Grantcoulson's Blog

     Do not think about, write about or deal with  human behavior without determining the effects of incentives.

    If this is not frightening, it would be difficult to find something frightening.

    The government which gives you all you want will take all I have.

Canadians pay more in taxes than basic necessities

Taxes are taking a bigger chunk out of Canadians’ budgets than basic necessities like food, clothing and shelter, a new report from the Fraser Institute says.

The public policy think-tank calculated that over the past 50 years, an average family’s total tax bill has increased 1,738%, the report Canadian Consumer Tax Index 2012 said.

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     That’s a multiply factor of X17.38 compared to an inflation rate of X6.59.

Over the same period, the cost of shelter increased by 1,185%, food by 518%, and clothing by 500%.

"Taxes from all levels of government make up the single largest expenditure facing Canadian families," Charles Lammam, Fraser Institute associate director of tax and budget policy research, said in a release about the report Thursday.

"In fact, the total tax bill has grown more rapidly than any other major item in an average family’s annual budget since 1961."

The report notes in 2011, the average Canadian family earned income of $74,233 and paid $30,792 in taxes, for a total tax bill representing 41.5% of family income.

In 1961, the average Canadian family earned income of $5,000 and paid $1,675 in taxes, for a total tax bill representing 33.5% of family income. The report also notes in 1961, the average family spent 56.5% of its income to pay for shelter, food, and clothing.

By 1981, the spending demands had evened up: 40.8% of an average family’s income went to governments in the form of taxes, while 40.5% was spent on shelter, food, and clothing.

By 2011, the situation was nearly opposite that of 1961: the average family spent 33.6% of its income on the necessities of life while 41.5% of its income went to taxes.

And the fact that the federal government and most provincial governments are running budget deficits means current taxes don’t even cover all government spending, so the situation is actually worse than it appears, the report said.

"These deficits are essentially deferred taxes into the future since the shortfalls must ultimately be repaid by working Canadians," Lammam said.

"If we include government deficits in the calculations, the total tax bill for the average Canadian family is actually $33,455 in 2011, not $30,792. This means the average Canadian family faces a future tax bill of an extra $2,663."

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      No one should wonder why the standard of living is going down. Money of the productive is going to the unproductive. We may not be doomed, but we’re doomed to mediocrity, stasis and, then, decline.

Cheerio and ttfn,
Grant Coulson
Cui Bono–Cherchez les Contingencies   

   Do not think about, write about or deal with  human behavior without determining the effects of incentives.

Moody’s put Ontario on credit watch last fall, now S&P’s rating service has done the same.

The debt bubble

Special to Financial Post  Apr 24, 2012

Governments decide to just kick the can down the road

By Niels Veldhuis and Milagros Palacios

As Ontario heads towards a fiscal crisis caused by over-spending and mounting debt, Premier Dalton McGuinty and Finance Minister Dwight Duncan have issued yet another top-to-bottom review of government spending. This, after Don Drummond’s recent and in-depth report, complete with 362 recommendations, was largely ignored by the Ontario government. With credit agencies breathing down its neck, the province needed to deal with the problem, not order more reviews and undertake further study. The same could be said for raising taxes.

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     Commission studies, Yep, that’ll fix it.

While Ontario is in the worst fiscal shape among Canadian governments, it certainly is not alone.

With nearly all Canadian governments having released their 2012 budgets (save for Prince Edward Island and Newfoundland), there has been a void of leadership in tackling ongoing budget deficits and the alarming increases in government debt across the country.

Consider that total provincial net debt (debt minus financial assets) is expected to reach more than $515-billion this year (2012-13), up more than $200-billion since 2007-08. As a percentage of the economy (GDP), the burden of provincial debt has increased to 29% this year from 21% in 2007-08.

Add on the current federal net debt of $663-billion and Canadians are leaving a legacy of over a trillion dollars in direct debt to the younger generation — more than 65% of GDP, up from 54.5% in 2007-08. Put differently, every Canadian family is being put into hock to the tune of $122,000 by federal and provincial government borrowing.

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     Obviously, this can go on forever.

Despite this debt legacy, Canadian governments continue to borrow and spend.

The federal government, for example, plans to run deficits until 2014-15, adding more than $32-billion to the federal debt. In addition, its plan to balance the budget over the next four years is based on optimistic revenue growth (4.9% on average) while promising to hold program spending growth to an average of 2% a year.

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     Four point nine percent growth–that’s gonna happen.

In Ontario, Mr. Duncan has decided to continue running deficits for another five years (until 2017-18), increasing Ontario’s debt to more than $315-billion from $238-billion today — after the debt has already increased by more than 70% since the Liberals took office in 2003. Like the federal government, Ontario plans to balance its budget by pinning its hopes on optimistic revenue growth forecasts (averaging 3.7% annually) while holding program spending growth to an average rate of 0.7% for the next six years.

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  Three point seven percent annual growth. Again, so unrealistic as to be nonsensical.

Out West, things are better, but still cause for concern. Alberta’s government won’t balance its budget until 2014-15 as it depletes provincial assets. It also projects revenue growth that is unlikely to materialize, averaging an 8.4% increase over the next three years.

Over in B.C. the government is relying on a host of new tax increases to balance the budget by 2013-14, but will still continue to add significant debt through increased capital expenditures. The BC government’s debt will expand by 30% over the next three years and reach 28% of GDP by 2014-15 from a low of 18% in 2007-08.

In fact, save for Saskatchewan, all Canadian governments that have delivered 2012 budgets will run deficits for at least another two years. And, in doing so, will collectively add another $115-billion in debt over the next three years or another $12,000 per Canadian family.

Chances are, however, that it won’t end there. As noted above, most Canadian governments are combining optimistic revenue projections and unrealistic low rates of program spending to balance their budgets.

If history is any indication, such plans contain substantial risks.

Through the 1980s and early 1990s, governments continually attempted to grow their way out of deficit by hoping for higher revenues and trying to slow the growth in spending. But the inability to constrain growth in spending, coupled with lower-than-expected revenues, ultimately resulted in ongoing deficits, mounting debt and a loss of Canada’s AAA rating in 1994.

If our current governments’ plans meet the same fate, the country will be left with even more government debt, which will be an even more significant drag on our economic prospects.

As the budget season comes to a close, Canadians ought to be concerned about their governments’ collective fiscal position. What Canadians needed was federal and provincial leadership to realize the seriousness of ongoing deficits and Canada’s growing government debt and put forth credible plans to balance government budgets. Instead, our governments’ largely kicked the can down the road. Let’s hope they get the message soon and find the resolve to actually tackle the problem head on.

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    Spending all that money to be first in green energy, giving government workers pay and perks far above their ability and other good “investments” haven’t paid off. How can that be?

    Government planning reminds me of the mighty Global Warming catastrophizers. Feed in some unrealistic expectations and everything will be well. In the case of Global Warming, feed in catastrophic predictions and the future will be catastrophic. Feed in hypothetical rosy growth imaginings and the future will be super. Hypotheticals make everything better, hypothetically.

Cheerio and ttfn,
Grant Coulson
Cui Bono–Cherchez les Contingencies

   Do not think about, write about or deal with  human behavior without determining the effects of incentives.

The 25 Best Quotes From Thomas Sowell
    John Hawkins

Apr 20, 2012

The 25 Best Quotes From Thomas Sowell

Thomas Sowell is not only one of the finest columnists in the business, he’s a prolific author, a brilliant economist, and he has an incomparable knack for simplifying complex concepts that few other human beings can match. Enjoy the distilled wisdom!

25) "Since this is an era when many people are concerned about ‘fairness’ and ‘social justice,’ what is your ‘fair share’ of what someone else has worked for?"

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    The current interest of politics is in insuring fairness in the tax system, not about producing more. This is the sign of something–apocalypse, end game, end of politics, irreversible trend. None of this is good. The politics of jealousy is not the politics of production.

24) "Imagine a political system so radical as to promise to move more of the poorest 20% of the population into the richest 20% than remain in the poorest bracket within the decade? You don’t need to imagine it. It’s called the United States of America."

23) "Four things have almost invariably followed the imposition of controls to keep prices below the level they would reach under supply and demand in a free market: (1) increased use of the product or service whose price is controlled, (2) Reduced supply of the same product or service, (3) quality deterioration, (4) black markets."

22) "What sense would it make to classify a man as handicapped because he is in a wheelchair today, if he is expected to be walking again in a month and competing in track meets before the year is out? Yet Americans are given ‘class’ labels on the basis of their transient location in the income stream. If most Americans do not stay in the same broad income bracket for even a decade, their repeatedly changing ‘class’ makes class itself a nebulous concept."

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    Aside from the obvious such as cognitive and physical handicaps, the vast majority of those on welfare are, a) unable to get along with others, and, b) a deep and abiding inability to work hard.

21) "There are few talents more richly rewarded with both wealth and power, in countries around the world, than the ability to convince backward people that their problems are caused by other people who are more advanced."

20) "The poverty rate among black married couples has been in single digits ever since 1994. You would never learn that from most of the media. Similarly you look at those blacks that have gone on to college or finished college, the incarceration rate is some tiny fraction of what it is among those blacks who have dropped out of high school. So it’s not being black; it’s a way of life. Unfortunately, the way of life is being celebrated not only in rap music, but among the intelligentsia, is a way of life that leads to a lot of very big problems for most people."

19) "The first lesson of economics is scarcity: there is never enough of anything to fully satisfy all those who want it. The first lesson of politics is to disregard the first lesson of economics."

18) "Each new generation born is in effect an invasion of civilization by little barbarians, who must be civilized before it is too late."

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    This is one of the paradoxes of the false necessity of public education where, according to unions, students are “socialized” by their interactions with other students. School students can only be socialized by adults who know the values and usages of society.

…… more to come

Cheerio and ttfn,
Grant Coulson
Cui Bono–Cherchez les Contingencies

    Do not think about, write about or deal with  human behavior without determining the effects of incentives.

Obama is the World’s Worst Investor

    Lurita Doan
Apr 23, 2012

Obama is the World’s Worst Investor

Barack Obama recently campaigned in Ohio about the importance of his policies, solar energy efforts. Solyndra, endorsed enthusiastically by Department of Energy and the president, declared bankruptcy less than 12 months after receiving Obama’s “investment” of $534 million dollars. Unfortunately, Solyndra was not Obama’s only poorly performing solar energy investment. Obama has, so far, lost over 2 billion dollars in poorly performing solar companies that, soon after huge infusions of taxpayer dollars, filed for bankruptcy protection.

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     A hundred million here and there soon adds up to real money. Beware a government bureaucrat talking about “investment”. These are not real investments, but political spending.

Consider Obama’s investment in “green jobs”. After three and a half years and almost one hundred billion dollars of “investments”, Obama’s programs have been able to create only a few thousand jobs, certainly not the 5 million “green jobs” originally promised by the president. And, many of those few thousand jobs created are actually existing government jobs that have been re-categorized by Team Obama.

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     None of these jobs are real. Once the subsidies subside, the jobs are gone. Ask Spain, the once-to-be-soon-leader in “green jobs” and now bankrupt state.

Consider Obama’s investment in “shovel ready” projects, which he promised would reduce unemployment dramatically and revitalize the engine of our economy. The only problem was that Team Obama didn’t understand their own government regulations, and they allowed themselves to be “snookered” into allocating Stimulus infrastructure funds for pet projects such as the San Francisco Harvest Marsh Mouse research. Two years later, the president admitted that perhaps he did not understand what it took to make a project shovel ready. Obama seemed to think it was a joke, but it turned out to be yet another bad investment for the American taxpayer. Unfortunately, the president’s $787 million dollar “investment” was lost—and the American taxpayer was, once again, left holding the empty bag.

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     Remember “shovel ready”? Yet another set of government buzzwords with no meaning. “Shovel ready” means ready to waste money.

Investment advisors in the private sector also are evaluated on the investments they passed on. For example, some of the investments that Obama decided to pass on were investments in the Keystone pipeline and additional nuclear energy plants, denying our nation energy independence and preventing hundreds of thousands of new jobs from being created.

Any way that Americans look at it, Obama’s record as an investor is appalling. He has blown through trillions of dollars of taxpayer money, added another 5 trillion dollars of debt and has little to show for all the spending. Time and again, his touted investments have gone bust, and never has he been able to achieve the returns he has promised. Curiously, despite these poor returns, the president continues to campaign on the promise of making even more “investments” for the American people.

In the private sector, when an investment advisor performs as poorly as Obama has, investors take their money and go elsewhere. Perhaps, in November, American voters need to follow that same example.

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    Lack of wisdom in economics does not mean political failure. FDR was elected four times and had the worst grasp of economics imaginable. He did; however, have a grandfatherly mien, a lot of hubris and the ability to sell nonsense to the electorate.

Let’s remember, too, that most investment prospectuses post a warning: “past performance does not guarantee future results”, but in Obama’s case, maybe it does.

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  Beware when the government starts using real worlds about imaginary political things. Never ends well. A good investment, made with someone’s own money, produces real results.

Cheerio and ttfn,
Grant Coulson
Cui Bono–Cherchez les Contingencies 

    Do not think about, write about or deal with  human behavior without determining the effects of incentives.

     Several taxpayer groups are getting together an award for the Secret Service agent who didn’t pay the Colombian prostitute. He’s the only federal employee  trying to cut costs.

Your ongoing Obama green energy disaster of the day: Fisker Automotive

The death watch begins.
by John Hayward

While we enjoy our latest Two Minutes Hate against oil speculators, here’s a little lesson in the interconnectedness of Obama’s disastrous “green energy” investments:

One of the big recent “green energy” epic failures is A123 Systems, which raked in $300 million from the “stimulus” bill, plus another $135 million in Michigan state funding.  They’re currently teetering on the edge of bankruptcy, and just got slapped with a class-action lawsuit for allegedly “making false and misleading statements” about manufacturing deficiencies in their products.

One of those products was the electric battery used in the Fisker Karma, a $100,000 electric sports car that literally dropped dead when Consumer Reports took it for a test drive.  A123 Systems was betting heavily on Fisker’s success – so heavily that they pumped $20 million of their own equity and cash into the auto maker.

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     Electric sports car? Once you’re on the nonsense road, all nonsense stops are possible.

Fisker got $529 million of your money from the Obama Administration, producing 500 manufacturing jobs.  Unfortunately, those manufacturing jobs were in Finland, not America.  Fiskers executives were quite proud of their wise decision to keep those jobs overseas.

Confronted by this horrific embarrassment, Obama apologists pointed to the Fiskers plant in Delaware, the lovely state from whence our Vice President hails.  They bought an old GM factory (built when the “G” stood for “General,” not “Government”) and planned to build a much more affordable $50,000 car for the common man in their American facility.  It’s called the “Atlantic.”  It doesn’t actually exist, and it probably never will.

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     In the Land of Theory and Righteous Intentions, the electric sports car exists in the same dimension as “social justice” and “fair wages”.

That’s because Fisker has begun laying off workers left and right at its Delaware plant, “because it ran out of government loan money,” as USA Today put it.  “Fisker had failed to meet production and sales milestones it had promised in the loan agreement with the Department of Energy, so loan cash was shut off last May.”  They’re up to 66 layoffs now.

As reported at The Truth About Cars, “At this point the plant is empty, Fisker having spent millions of dollars, most of it public funds, to remove the old equipment yet not having the money to buy and install a new assembly line.”  Every single one of the few cars Fisker has sold were assembled in Finland.

The kinda-sorta good news, if you’re willing to put a happy face on anything salvaged from the ruins of Obamanomics, is that Fisker didn’t burn through all $529 million of the U.S. taxpayer money the Obama Administration handed them.  They’ve only spent about $200 million so far.  The Energy Department put a hold on the rest of their subsidized loans.  It’s very unlikely they’ll be able to meet the qualifications necessary to unlock that money… and no private investor in their right mind is going to give them big bucks unless they know Uncle Sucker is going to provide that taxpayer support.  Meanwhile, the state of Delaware is reportedly paying the utility bills for the empty Fisker factory, which is not exactly an encouraging sign to potential private investors.

The need to get that money from the Obama Administration wipes out whatever flexibility Fisker might have had to develop an alternative business strategy.  As Ronnie Schreiber writes at The Truth About Cars, “The problem for Fisker is that their entire business plan was based on getting money from the federal government and other assistance from the state of Delaware conditional on building cars in that same Delaware plant.  If Fisker walks away from Wilmington, they’re on the hook for that same $200 million that they’ve borrowed in addition to what they’ll need to set up shop somewhere else. There’s just no way they’re going to find private funding with that hanging over their heads.”  Schreiber wonders if it’s time for the “Fisker death watch” to begin.

So, for anyone still wondering: no, command economics can’t compete with the power and wisdom of the free market.  Subsidized production and artificially created demand are collapsing into a black hole of serial bankruptcies, as the dying days of Obamanomics leave us with nothing but a mountain of debt and empty factories.  And if you think that isn’t bad enough, try adding in the lost profit from the true opportunities obscured by the static of command economics, and the immense interest payments we, and our children, will be shelling out to finance the hundreds of billions of dollars Obama has wasted.

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       Aside from no product, prohibitive costs and unrealistic sales predictions, the electric sports car?

Cheerio and ttfn,
Grant Coulson
Cui Bono–Cherchez les Contingencies

    Do not think about, write about or deal with  human behavior without determining the effects of incentives.

As France Goes, so Goes Europe?
Pat Buchanan

Apr 20, 2012

As France Goes, so Goes Europe?

When survival is at stake, one may hear from a politician not what he believes — but what he thinks the people deciding his fate wish to hear.

By that standard, what do the people of France, in the final weeks of their presidential election, wish to hear from their candidates?

President Nicolas Sarkozy seems to believe his countrymen are in a deeply nationalistic frame of mind.

Five million Muslims live in France, but he is cracking down on Islamists. He is demanding that the Schengen Agreement, under which Europe’s nations maintain open borders, be renegotiated. If immigration from outside Europe is not restricted, says Sarkozy, he will pull out of Schengen.

He is demanding a "Buy European Act" for public contracts. He will confront Japan and China on trade. Were he running in the U.S.A., Sarkozy would be denounced as a protectionist and nativist.

His strategy? He wants to finish first in the first round of voting April 22, by siphoning support from the rightist National Front of Marine Le Pen.

Le Pen would halt immigration, crack down on crime, pull France out of the eurozone and restore the franc. She calls for an "Arab Spring" in France, a democratic revolution, yet sounds statist with her pledge to force down oil and gas prices. This lady is no libertarian.

Sarkozy is moving right to crowd her out in the first round of voting and is being assisted by a rabidly anti-Le Pen party of the extreme left led by ex-Socialist and ex-Trotskyite Jean-Luc Melenchon, who appeals to an angry and dispossessed working class.

The Left Front, made up of the Communist Party, Greens and radicals, has been gaining from the fiery speeches of Melenchon, a supporter of Hugo Chavez who endorses China’s policy in Tibet and regards the United States as the "greatest problem in the world."

Melenchon loathes and mocks "the rich," and has proposed a 100 percent tax on income above $450,000. No executive would be allowed to earn a salary more than 20 times higher than his average worker. France’s minimum wage would be raised 40 percent to more than $25,000 a year.

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   Nothing like legislation to produce prosperity and minimum wage legislation is the best of the best. How will this help with youth unemployment you ask? It will really increase it.

An anti-capitalist and anti-globalist who called at the Bastille for "civic insurrection," Melenchon has gained at the expense of Socialist Francois Hollande, who yet appears the favorite for the Elysee Palace.

Defending his imperiled left flank, Hollande supports a 75 percent tax on all incomes above 1 million euros and would restore pension benefits peeled back by Sarkozy to reduce France’s deficits and halt the rise in her national debt.

In the first round of voting, Hollande and Sarkozy are expected to finish first and second, and enter the runoff May 5.

One debate is scheduled. Sarkozy wants two. Hollande is seen a a bore. However unpopular Sarkozy is, he is not.

Looking at the speeches of the leading contenders and the issues they are emphasizing, what does this tell us about France — and Europe?

First, Europe’s economic crisis has engendered a deep resentment against the rich that, if reflected in the tax policy of Hollande, could cause an exodus. France’s most productive and successful citizens would likely flee to countries where the tax rates do not confiscate the rewards of their labors.

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     As the European Union falls apart, how long will it take to realize that adding a layer of bureaucrats and more regulation impedes prosperity and does not produce it?

Second, anti-immigrant sentiment is surging, especially against Muslim and Third World peoples. Yet, as no EU country has a birthrate that will enable it to replace its present population, immigration is certain to continue, as will the ethnonational recoil against it.

In the name of EU solidarity, German Chancellor Angela Merkel had agreed to campaign for Sarkozy. He no longer seems to want her.

Third, as nationalism is on the boil in France and across Europe, globalism and transnationalism — the vision of an EU evolving into a federal union, a United States of Europe, leading to the dream of One World — no longer seem to be the future. They no longer inspire, if ever they did.

Among France’s young, it is Marine Le Pen who runs strongest at 26 percent.

Neither Le Pen nor Melenchon, who together will amass more votes than Hollande or Sarkozy, supports further surrenders of French sovereignty. To augment its power and deepen its presence on the continent, the EU will have to overcome rising popular resistance.

Economic nationalism appears a growth stock on the right and left, as it was in the United States in the NAFTA debate, when Socialist Bernie Sanders marched with Ross Perot.

Great crises often bring people together.

Our Revolutionary War was indispensable to creating America.

But as Gideon Rachman writes in the Financial Times, Europe’s crisis is "encouraging the citizens of the European Union to fall back on older, more deeply rooted national identities."

The people of France and the peoples of Europe seem to be returning to their roots, to whom they were, and to whom they wish to be again.

Europe is coming apart — and so, it appears, are we.

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     As prosperity wanes, discontent increases, but wisdom, apparently, does not.

Cheerio and ttfn,
Grant Coulson
Cui Bono–Cherchez les Contingencies