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The Lebowski Blog

Shock Doctrine Budgets in Toronto and Canada

by Gwalgen Geordie Dent

The Lebowski Blog

"Where's the f'ing money, Lebowski?"

It's a pretty sad state of affairs when any right wing organization supporting tax increases amounts to "news". 

But such is the current state of affairs in "Shock Doctrine" Canada.

Shock Doctrine economics, as argued by Canadian writer Naomi Klein, are free market policies rammed down the throat of the public during periods of "disasters or upheavals".

In the current context of Canada, the economic crisis in 2008/2009 (itself caused by free market policies) has laid the groundwork for continued free market "shock" policies from our current federal government.

The "shock" policies have been deficit budgets in Canada.  After more than a decade of federal surpluses, the budget went into deficit in 2008 on the back of the meltdown of the Canadian economy.  Less economic acticity = less tax revenue.

A little discussed fact in the mainstream press though, was that the deficits never needed to happen.  Both massive tax cuts introduced in 2006 along with a major bailout for the Canadian Banks in 2009 meant that the budget ended up in deficit.  Without both of these, the budget would have been balanced.

Fast forwarding to today, the latest 2013 budget is a continuing tradition of the 2009 deficit shock doctrine plan.

While being touted by the government as a "infrastructure budget" our friends at the Canadian Centre for Policy Alternatives (CCPA) have been quick to point out that the latest budget ushers in massive cuts to infrastruture spending today, with infrstructure money supposedly supposed to rain down on Canada in 2020.

In addition $11 billion and 90,000 jobs will have been cut by the 2014-15 budget to balance the books.  Almost 75% of the balancing of the books comes from spending cuts with the additional coming from raising revenues by closing tax loopholes for the rich.

But remember, the books were already balanced had it not been for massive tax cuts in 2006 and the $114 billion bailout to the Canadian banks

And the cuts will likely continue.  The estimates of the future deficit keep going up.  As David Macdonaold of the CCPA notes:

"Last year at this time, the government estimated that the deficit in 2013-14 would be only $10.2 billion. Now, the deficit estimate for 2013-14 is almost twice that at $18.7 billion. This is the danger of slow growth. We keep expecting that three years out everything will be great again—unemployment will be low, growth will be robust—but once we get to three years from now, the economy is still stagnant."

Is this happening on purpose?  Keynesian economists usually promote stimulus funding to get an economy out of recession, while cuts keep a recession going on in perpetuity.  Is this why the government keeps cutting things like infrastructure spending today while promising it 7 years down the road?

A host of infrastructure spending projects remain on the table that could boost domestic wages, spending and create a better Canadian economic climate from high speed rail projects, to road upgrades and better internet networks, not to mention spending on day care, social housing and first nations health and education.

This of course brings us to the recent statement by the Toronto Board of Trade (TBT).

Knowing the capitalistic economic benefits of better transit while knowing that the money ain't coming from the Feds, the TBT recommended increasing taxes to get better transit.  While some Toronto Star authors noted that this was "an unusual step for a business group", their proposal to incease sales taxes, gas taxes, tolls and parking levy's are in complete alignment with right-wing views on taxes.

Milton Friedman (the father of Shock Doctrine economics) often advocated that government (at least the limited amount he actually believed in) be paid for almost exclusively by sales (also known in Europe as "Value Added") taxes.  Of course this is because these taxes benefit the rich by leaps and bounds.  Progressive taxation, based off of a persons income, usually hit the rich harder taking a larger share of their taxes because of how well they are normally doing compared to the rest of us.  Sales and gas taxes on the other hand disproportionally hurt the poor more.

In an apparent abandonment of logic the Star's editorial board backs the proposal but chastizes opposition of it by the Ontario NDP saying "Horwath insists necessary billions could be raised by closing corporate tax loopholes. It’s us against them, again: transit users get a free ride — business pays."

Of couse the irony is that the Star is advocating the same thing...for the rich.  Transit funding actually benefits the entire economy, including businesses.  Business gets the free ride under the sales tax propsoal, hence the endorsement by the Board of Trade. 

Ontario NDP leader Andrea Horwath though, doesn't want to hit the poor. "We understand that there needs to be some financing solutions found … ones that don’t hurt people who are already struggling to make ends meet,” she said. 

The financing is that alluded to by the Federal Finance Minister - corporate and rich tax money slipping through tax loopholes.  Though it's debatable how hard political parties that are cozy to corporations would go after tax loopholes, the NDP have long advocated going after those trillions being hidden away by Canadian businesses in tax havens like Cyprus.  They've also suggested that the rich actually start paying their taxes.

But with the media against you, threats by government debtors and a public constantly being shocked into spending cuts and a weak economy, Canadians may be stuck in what the CCPA has called "austerity on autopilot".

One can only hope we get used to the shocks.

The Lebowski blog tracks big piles of money.  It appears regularly on the Toronto Media Co-op.

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