The Canadian Centre for Policy Alternatives released an article today stating reiterating the need for the federal government to invest in public services to fight the second wave of recession hitting Canadians. Although I agree with their idea, I can see how it can be dismissed by those of varying political stripes. I hope this post can help shed some practical and factual insight on their recommendation.
Historically, typical government response to stimulus is corporate tax cuts or infrastructure spending. The problem with tax cuts is two fold. It deprives us of revenues, creating larger deficit and economic instability. This may well serve political ideologies that want no part of social services at all, but does nothing to strengthen our fiscal standing.
Tax cuts are also problematic because figures show these cuts serve to strengthen shareholder revenues but do not assist labour nor capital equipment investment.
Infrastructure spending while a bit more direct in job and possible capital investment is a short term solution. Widely know as “make work” projects they lack the ability to stimulate economies on a large scale.
There is a way to inject money into the economy though that is affordable and paves the way to long term economic strength.
I share again the report by Dr. Kubursi of Econometric Research Limited. The findings show the very real economic spin off that comes from social assistance payments.
Unlike funds given to private corporations, these funds go directly back into local economies. The reason for this is two-fold. One, the recipients are not mobile and so all funds stay in areas where the recipient lives. Two, the money is spent in its entirety, as the funds are not high enough for the people to put it into savings. This ground level stimulus creates demand for local goods. Community level businesses flourish, stimulating job growth and tax base.
Furthermore, we must cease our myopic view of the cost of social assistance at every level of government. When speaking of affordability full cost analysis must happen.
“The remedial costs of poverty related to health care and crime are substantial. In Ontario, poverty-induced costs related to health care have an annual public cost of $2.9 billion. The national added cost to health care budgets is much greater, at $7.6 billion per year. The poverty-induced costs related to crime in Ontario have a relatively small annual public cost of $0.25 to $0.6 billion, split between federal and provincial governments.” Ontario Federation of Food Banks
Our current models of service delivery are unsustainable. They do not serve the public, namely the bulk of taxpayers.
The time is now to demand greater equity for all. And by all, I mean the majority of citizens and small businesses. Median incomes have increased very little over twenty years while inflation grows and shareholder profits have skyrocketed. Economic business models which serve shareholders before living wages continually strangles our economy, lessening demand for goods and raise personal debit levels to alarming and unsustainable proportions.
Ask your government to invest in people and provide policies which create long term, economy wide growth.