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One major reason for the drop in federal gubmnt expenditures was the huge decline in nominal interest rates, which lowered the interest payments on the debt. Getting inflation under control in the 1980s, thus lowering nominal interest rates eventually, was important in this realm, too.

How 'bout, whichever graph we look at we cut useless (at best) and harmful (at worst) spending and give us back our own money?

Why do taxes need to be cut or spending increased simply because there is a budget surplus? Your second chart, blue line, seems to me to be the most relevant if one is simply interested in the "health" of Canada's public finances. How about getting back to "normal", as defined by the debt as a % of GDP years of ~10%? The discipline of getting to that point would tend to hold back noninvestment budget moves by parliament. Here I'm thinking of physical capital investments (private or public) and human capital investments being potentially good, everything else bad.

That said, I'd love to see Canada reduce its corporate tax rate as much as is politically feasible to do so, ideally eliminating it, or at the very least being comparable to Ireland's rate, which one would think worthy of emulation given their history. After adding in the provincial corporate tax rates, as well as the hari-kari corporate capital tax (why does that monstrousity still exist?), Canada has one of the very highest corporate tax rates in the entire world, not just the developed world. (The US also has one of the very highest, which perhaps explains why more Canadians don't realize this).

Somewhere in your archives you have a post or two on the incidence of corporate taxation. Not only does this fall heavily on the average Canadian, but if countries like Ireland, Estonia, and the rest of the formerly communist European countries is any guide, corporate taxation is highly detrimental to economic growth. Additionally, as you mentioned in your archives, those on the Left ought to seriously consider the case of the Nordic/Scandanvian countries which have high personal income tax rates and low corporate tax rates, while at the same time it seems obvious to this libertarian that those on the economic right ought also to welcome low or no corporate taxation.

Just who exactly is in favor of corporate taxation when the reasonably successful welfare state countries and also the more economically free countries such as Estonia, Hong Kong, and Singapore all seem to do best with low corporate taxation?

Earnest question: When you say they cut spending, does it really mean that the spending was cut or merely that it was shifted to the provinces and cities?


"Do we look at the second-last graph and decide to cut taxes? Or do we look at the last picture and decide to increase spending?"

How about we look at one that shows revenues vs. total expenses including debt service, and realize that there's not nearly as much room as implied by those two charts to do much of either without going back into deficit? As expected, the answer from the government is to do some of both. I'm sure they'll get rid of that troublesome surplus in no time.

Yes, a proposal to increase spending is ridiculous without identifying what it should be spent on. The simple idea that we need more spending, typical of a government in Canada, is backed only by their desire to appear powerful before the people, hand out pork and win elections. The idea that spending should be restricted to those things for which government spending has proven to be effective has been completely lost in the dialogue.

Which political party wracked up the most debt?

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