support it?

That's like saying that the reason some youth sports league fights over unisex teams is because they support gender equality.  Why would they fight it if they support it?

JKR

It seems to me that the right is much better than the left at putting their differences aside and uniting in the common cause of reducing their taxes. Social conservatives here in Canada are willing to marginalize their social conservative causes within the Conservative Party for the overriding cause of reducing taxes. People on the left don't seem to marginalize themselves for electoral political success like people on the right do.

Mr. Magoo

Quote:
It seems to me that the right is much better than the left at putting their differences aside and uniting in the common cause of reducing their taxes.

I partially agree, but I think they're an order of magnitude better at putting their differences aside and uniting in the common cause of removing sex-ed from schools, ensuring that equal marriage and reproductive choice are never dead issues, and hating on the Liberals.

TBH, I think that they really only have to make an effort to marginalize the elements that are effectively marginalized anyway -- the "Freemen on the land" types and the "Send the blacks back to Africa" types and the "sterilize Muslim" types.  The rest can probably find themselves well represented by Scheer or Ford or whomever.

If they have an advantage, it's that they never seem to feel any shame or embarrassment about "going there".

Ken Burch Ken Burch's picture

Mr. Magoo wrote:

Quote:
Massive tax reductions not overspending is at the root of our deficits.

Overspending means spending more than you have, or can afford.

If your hours at work are cut, that will mean you earn less money.  If you continue to spend the way you did when you worked more hours, you'll probably be overspending.  It can be the same exact amount, but now it's "over"spending because you have less money.

Quote:
Surely you have not missed the pattern of cutting taxes then complaining there is too little money to sustain programs, then cutting taxes again.

Doesn't this imply that the electorate would rather pay less to the government and get less from the government than the other way around?  It's not like tax cuts have to be forced on Canadians.

 

Problem is, Magoo, that doing what you seem to be advocating-that is, having social democratic or socialist parties accommodate the low-tax/balanced budget fetish-means asking social democratic or socialist parties to cease being, in any sense, social democratic or socialist.  Egalitarian values and perpetual austerity can never co-exist.  All austerity is the same-it doesn't matter whether it's the left or right doing the cutting.  We can't just turn every NDP government into the Romanow years in Saskatchewan an still have any reason for the NDP to exist at all.

Ken Burch Ken Burch's picture

What the Left SHOULD be doing is challenging the low-tax/balanced budget at all cost fetish-neither low taxes or an obsession with balanced budgets serve the actual needs of most people, and the point of the Left is to argue for another way to run life-NOT to try to make neoliberalism, an intrinsically barbaric model, slightly less barbaric, so long as reducing the barbarism doesn't reduce the profits of our corporate masters.

Mr. Magoo

Quote:
Problem is, Magoo, that doing what you seem to be advocating-that is, having social democratic or socialist parties accommodate the low-tax/balanced budget fetish-means asking social democratic or socialist parties to cease being, in any sense, social democratic or socialist. 

OK.  But I wasn't so much saying "this is how I think we should conduct our affairs" as suggesting that this seems to be what the electorate wants.  At any rate, it's only government policy if the electorate chooses it over the other options.

cco

That seems to me to be a rather simplistic view of the electorate as one coherent individual whose views have turned irrevocably conservative over the years and who must be appeased, not persuaded. Parties, governments, and even court decisions have enormous power to change public opinion, often fairly quickly.

It's also assuming that the electorate has to be in any way consistent. California with its referenda (and more recently Kansas, indirectly) demonstrate that many voters are quite happy to check:

1. Do you want spending? [x] Yes [] No

2. Do you want to pay for said spending with taxes? [] Yes [x] No

Harper wasn't just the man of his times who coincidentally happened to ride the bubble of a massive rightward shift among Canadian voters. He exploited a scandal and carefully massaged messaging to create his own changes in public opinion. If that can be done rightward, it can be done leftward. Perpetually chasing the electorate's shadow as expressed in opinion polls makes for bad policy, as well as eviscerating any credibility the NDP has.

JKR

Mr. Magoo wrote:

But I wasn't so much saying "this is how I think we should conduct our affairs" as suggesting that this seems to be what the electorate wants.  At any rate, it's only government policy if the electorate chooses it over the other options.

The electorate seems to want low levels of taxation and gold plated programs. The political party that does the best at convincing the electorate that they can have their cake and eat it too, usually wins elections. A.K.A, the Liberals. Being the party of the centre makes it easier to talk out of both sides of your mouth.

Mr. Magoo

Quote:

It's also assuming that the electorate has to be in any way consistent. California with its referenda (and more recently Kansas, indirectly) demonstrate that many voters are quite happy to check:

1. Do you want spending? [x] Yes [] No

2. Do you want to pay for said spending with taxes? [] Yes [x] No

FWIW, I find California and its electoral rules fascinating, for exactly the reason you mention:  the electorate is totally permitted to be logically contradictory, and the government must find a way to square the circle anyway.

Surely it's not LESS logical when a Canadian political party -- even if they just won! -- says "we cannot do what you want us to do without the money you don't want to give".

But what's stopping the electorate from choosing the party that is most likely to tax them more and give them more?  Isn't that party on the ballot?

JKR

Mr. Magoo wrote:

But what's stopping the electorate from choosing the party that is most likely to tax them more and give them more?

The party that says it will give them more and tax them less?

Sean in Ottawa

I do not think that the right are better at uniting. I think they ahve an easier question Here is the logic:

Do you beleive government should be involved in making a difference for people's lives and creating more equality?

If no -- vote Conservative

If yes then fight about how to do that.

The left have a much more complicated set of arguments becuase they ahve to not only say the government can make a difference but how this should be done.

There is no how with the argument that governmetn cannot do these things.

Just like there is a simple argument on taxes: should you raise them?

Answer no -- then it is easy to support the conservatives.

Answer yes, and you have to explain what you will do with the money and why it would work and why you are choosing this priority over another.

The right -- is by definition a series of simpler arguments than the left.

Mr. Magoo

Quote:
The party that says it will give them more and tax them less?

That trick should only work once.

JKR

Mr. Magoo wrote:

Quote:
The party that says it will give them more and tax them less?

That trick should only work once.

Not if all the political parties engage in that practice.

JKR

Sean in Ottawa wrote:

I do not think that the right are better at uniting. I think they ahve an easier question Here is the logic:

Do you beleive government should be involved in making a difference for people's lives and creating more equality?

If no -- vote Conservative

If yes then fight about how to do that.

The left have a much more complicated set of arguments becuase they ahve to not only say the government can make a difference but how this should be done.

There is no how with the argument that governmetn cannot do these things.

Just like there is a simple argument on taxes: should you raise them?

Answer no -- then it is easy to support the conservatives.

Answer yes, and you have to explain what you will do with the money and why it would work and why you are choosing this priority over another.

The right -- is by definition a series of simpler arguments than the left.

Under proportional representation
there would be no electoral advantage to uniting people with different viewpoins within a single big-tent party such as there is under FPTP.

Pondering

Quote:
Massive tax reductions not overspending is at the root of our deficits.

Overspending means spending more than you have, or can afford.

If your hours at work are cut, that will mean you earn less money.  If you continue to spend the way you did when you worked more hours, you'll probably be overspending.  It can be the same exact amount, but now it's "over"spending because you have less money.

Quote:
Surely you have not missed the pattern of cutting taxes then complaining there is too little money to sustain programs, then cutting taxes again.

Doesn't this imply that the electorate would rather pay less to the government and get less from the government than the other way around?  It's not like tax cuts have to be forced on Canadians. 

I'm talking about tax cuts for the wealthy and corporations and tax havens. 

The deficit was created through tax cuts not over-spending because income was deliberately reduced. 

"Overspending" is a result of cutting taxes for the wealthy and corporations. 

I put overspending in quotes because it can also mean paying too much for something or paying for things you don't need. 

If you can't afford to pay for necessities then you are not overspending. You are underfunded. 

Mr. Magoo

Quote:
Not if all the political parties engage in that practice.

So it's the same as saying "The xxx party!  For a bigger, better, brighter future for your childrens!"

Quote:
If you can't afford to pay for necessities then you are not overspending. You are underfunded.

I see.  "the NECESSITIES".  I'm sure we can all agree on them.

 

JKR

Mr. Magoo wrote:

Quote:
Not if all the political parties engage in that practice.

So it's the same as saying "The xxx party!  For a bigger, better, brighter future for your childrens!"

and for granny too!

progressive17 progressive17's picture

People who use a "household budgeting" attitude to government spending obviously missed the 20th Century. Ask any American politician, left or right, about paying off their national debt, and they will just laugh in your face, and for good reason too. Since about the 1930s, American military spending has been a constant kick-starter for "free enterprise". (I consider NASA to be an Air Force operation). That military spending caused the microprocessor computer you are using to be invented. Military spending against the Nazis was the reason the computer itself was invented.

Considering government to be a "household" is one step even more inaccurate than considering it to be a "business". Oh yeah economics (oikonomia) comes from "house management" in Greek. However these days, when it comes to government, we don't call it "economics" but "public policy". A household earns money, either from its labour, its capital, or both. The government earns nothing. They collect the money through source deductions from most of us through the force of law. Then they spend it. When government spends money on things like social services provided by a prosperous civil service, infrastructure provided by prosperous construction workers, and income supports to make economically disadvantaged people slightly more prosperous, this spending has a huge knock-on effect to the rest of the real economy. Not only do we get more spending in the general retail economy from all these people, but we also get the added value that they provide making our lives better through health care, transit which works better, etc.

"But we are all the deciders of our own destiny, and the government should be too!" This does not make sense on many levels. The government is not even the sum of all Canadians. It doesn't need to eat, and it has no emotions. It is an artificial European creation based on monarchy and the Estates. It is there to govern us, hence the name government.

If anyone hadn't noticed, there has been an economic depression in the real economy for quite some time now. All the usual suspects are to blame. Automation. Competition from the developing world. Trickle up economics, and hoarding of money in tax havens. Small businesses failing because of operations like Wal*Mart and Amazon (as predicted quite neatly in the Communist Manifesto). You get less money, so you want stuff cheaper, so they have to pay their workers less, so you eventually get your $25 an hour job replaced by $12.50 an hour. Be careful how much cheap you want, because you might get your wishes answered in more ways than you expected.

There has been some talk here about how GDP growth covers the debt. That which does even more so is inflation. Inflation of prices means more sales tax. Inflation of wages means more income tax. In turn, the value of the debt is also eroded in constant dollars. Inflation is kind of like a bottle of good cognac. A couple of shots will give you a glow, but drink the whole bottle and the next day will be somewhat dismal. Ask the traditional post-war non-Tory-Blairite British Labour Party. Its next day was Margaret Thatcher.

So given the economic boom for the wealthy and the depression for the rest of us, the solution has to be in government spending, as it was in the 1930s and much of the post WW-II period.

The only concern is whether the bottomless pit of the international financial markets will refuse to buy the debt. Even under an NDP government, Canadian sovereign debt will be snapped up like hotcakes. If any rich person asks what you are doing, you give Keynsian explanations and not socialist ones. In a capitalist economy with a large public sector (what we used to call a mixed economy), we disagree that a retreat by government will mean an increase in demand. We have much proof of exactly the opposite.

Conservatives voted for Justin Trudeau because he made a Keynsian case. Unfortunately, he is now subject to ridicule for whatever reason, which is doom for his political career. 

The NDP can honestly say they will continue with real Keynsian economics for the prosperity of local business, unions, the civil service, and the people as a whole.

By the way, if you are on an interest-only mortgage, what business do you have telling anyone else they have to "pay off the debt"?

Sheesh!

Sean in Ottawa

JKR wrote:
Sean in Ottawa wrote:

I do not think that the right are better at uniting. I think they ahve an easier question Here is the logic:

Do you beleive government should be involved in making a difference for people's lives and creating more equality?

If no -- vote Conservative

If yes then fight about how to do that.

The left have a much more complicated set of arguments becuase they ahve to not only say the government can make a difference but how this should be done.

There is no how with the argument that governmetn cannot do these things.

Just like there is a simple argument on taxes: should you raise them?

Answer no -- then it is easy to support the conservatives.

Answer yes, and you have to explain what you will do with the money and why it would work and why you are choosing this priority over another.

The right -- is by definition a series of simpler arguments than the left.

Under proportional representation there would be no electoral advantage to uniting people with different viewpoins within a single big-tent party such as there is under FPTP.

This was not the kind of uniting I was talking about. I agree but what I mean by unifying message is that Conservatives can go in with less government is better and reducing taxes as a simple message whereas if you are making an argument for a role for government then you ahve a more complicated mesage that is less unified as you then have to agree on what government should do and how taxes need to be spent. This rarely fits the soundbites. It is a profound disadvantage for the left compared with the right.

Sean in Ottawa

Pondering wrote:

Quote:
Massive tax reductions not overspending is at the root of our deficits.

Overspending means spending more than you have, or can afford.

If your hours at work are cut, that will mean you earn less money.  If you continue to spend the way you did when you worked more hours, you'll probably be overspending.  It can be the same exact amount, but now it's "over"spending because you have less money.

Quote:
Surely you have not missed the pattern of cutting taxes then complaining there is too little money to sustain programs, then cutting taxes again.

Doesn't this imply that the electorate would rather pay less to the government and get less from the government than the other way around?  It's not like tax cuts have to be forced on Canadians. 

I'm talking about tax cuts for the wealthy and corporations and tax havens. 

The deficit was created through tax cuts not over-spending because income was deliberately reduced. 

"Overspending" is a result of cutting taxes for the wealthy and corporations. 

I put overspending in quotes because it can also mean paying too much for something or paying for things you don't need. 

If you can't afford to pay for necessities then you are not overspending. You are underfunded. 

This is very true on a number of points. It is one of the reasons the left has to win the tax and spend argument and why they are vulnerable to it.

Ultimately the left is forced into the us and them class argument becuase that is where the problem lies: one group are seeking economic advantage over another. If people see themselves as all in one class then left parties become much more vulnerable to tax and spend arguments. This is true because when people consider that they are the ones benefiting in tax reductions from loss of programs, sadly they will consider it. When they realize that it is people with much more money than them who will get the benefits that gives pause.

This is one of the reasons why the success of social democratic governments can become an electoral threat -- as the society becomes more equal, benefits are paid more uniformly from broader taxation. In some respects it is obvious to see that mre conservative governments in countries that have less inequality remain more responsive and less dangerous. While the right tendency may come from having to pay for the program the welfare of the public is also more balanced in terms of benefits.

So behind your very good argument about spending there is this truth about the corossive effect of inequality.

At the same time there ius a second reality that further supports your point and that is that it is much easier to vary income for a government than expenditure. in most cases. I can explain if needed but I think many poeple already understand this. The main exceptions relate to aggression and military expenditure which can vary based on a government's posture and attitude. For a country like Canada where the majority of expenses are direct benefits to Canadians changes are more difficult.