Comment 26622

By A Smith (anonymous) | Posted September 17, 2008 at 12:39:07

Geoff, in WWII, non-military spending as a percentage of the economy went from 17.25% in 1939, to 3.59% in 1944. During this period of rapidly declining "social spending", GDP grew at enormous rates, averaging about 12% per year.

I make the distinction between military and non military spending because of government's intentions. Notably, non military spending tends to be aimed at "helping" people, whereas military spending is often criticized as being a waste of money.

This distinction also explains why some government spending, notably wasteful spending, actually produces positive results, whereas the opposite is true for spending aimed directly at helping people. The fact that the economy could grow at 12% per year, even though the government cut back spending on health, education, and any other soft program proof of this.

You mention Scandinavian countries as an example of how government can drive living standards and I agree with you in some respects. The fact is, both Sweden and Norway have excellent public finances, taxing their people to cover the costs of the programs they deliver. They also both have much lower corporate taxes, which on the surface appear to favour big business over the average citizen, but in reality drive workers wages.

Therefore, if Hamilton wants to build a rapid transit system, the politicians should raise our taxes to cover the cost. That way we would be paying for everything we get. No free lunch, which is what I believe leads to negative results.

Curiously enough, that is why I feel Stephen Harper has been such a disappointment. He has decided to "help" people by lowering their taxes, and increased spending, again, in order to help them. The result has been the worst economic growth in 17 years.

Under Chretien, taxes were allowed to rise substantially, while program spending decreased. The result was one of the greatest economic times in recent history.

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