The Ministry of Un-Finance and Tax Games

(No, this title is not “Orwellian”, but the consequences are!)

As we close to within one week of what may well be the most significant election of my lifetime, and possibly in Canada’s history, I am continually confronted in discussions by our confused and conflicted political positions around money, where it comes from, and where it goes. This includes massively widespread confusion and contradiction about taxation.

Chapter two of my book, Salvaging Capitalism / Saving Democracy, entitled R.I.P. Middle Class talks about wealth transfer, and Chapters three and four specifically talk about the true role of money, and the irrational love of money and worship of those who have money – regardless of how they got it.

I spent far less time on taxation – a nasty and unpleasant topic for most of us. In hindsight, I see that as a regrettable omission, but in part a result of my limited understanding at that time. I have learned a lot more since publishing that book, both through additional reading, and through feedback and discussion of topics in the book.

Why is this significant during an election? Because what politicians say about taxation and what they actually do has massive impacts on our well being and on our long term future. And when things go well in the economy, politicians are quick to take credit. When things go badly, it is ALWAYS the fault of external factors they could neither foresee or control – or so they would have us believe.

Today, October 9, 2015, Canada is 600 Billion dollars in debt. And that debt is today some 151 Billion dollars higher than it was in 2006. That is an increase of about 31%, very nearly one third – by a government that promotes itself as fiscally competent.

EVERY DAY, we Canadian taxpayers collectively pay about $160 Million in interest payments on this debt, mainly to the commercial banks! If you are a family of four, that works out to $18 per day out of your pocket, about $6600 per year just in interest payments, and the Harper Government is responsible for the last 31 percent of that. Put your (fully-taxable) child care benefit in that context! Give with one hand and take away with the other.

Now of course you don’t see that $6600 taken from your pocket directly. You see it in government services you just don’t get, whether that is decreased money for healthcare and education, less money for government scientific research, less aid for other countries, or a poorly equipped military. That part is all about priorities.

So how did we end up with this debt, and why? Some claim it is because we are living beyond our means, and have to learn to live with less. The international financiers pressed the Chretien/Martin governments hard on this, and some of the resulting cuts to actually balance the budget were pretty draconian and poorly thought out..

When it comes to our environment, there is something to the “live with less” argument because our current rate of resource consumption and environmental degradation is not sustainable. But in my experience, those who preach constraint are generally the worst in actually practicing it. Conspicuous consumption, also called “keeping up with the Joneses” became a hallmark of life in the twentieth century.

And the living-beyond-our-means argument also assigns that mystical character to money that Chapters three and four of Salvaging Capitalism / Saving Democracy debunks. Money has no function or intrinsic value except as a medium to facilitate the exchange of goods and services.

Governments around the world, together with some mysterious power called “market forces” conspire to mess with the money system to advantage themselves over others on a daily basis – including schemes that are outright theft – such as the Libor scandal of 2012, or seriously distort trade through currency valuation. But that is tangential to the discussion of taxation and debt.

So returning to deficit, debt, and taxation – and at the risk of stating the obvious – we need to define some things, because for many these ideas are hazier than they need to be.

One confusion is between debt and deficit. Most of us in our daily lives understand debt. When we want to buy something and don’t have the cash in the bank, we go into debt. We put it on a “credit” card, or take out a loan. We increase our debt. (Interesting how marketers use Spin words to deliberately confuse us. If those first magic pieces of plastic had been called “debt” cards, one wonders if they would have caught on as fast, or in such a massive way.)

So our total debt is the sum of all our future obligation to pay, all those I.O.Us, from our car loan, to our mortgage, to our education loan, to the “debt” card payments that we owe for “stuff”.

We don’t tend to use the term “deficit” in our lives, but most of us understand that if we spend more money than we take in, we dig ourselves into a bigger hole. We either spend less, or we have to make more. So people take a second part time job, work overtime, or even steal to try to bring in more money. The lack of balance between what we spend and what we take in is either a surplus ( we have money left over at the end of the month) or we spend more than we take in, and run a deficit. So even though we don’t use the term, we do often run a personal deficit – sometimes for good reasons, and sometimes for not so good reasons.

Governments don’t make a wage, and can’t take a second job (although they do often steal and extort). Governments get their money by taking some of yours. They then give it back – in theory – by providing services (such as healthcare, police, border security), or building and maintaining infrastructure (roads, bridges, utilities, etc.). Governments at all levels get their money by a combination of taxes and user fees. Here is where the rubber hits the road, and where ideology, monetary theory, and worldview make a huge difference in the approach.

More progressive governments prefer “progressive” taxation. We are all familiar with the concept of tax brackets. The higher your tax bracket, the greater percentage of your “income” you pay. This is based on (1) religious teachings and (2) clear evidence that money has – as German economist Karl Marx put it “…the occult ability to add value to itself.” – i.e. The rich get richer not by effort but because money “grows” in and off itself.

Progressive taxation then, is based on the notion that we have a moral obligation to help those less fortunate than ourselves but is also a pragmatic attempt to re-balance wealth distribution, which in the absence of such measures will very quickly concentrate into the hands of a very few, leaving the bulk of the population totally landless and subservient – a return to the feudal times that western democracies presumably left behind a couple of centuries ago, and from which some countries in Africa and the Middle East have yet to escape. This is the so-called “wealth inequity” we occasionally hear about but don’t really understand.

The middle ground would be a so-called “flat” tax. This means that the percentage of income you contribute to government coffers is a constant. For example, if the rate was 10%, for every $10 you took in, you would pay $1 in tax. This seems very simple, and intrinsically “fair”, but makes the assumption that everyone also benefits equally from government services – a notion that does not stand up to the most cursory examination of reality. Those most disadvantaged in our society get little benefit from superhighways, modern airports, and similar infrastructure.

The flip side of progressive taxation is “regressive” taxation. Such schemes are never called regressive by their proponents, but the effects are clearly to deliberately put (or leave) more money in the hands of the already wealthy, or to extract a disproportionate percentage of total income from those who make less.

This is the most insidious form of taxation, and one very much in favor with right-wing governments, in part because most of the people who pay this tax don’t understand they are being gamed by the system. Consumption taxes like Mulroney’s GST fall in this category, for the simple reason that lower and middle class consumers spend most of their money, thus making it subject to consumption tax. The wealthiest hoard most of their money, investing it, banking it off shore, and buying “stuff” in jurisdictions where there is no consumption tax. So as a percentage of income, the wealthiest contribute very little to consumption taxes.

Problems are compounded by lower rates of taxation on money made from investments compared to money from wages, together with hugely complex systems of deductions that keep an army of tax accountants employed.

So when the Harper Government announced income splitting and a child tax credit, their opponents had difficulty having people understand that this plan represented “regressive” taxation, disproportionately benefiting those in higher tax brackets.

People tend to see only the apparent direct impact of such schemes on their immediate family situation, and don’t factor in long term costs like the annual cost of servicing Canada’s debt. Because when we implement regressive tax regimes there is only one possible outcome – the rich get richer and the poor get poorer!

And if you make $100,000 – $150,000 a year and consider yourself among the “rich getting richer” you have no idea what RICH means, or what is really happening to your slice of the pie. (see links below.)

Just as Mulroney did, at the same time as Harper cut taxes for the wealthiest, he continued to spend like a drunken sailor on things of little or no benefit to ordinary Canadians and to cut money for research, social programs, and transfers to the provinces. The result is shortfalls that then force local and provincial taxes to go up. It is important to recognize that such changes are ideological and political – not based on what is ultimately best for the country. That is very clear from my reading of Harper’s thesis – written in the right-wing school of economics at the University of Calgary.

This tax-cut-and-spend places a burden disproportionately on some provinces and benefits others. For example, unilateral short term changes to Healthcare funding benefit Alberta and provinces with a younger population and put a huge additional burden on provinces like Ontario, already reeling from the loss of 400,000 manufacturing jobs under Harper. This tax policy is purely political, buying friends and punishing “enemies”. It is wedge politics at its worst, and can only lead to more of a downward spiral in our total economy and increased wealth inequity. We hear this last term thrown around a lot, but just how bad is it?

Here are two short videos, the excellent original based on U.S. data and then a later adaptation showing the situation in Canada. Unless you are one of the 87 most wealthy families in Canada, you owe it to yourself, your family, and your country to view and think about these short videos before you vote.

Wealth Inequality in America (length 6.23 minutes)

Wealth Inequality in Canada (length 4:14 minutes)

Of course there are lots of “Cheerleaders” (as defined in my book) for an alternate point of view. This is the usual right-wing spin from places like Forbes.com, home of Forbes Real-Time Billionaires site. Just gotta know who made $292.71 Million in the market today!

Ministry of Peace

(Also euphemistically named the Ministry of “Defence” or “ Defense” in the U.S.   Continuing along the line of my last post about the Ministry of Truth, in Orwell’s 1984, the ministry responsible for perpetuation of continuous war between the three superstates was – of course – called “The Ministry of Peace”)

In this week of the 9th Annual Ottawa Peace Festival, do you ever question what we are “defending”?

I’ve had a long fascination with history, and much of recorded history is war. My birth in the early days of World War II was an event that might have never happened, had my father not been diagnosed with Tuberculosis by military doctors when he and his only brother Claude went together to enlist in the fight against Hitler. My only uncle on my fathers side, Major Claude Abell of the North Novas is buried in a military cemetery in Cape Gris Nez, France, one of the approximately 42,000 Canadian servicemen and women that did not survive that war.

As a young boy, I listened to the radio show about the heroic Horatio Hornblower, of Her Majesty’s Royal Navy, based on books by C.S. Forester. I was drawn to study weapons, and their role, from the siege weapons of the Romans, through the long bow vs crossbow battle of Agincourt immortalized by Shakespeare in Henry the V, to the Spitfires and Hurricanes of the Battle of Britain, and the howitzers, machine guns and mines that were a part of modern warfare. I was a Queen’s Scout – an organization that arose out of the Boer War, and an army cadet, where I learned to parade, to salute, to shoot, and to read military topographical maps.

It was not until my college undergraduate studies in the early sixties, that I began to seriously look at the political side of war. This included a very thorough study of Hitler, the situation, tactics and forces that brought him to power, through to his final sociopathic rant against the German People for letting him down.

This was also the 60’s, of the Dawning of the Age of Aquarius. The U.S. was embroiled in the Vietnam War, wars raged in Burma, the Congo, Guatemala, in fact in some 56 countries around the world, but mainly in Africa, Asia, and Central America. Cast on one side as a fight against godless communism, and on the other as wars of liberation from colonial oppression, these became proxy wars between the superpowers – funded, armed, and heavily propagandized by the United States and the U.S.S.R. – often with direct or covert involvement of armed forces from the superpowers and/or from their respective allies.

When opposition to this extension and deployment of U.S. Military forces arose in the context of the Vietnam War, a huge political polarization occurred, which tended to drown out any discussion of paths to peace and reconciliation. It also resulted in a right-wing backlash that bedevils the U.S. and Canada to this very day. The result has been over sixty continuous years of a World at War, with the poorest and most vulnerable nations the inevitable victims, with millions of civilian deaths and hundreds of millions displaced – living in poverty and misery.

(cf https://en.wikipedia.org/wiki/List_of_ongoing_armed_conflicts)

There is no moral high ground in the real history of this period of continuous warfare from the 1950’s – inaccurately called the “post-war period” – to the present day. The more I study and come to understand the root causes and progression of these hundreds of conflicts, the more disappointed and sometimes furious I become with the leadership of what is inaccurately called “the Free World”.

And we have such leadership because we, the people, buy into their fear and division tactics, and let them get away with wrapping themselves in the flag, even as they work against our best interests.

The Ministry of Truth (or Look at the Bloody Dates!)

(Note – update as of 27 Sept.  The page referenced below has changed somewhat since yesterday, and I confirmed that with someone else, to make sure it was not my imagination.  Some of the missing data was restored, even though the headings continue to be deliberately misleading.   RA  26 Sept 2015)

As is typical of my prose, this blog was triggered by a real event – an observation of a CBC website, (http://www.cbc.ca/news/multimedia/canada-s-deficits-and-surpluses-1963-to-2015-1.3042571 – which was originally published on April 21, 2015 and was then updated on September 16, 2015.

I saw the earlier version, and recorded data at that time. So I was shocked to see the “revision of history” that occurred in September, conveniently one month prior to a national election in Canada.

When Orwell wrote the dystopian novel Nineteen Eighty Four – only 4 years after the end of the Second World War – he imagined three Super-States in a world of perpetual war. Control was maintained through total public surveillance in what was a police state, with complete control of media and total manipulation of the public by a government and political system set up to provide a life of luxury and privilege to a very few. Critical to this whole scheme was a cult of personality around the Party Leader. Critical to the whole structure was the Ministry of Truth.

The role of the Ministry of Truth was to revise history. The protagonist, Winston, is employed to rewrite records, alter photographs, and dispose of original documents which were incinerated in a “memory hole”.  Any dissenting opinions were punished by the Thought Police.  If Orwell were to drop in on us today, he would see that in some of his inventions, he was very wrong. But in Canada at least, the Ministry of Truth exists. It goes by other names, but the effect is the same. History is being rewritten, and inconvenient truths dumped in a memory hole.

Where does the Ministry of Truth kick in?

So what do we see when we go to that CBC website?  We see a smiling picture of the current Prime Minister, Steven Harper, and two big black boxes signifying a $13.8 Billion Dollar Surplus and a $1.9 Billion Dollar surplus.

If you click on the little arrow to open the display, you see the same box duplicated again (so it appears twice now), followed by two black boxes beside a picture of Liberal Prime Minister Paul Martin, again with two black boxes and almost identical amounts of 1.4 Billion Surplus and 13.2 Billion Surplus. Chretien managed a Black box of $10.6 Billion and a Red Box with a $38.5 Billion Deficit … but I bore you with details. You can see it for yourself.

LOOK AT THE BLOODY DATES!!!!

So what went into the memory hole? SIX YEARS OF RED INK!  Harper’s surpluses are for 2006-2007 – when he was a minority government, and for 2014-2015 – a time period not fully finished and therefore not presumed accurate – only a forecast.  The heading of the CBC piece claims to be the deficits and surpluses from 1963-2015, but SIX YEARS ARE MISSING!  Until Harper’s Thought Police come to get me, and scrub my websites, here is the missing data:Canadian Deficits 1963-2014

From 2008 until 2010, Harper ran a deficit – a BIG deficit, in fact the second largest in real dollars in Canadian history – $94.7 Billion.

From 2011 until 2013, Harper ran another deficit – another BIG deficit. $71 Billion in red ink.

Over the period from 2006 to 2014, the “Harper Government” added $158.9 Billion to taxpayer debt.

Of our total debt of approximately $600 Billion, Harper is responsible for almost 25%.

No wonder the Ministry of Truth wanted to put this in the Memory Hole.

Salvaging Capitalism/Saving Democracy – Chapter 14 – A New Face for Government

Chapter 14 Salvaging Capitalism

“I am only one, but I am one. I cannot do everything, but I can do
something. And because I cannot do everything, I will not refuse
to do the something that I can do. What I can do, I should do. And
what I should do, by the grace of God, I will do.”
(Edward Everett Hale {April 3, 1822 – June 10, 1909} American
author, historian and Unitarian clergyman.)
“Chains of habit are too light to be felt until they are too heavy to
be broken.”
(Warren Buffett, from “www.brainyquote.com”)

Chapter 14 – A New Face for Government
The cures that can salvage capitalism and save democracy in the
process are conceptually very simple, but for a government to put
them in place, and/or for Capitalists with the moral persuasion of
Adam Smith to put them in place will take a concerted effort. …

Download the chapter with forward and author end notes.

Click to access chapter-14-salvaging-capitalism.pdf

Chapter 15 – Responsible Corporations

Get both chapter 14 and chapter 15:

Click to access chapter-14-and-15salvagingcapitalism.pdf

Blind Men

Do you ever wonder why we have so much argument, and so little discussion these days?

I think it is mainly because we don’t see the whole picture, and feel the need to defend our position, in a very “territorial” way.

It’s as if learning more and actually understanding more would somehow diminish our own sense of worth.

The last two lines of this classic poem sum it up well: “Though each was partly in the right, And all were in the wrong!”

So how could the argument have been easily solved? And do we all, on occasion, behave somewhat like these learned men of Indostan?

The Blind Men and the Elephant
John Godfrey Saxe (1816-1887)

It was six men of Indostan
To learning much inclined,
Who went to see the Elephant
(Though all of them were blind),
That each by observation
Might satisfy his mind.

The First approached the Elephant,
And happening to fall
Against his broad and sturdy side,
At once began to bawl:
“God bless me! but the Elephant
Is very like a WALL!”

The Second, feeling of the tusk,
Cried, “Ho, what have we here,
So very round and smooth and sharp?
To me ’tis mighty clear
This wonder of an Elephant
Is very like a SPEAR!”

The Third approached the animal,
And happening to take
The squirming trunk within his hands,
Thus boldly up and spake:
“I see,” quoth he, “the Elephant
Is very like a SNAKE!”

The Fourth reached out an eager hand,
And felt about the knee
“What most this wondrous beast is like
Is mighty plain,” quoth he:
“‘Tis clear enough the Elephant
Is very like a TREE!”

The Fifth, who chanced to touch the ear,
Said: “E’en the blindest man
Can tell what this resembles most;
Deny the fact who can,
This marvel of an Elephant
Is very like a FAN!”

The Sixth no sooner had begun
About the beast to grope,
Than seizing on the swinging tail
That fell within his scope,
“I see,” quoth he, “the Elephant
Is very like a ROPE!”

And so these men of Indostan
Disputed loud and long,
Each in his own opinion
Exceeding stiff and strong,
Though each was partly in the right,
And all were in the wrong!

Spin Doctor

Living in this world can be complex and downright dangerous at times.  There are lots of funny things going on around us that cause us the blahs.  
One of these is a disease that seems to affect all media communication called “Spin”.

Spin is widespread and is communicable like any disease, that is, people exposed to Spin often both get the disease and transmit it unknowingly to others. It is possible to develop a level of immunity to Spin, although new strains seem to show up with regularity, especially in election season – which itself appears to have grown like a massive tumor to 365 days a year (except in leap years).

“Spin Doctor” tries to track some of the more dangerous varieties of Spin, give you tools to recognize the symptoms, and help immunize you against infections by this dangerous virus.

Strangely enough, even the term “Spin Doctor” is a form of Spin – Bafflegab.   Doctors are supposed to cure us – right?  So why call someone who makes us sick a doctor?  I guess it is because they  “doctor” bad ideas to make them look better – sort of like cosmetic surgery.   I would prefer to call them Spin Masters,  because their intent is to control the way you think.