Sunday, April 20, 2008

The GST Cut: Thanks for Nothing


We all know the Conservatives would sell their mothers down the river if it would buy them a few more votes. In fact, "Canada's New Government" has repeatedly abandoned supposedly "conservative" principles in order to advance a more populist agenda. Chief amongst these moves was their commitment to reducing the GST. The economic benefits of the plan were dubious at best, but it sure made for good election campaign fodder. CBC Marketplace has an interesting little piece on the much ballyhooed GST cut, and who the real beneficiaries are (hint: it's not you or me).
*Skip to about 02:50 in the video above for the GST story.

7 comments:

The Right is Where its At said...

Apparently red you must have missed this story.

Here is part of it,it talks about of interest rate cut and the reason of why we have a low inflation.


"I'm grudgingly calling for a 50 basis point (half point) drop on Tuesday, but I'm not convinced that is the right call,'' says Douglas Porter, deputy chief economist with the Bank of Montreal.

"There's lots of signs the economy is holding up. Auto sales look to have posted their strongest quarter on record, housing starts had their second best quarter in 20 years and more than 100,000 jobs were added. Even with the talk of the credit crunch, the reality is that overall household credit growth has simply not skipped a beat in Canada''.

"Carney himself hinted last week he was leaning toward making another bold move after a 50 basis point cut in January, saying he was worried that credit markets are tightening and saying he would make monetary policy ''on a forward-looking basis.''

"The explanation for Canada's incredible shrinking inflation story can be traced to two events that occurred last fall.''

"The first was Finance Minister Jim Flaherty's unexpected one-point reduction in the GST, which Statistics Canada judges is likely shaving inflation by half-a-point and will do so throughout 2008."

"Equally significant was the Canadian loonie's flight to parity last September. After much complaining, including a public rebuke from the finance minister, that retailers were not passing on the savings, consumers are now seeing discounts, sometimes deep price cuts, on many items."

Maybe with a little research you can get your facts straight. I'm not the one who is saying this,its Mark Carney, Governor of the Bank of Canada. Maybe you know better than him. Right? So please red don't give me this nonsense that the GST cut did not do much to help Canadians,when in fact one of the reason for the low inflation is the GST cut.

Red Canuck said...

TRIWIA - Apparently, you missed the point of my post. Cutting the GST, when it was announced as part of the CPC platform, was strictly a PR move by Harper and Co. Not only that, but as a matter of principle, it rather goes against the traditional Conservative mantra, which would be to lower/eliminate income taxes and promote consumption taxes like the GST.

Secondly, I quite clearly stated that the benefits of the GST cut were "dubious", indicating that some debate exists.

Maybe you know better than him. Right?

I've never claimed such. But then I'm guessing you're no economist either. There can be no denying that Flaherty's GST cut was met with derision by many economists. Read for yourself.

Lastly, the point of the CBC piece still stands; Namely that GST savings that should be passed on to the consumer are in fact being kept by corporations or offset by higher prices, in particular for small-ticket items like a cup of coffee or a movie ticket.

The Right is Where its At said...

"I've never claimed such. But then I'm guessing you're no economist either. There can be no denying that Flaherty's GST cut was met with derision by many economists. Read for yourself."

No I'm no economist,but when the the Bank of Canada the most important institution when it comes to the economy of the country says that one of the reason for the low inflation that we have is,because of the GST cut I tend to believe them over all others who may disagree. Fact in the month of March the inflation has dropped. In closing don't you think that the Governor of the Bank of Canada before saying this must have gotten opinions from some of the best economist of country? I don't think that he got it out of thin air.Do you?

Red Canuck said...

TRIWIA - I'm not the one who is saying this,its Mark Carney, Governor of the Bank of Canada.

Strictly speaking, Mark Carney did NOT specifically say that, at least not in the article you cited. If you read the article again, you will see that the bit
about the GST cut was by Don Porter, an economist with the Bank of Montreal, not Carney.

In any case, even if Carney espouses a sililar stance on the GST cut, his position as Chairman does not in and of itself make him "right" and everyone else "wrong". Ben Bernanke has blamed spread of the Great Depression on the actions (or inactions) of the Fed at the time, so just because the BoC says something, doesn't make it unequivocally so. As I said, there appears to be dissent amongst economists.

In closing don't you think that the Governor of the Bank of Canada before saying this must have gotten opinions from some of the best economist of country?

This is absurd. Of course he receives input from economists, but what exactly makes someone "the best economist"? Do they wear a cape and a uniform? Do they get to put it on their resume? Many leading economists dispute the value of the GST cut. If you choose to believe one who doesn't, so be it.

And you conveniently ignored every other point I raised in my last reply to you, but I hardly expected anything else.

MD said...

I'm not aware that Carney himself ever attributed inflation control to the GST cut. Canwest has run a couple of articles boldly stating the benefits of that tax cut as fact, suggesting but carefully failing to cite any evidence that the Bank of Canada shares their view.

At any rate, as a non-economist, I was struck by how broadly criticized the tax cut was by economists on both the left and right. Red Canuck's post demonstrates how it cost the federal treasury without really benefitting individuals with small purchases. In other words, its a typically Conservative project...expensive, wasteful, well marketed, and more or less useless to individual Canadians.

Red Tory said...

Discussing economics with TRIWIA... kind of like talking about astrophysics with a turnip.

Red Canuck said...

RT - True enough. But the turnip offers some distinct intellectual advantages over your average Blogging Tory.