Comment 61218

By A Smith (anonymous) | Posted March 21, 2011 at 00:37:17 in reply to Comment 61199

>> We have more technology, fancier corporate power structures, and many more billionaires. 80% of us, though, aren't making any more in real terms. Why?

If you want to go back to the "middle class" years (1946-1969) that Obama talks about, keep in mind that military spending was around 10-12% of GDP (U.S), there were no deficits and non military spending averaged around 17% a year. That means that for every dollar paid in taxes, the average American only got back 60 cents in social services.

In contrast, in the third quarter of 2010, non military spending (primarily entitlements) in the U.S. was 32% of GDP, while tax revenues were only 27%. That means the for every dollar paid in taxes, people got $1.18 in social services.

From 1946-1970, Canada's military spending averaged 4% of GDP and deficits were small.

Today, military spending is low, 1.3% of GDP and yet the federal deficit is 3% of GDP and the Ontario deficit is 3% of GDP.

Imagine if Harper told Canadians he was going to go back to post WWII spending trends. He would need to cut $55B in spending (current deficit), plus take an additional 2.7% of GDP, or $43B from current spending and move it to the military. That's $2,882 less per person in Old Age security, health, education.

But that's not it, McGuinty would have to run a balanced budget as well (debt in Ontario was only 13% of GDP in the late eighties, compared to 37% today). That means cutting $20B from current spending, or $1,500 per person.

In other words, in order to go back to the type of government we had in the 50's-60's, when the economy was strong, $4,300 would need to be cut from social benefits per person, given current tax levels. To understand this number, public health care spending in Canada for 2007 was around $2,700 per person.

If you added that $4,300 per person figure to the average Hamilton household, which according to the 2006 Census was 2.5 people, that works out to an additional $10,750 in non cash, after tax benefits.

The median annual payments for a dwelling in Hamilton for 2006 was $11,748. That means that the current non cash benefits that we now receive due to our expanded welfare state, almost equals what it costs to own a home.

The question becomes, do we want a welfare state, or do we want a fast growing economy?

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