Saturday, January 10, 2009

What will be missing from the Harper stimulus package


For simplicity's sake lets say that in order to make a $1000 dollar per month payment on a mortgage in Canada you need to earn around two thousand dollars pre-tax.

Income $2000 
Tax $1000 
Mortgage Payment $1000
Disposable income $0 = no benefit to national economy

Then let's say you were lucky enough to live in almost any other of the G8 countries or for that matter almost any other country other than Canada where your mortgage is tax deductible.

Income $2000
Deductible for mortgage $1000
Taxable Income $1000
Tax $500
Disposable Income $500 = Benefit to national economy

The same rule could be applied to say private school fees

As it happens I do not believe for a second that Canada at this point in time is in the least in need of a government sponsored handout of any sort to either the financial services industry nor the auto industry any other.

If the auto industry is truly in need then let the oil and gas majors bail out the auto industry. After all the auto industry is the oil and gas industry's only major client. Oh, and the airlines of course. When Shell and Esso start buying shares in airlines and Chrysler, Ford and Mercedes Benz then this world will start to stabilize. We need to robb Peter to pay Peter in other words.

Back to Canada. Instead of running huge surpluses in order to run huge deficits in times of trouble, would it not be expedient to run the economy correctly from the start. The pendulum game is a fools game.


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