[SWAY] Canada living the "American Dream"?

[Valiente]

I don't usually wade into the frankly self-limiting "liberal vs. conservative" debate that features so prominently among our American friends here, because I think it's very narrow in many respects. The few times I've commented have been to indicate that if I ever found a politician I considered classically conservative, I would probably vote for him or her. But we have a situation where nominally conservative governments rule both America and Canada at the moment, having defeated nominally liberal regimes.

So one might expect spending to decrease, government to devolve a bit, and opportunity for social mobility to increase as market forces trumped social engineering and governmental activism.

Alas, no.

An interesting article in today's Globe and Mail points out that the American Dream is much harder at this point to achieve in America than in some allegedly "socialist democracies", and that Canada is in danger of "conservative" politicians (who seem completely ignorant of what conservatives have traditionally stood for, like fiscal probity, and against, like legislated morality) making Canada more like the U.S., where, statistically, the poor stay poorer for longer.

Feel free to discuss. I'm not saying the Brookings Institute interpretation is right or complete, but it is quite interesting, to say the least.

globeandmail.com: A taxing burden on Canada's 'American Dream'


A taxing burden on Canada's 'American Dream'

DOUG SAUNDERS
March 1, 2008 at 12:05 AM EST

LONDON — What sort of country might conservatives want to live in? Let me take a guess — the sort of place where hard work, inventiveness and business acumen are rewarded, where laziness and dependency on handouts aren't, where mere identity or status don't give you rewards and where everyone has the opportunity, but not the right, to get rich if they try hard.

So what sort of place are Canada's Conservatives creating? A place like the one above, where you are what you accomplish? Or a place like many other countries, where your future is defined by the group you're born into? Given the shape of this week's budget, I fear that we're headed in the wrong direction.

To understand Canada's unique and vulnerable position, this week also gave us a handy new study by Julia Isaacs, Isabel Sawhill and Ron Haskins of the Washington-based Brookings Institution. They look at economic mobility — that is, the chances of escaping your economic circumstances.

Getting Ahead or Losing Ground: Economic Mobility in America - Brookings Institution

According to a number of comprehensive studies analyzed by the authors, the United States, Britain and France have low rates of intergenerational mobility — that is, if you're born in the bottom rung of the ladder in those countries, you're more likely to stay there. Canada, Norway, Finland and Denmark (two countries with conservative governments, two with social democratic governments) have the highest rates.

If you were born in the U.S., France or Britain, about half the income you earn is statistically linked to your father's income; it would take as long as six generations to escape the influence of your birth.

In Canada, family ties are less than half as important: Only one-fifth of your "income advantage" comes from your family; it takes on average only three generations to lose the effects of your family's wealth or poverty.

In other words, the American Dream, the lifetime journey from log house to penthouse, is far more real in Canada and its Nordic neighbours.

This despite the fact that Americans, even poor ones, earn more than Canadians, or that the very low unemployment rates in the U.S. over the past decade have led to what one Canadian study describes as "a significant improvement in the wages of low-paid workers, a decline in poverty, and a rise in median wages" — improvements that so far have not been documented to the same degree in Canada.

Over all, it should be good news for any Canadian government that this is a place where you're not governed by your birth, poverty isn't usually intergenerational and wealth isn't locked into a closed elite. But this is not at all a guaranteed thing, and to appreciate the Brookings findings, it's worth finding out where this advantage comes from — and how we could lose it.

The 1980s — the Brian Mulroney era — saw huge changes in the way government acts on the population, according to a detailed analysis by Andrew Heisz of Statistics Canada. He concludes that "taxes and transfers both changed in that decade, increasing the share of income redistributed by the state from high- to lower-income families."

Despite its (progressive) conservative name, that government actually changed Canada into something of a Robin Hood state, reducing the tax burden on the poor and transferring some money from the well-off into their pockets.

While Canada and the Scandinavian countries moved in that direction, the U.S., Britain and France were changing their systems in a different way: They were taking taxes from the middle classes and spending them on people already in the middle classes — expensive government that doesn't change anything.

Government redistribution of income has a bad name among conservatives. They tend to fear that it creates dependency on the state, hampers the economy and kills entrepreneurship. But properly designed programs can do something else entirely: They can give motivated people a chance to get out of the traps of poverty. If you can put your kids in child care and get some extra education, you might have a shot at the middle class.

Look what happened after Canada became more redistributive: The economy grew by 50 per cent over the next decade, unemployment rates reached record lows and work-force participation rates hit record highs. The percentage of children living in poverty dropped from 18 per cent to just under 12 per cent. Starting in the 1990s, the risk of job loss fell and job tenure rose. The possibility of moving out of low-income employment remained stable for men and it improved substantially for young women.

But just as we have begun to enjoy the benefits of a system that harnesses the energies of all Canadians, our governments have begun to chop the bottom rungs off the ladder again.

In the past 10 years, the assistance programs offered to the poorest fifth of the population by Canada and most of its provinces have been cut back. Government programs have shifted toward the comfortable middle class. And, in the midst of this boom, we are seeing a dangerous decline in incomes among the poorest 20 per cent, an increase in inequality.

In a recent Statistics Canada study that examines these trends, Mr. Heisz issues a sober warning: "Presently, Canada has a level of family market-income inequality that sits near the middle level of the market-income inequality of Western countries.

"In the absence of increases in government transfers to lower-income families or increases in taxes to higher-income families, further increases in family market-income inequality would continue to be directly converted to increases in family after-tax-income inequality."

In other words, the American Dream that has propelled much of Canada's prosperity could come to an end, with a large part of our population trapped in intergenerational poverty. This is a decisive moment.

Unfortunately, what Ottawa offered this week was not a remedy, but a move toward a tax regime that uses private savings accounts to shift large chunks of wealthy Canadians' income away from taxation, and shifts the burden onto the poor.

If it continues, this could be the Conservative party that puts an end to the conservative dream.

[sailaway21]

That is hilarious, if not surprising. Strobe Talbot, the president of the Brookings Institution, was one of the foremost apologists for the recent Soviet Union. So we have a notion of where his ideas on equality lay.

What the article fails to acknowledge is that it is only the bottom rung of poverty that tends to be self-replicating. Grants in kind and financial assistance have raised the standard of living of this group but not in a permanent manner. Only education can perform that feat. Educate the underclass and you'll eliminate the underclass.

It's far more dynamic and interesting to look at the upper tiers of income. In the United States, yesterday's millionaire is not necessarily today's millionaire. Rather than "the rich" being a static class the group actually is more dynamic in membership than any other economic class within America.

What statisticians call "rich" may not be what most people consider to be rich. If you possess a household income of over $100,000 you're very, very close to what the statiticians and, more importantly the IRS, consider "the rich". But then, you probably already know this from your tax filings.

It is money left in these people's hands that actually grows an economy and provides the best of the trickle down benefits to those beneath them in income. To the extent the government takes that money and distributes it, those efficiencies are removed. And government knows where it's bread is buttered. If it's attempt is to help the poor, it has been niggardly in the process of doing so. But government's attempt is never to help the poor, while ignoring the middle class; that's not politically feasible. The middle class reaps a huge benefit from programs designed, in large part, to help the poor. Ex: all those socuial workers 'helping' the poor are themselves middle class. Government created those middle class jobs. The poor remain poor. They also remain uneducated but "socially served". Gee thanks. With the money we spend on government assistance we could buy every "poor" person in the US a brand new house. It wouldn't solve the problem of poverty but we could do it.

The poor themselves are also a dynamic class. Many end up being "poor" for a period of time and then returning to the middle class. In my own life, since childhood, I've been middle class, poor, middle class, rich, and am now middle class again. The two major determinants within the progression were parental divorce and education. Education is the only path to economic mobility, especially inter-generational economic mobility.

There's long been a saying in America, "shirt sleeves to shirt sleeves in three generations". A man in huis shirtsleeves works hard, perhaps inventiong something, and becomes wealthy. His children grow up privilaged but do not expand the family wealth at the same rate or, in fact, it contracts. Their children resume work in shirtsleeves.

It's interesting that the study contrasts countries with small economies against three countries with the largest economies.

The article's final paragraphs are merely liberal boilerplate for the fact that a rising tide lifts all boats and attempts to ascribe government redistribution as a motivating mechanism while ignoring that the expansion of the economy lifted all boats.

Income inequality is the most over-hyped statistic currently within the liberal lexicon. It's primary deficiency is an apparent unawareness of the fact that while the groups may remain, their membership is not the same. We are not "helping" the same poor year after year in many, if not most, cases.

"In the absence of increases in government transfers to lower-income families or increases in taxes to higher-income families, further increases in family market-income inequality would continue to be directly converted to increases in family after-tax-income inequality."

The above quote is one of the more succinct defintions of socialism/communism that one might find outside of the writings of Marx or Hegel. It's hardly "conservative" thought in the most lenient of defintions and results, in practise, in a country of poor to lower middle class citizens similar to the wretched former Soviet Union. It's basic faulty asumption is that people will continue to work to a level and beyond at which their further work production merely feeds the coffers of the government. Nothing we have seen in world history proves this to be the case in reality.

Liberal economic thought is socialist in nature, no matter how it's dressed up. And socialism doesn't work in the long run. Never has, never will.

[Valiente]

So who, by your lights, is practising conservative government today? Who has the fortitude to resist bribing voters with their own money, or to avoid subsidizing industry or agriculture? Why do liberals keep taxes high, and decrease debt, while conservatives drop taxes, and run ruinous deficits?

You can see where I'm going here. I don't mind paying my current taxes if a) I can see the bribe factor of pork barrelling and subsidy is kept low, and b) if I can see the discipline of eliminating the national debt.

I also don't mind paying taxes for unglamourous infrastructure, which modern governments seem to hate doing. It's great that Canada has very high penetration of internet, cell phone networks and cable TV, because then we have the means to bitch about our crumbling overpasses, 100-year-old sewers and pit-of-hell potholes. My impression is that America's not much different in this regard. What government sees value these days in allocating money for a 10 year plan to renew all urban wastewater systems? But this sort of thing used to be done as a matter of course.

The previous regime here in Canada ran surpluses for years, and knocked down the debt. Our "conservatives" have lowered taxes, but are still spending that surplus, meaning that they have no wiggle room if (as my portfolio planning assumes), our heavily resource-based, export-dependent economy goes pear-shaped?

Just like the U.S., the parties of alleged fiscally sound management run deficits, while the free-spending socialist hordes get to play Dr. No for a few rounds until we get back to balanced budgets (but with bigger debts).

Your well-attested disdain for socialism and liberalism aside, why are "conservative" parties failing to provide government on conservative principles? And to be clear, I do NOT mean "socially conservative": if two male atheists live together, my conservative instincts don't give a tinker's about their bedroom antics, but rather "can I tax them as a family, and can I get a levy on lube?"

The "family-values" nitwits can't grasp that the creation of non-traditional families creates families, and the economic stability (and tax-regime opportunities) that come with that. Because straight people aren't getting married and having eight kids anymore, and that time isn't coming back.

[sailaway21]

Leaving aside the family values issue, I'll say that, as WFB did about both of our Bush presidents, they are conservative but they are not conservatives.

Reading the full meaning of that statement, you'll know that I, as you, find nothing of value in a conservatism that patterns itself as conmservatism-lite or not-quite-so-much liberalism.

The unifying factor exhibited within both Canada and the US is the loss of the concept of federalism. Very few things require a national solution and, to the extent they are done on the most local level possible, waste, fraud, and abuse are eliminated. Conservatives engaged in an effort to out-do liberals in the scope of central government action are doomed to failure and disrepute. What's worse is that they have sacrificed their entire reason for existing.

Conservatism must first be a philosophy before it can be a practise.

[sck5]

"few things require a national solution and, to the extent they are done on the most local level possible, waste, fraud, and abuse are eliminated."

This is exactly the anarchist view. They were painted as anti-all government but in actual fact they just believed that all power should be exercised at the lowest possible level. Sway, did you ever think you would have something in common with them?

But it brings up a question - Is the level at which power is exercised what makes liberal vs. conservative? I dont necessarily think so. I have felt a mismatch at times on this site between what people imagine liberals want and what I actually think. The "cartoon version" of a liberal wants to boss everyone around and be the nanny of everyone. While I wouldnt deny that there are some liberals like this, there is definitely a strong element of the conservative movement that is at least as intrusive, wanting to control sex, marriage and to spy on everyone (or so it seems). I am not trying to paint the whole conservative movement with the same brush, just pointing out that I, for one, would feel a lot more at home with the libertarians than I would with some of the more publicly known evangelicals.

So it seems to me that it has to be something else that makes the lib/con difference. I would go back to valiente's question. Is there now, or has there ever been a conservative government that you think has been good?

[camaraderie]

Yeah...I liked JFK's conservative government!...and Reagans.

[Rockter]

Well, have a look at some of the graphs in this one. Just look at that national debt. At one point close to 90% of a years's taxation revenue, IN DEBT.

The Bolt: Canadian National Debt vs. GDP

Long live the socialist dream of equality, but you will borrow your country into debt to get there.

Some of them call it "prosperity", and when it stops, someone gets pilloried for it.

You are welcome to this stupid redistributive crap. All you do is distribute debt, ever wider. Sure, the usual socialist mantra of "inequality" is muttered ever-louder, but in reality, it helps no-one.

They tried it here. In the 1970s, the top rate of income tax in the UK was 83%, and if you fell into that tax bracket, your share income was taxed 98%.

The money all ran out in the end, as our best simply left, and taxes rose ever-higher.

It's all been tried before there guys. Raising taxes and redistributing is done by an act of parliament...yes, a few bits of paper, some yelling, and draconian powers to collect the tax.

Making the people more prosperous needs a bit more thought, and 90% debt is maybe not the way to achieve it.

[bestfriend]

Hey Sway and Valiente, knock it off, you're sucking up all the bandwidth!

[Valiente]

At least electrons are still free, if I pedal hard enough.

But Rockter provided a helpful link. The very sad thing here is how endemic governmental living-beyond-its-means is, as I heard that with the recent bucket of billions the Canadian government threw at its debt, Canada is now either first or second in the G8 nations for "owes the least money to foreigners and its own citizens".

That's a little like being the bomb defuser with the most fingers, isn't it?

This table, from Rockter's link, shows where the American Republicans seemed to have forgotten that a dollar saved is a dollar earned: Whatever happened to that "peace dividend"?



But again, this is how absurd things have become if it's the allegedly conservative politicians under whom the countries are put into hock.

[Rockter]

Imagine...

Just let the debt roll on, and say your national Debt gets to 90% of GDP.
Say the debt is foreign-owned.
Say the interest rate is 5%.... it would need to be more than that to get anyone to buy into Canada's fiscal future.
So, debt repayments are then... 5% of 90% of all taxation revenue for a year.
That works out at 4.5% of a year's taxation revenue.
Each time you look at your deductions for tax, corporate tax, fuel tax, imagine that a foreigner gets 4.5% of it.... that's 1 dollar in every 22.... year on year on year.

Welcome to National Debt.

In the UK it's about 40%, and rising, and rising, and rising.

Include Public Sector unfunded pension requirements and it's nearer 100%.

You won't see that in their manifesto at the next election.