Economic Stimulus Package vs Infrastructure Improvements

[FearSonic]

Saw this article in my iGoogle today with Jim Flaherty telling provinces to 'put their money where their mouth is'.

http://www.cbc.ca/canada/story/2008/12/17/finance-meeting.html?ref=rss

Something interesting caught my eye: Flaherty says that there needs to be a delay in infrastructure improvements in order to give out economic stimuli packages.

I'd like to discuss this because I'm a personal believer that with an improved infrastructure, the economy will be in a better position in the long run to recover because people will be able to save costs through improved infrastructure.

But that got me thinking - what are these infrastructure improvements? I guess if it doesn't involve accessibility and communication, it might not do much good for most people.

Thoughts?

[konfusion666]

The 401 is in horrible shape throughout most of the GTA. They can start "improving infrastructure" right there. ;)

[FearSonic]

The 401 is in horrible shape throughout most of the GTA. They can start "improving infrastructure" right there. ;)

I think if they had a much better public transportation system, so many people wouldn't drive. As it stands right now, everybody drives because nobody wants to ride the TTC.

If it came down to road improvements versus public transit improvements, I would definitely take the public transit improvements. It would help us get a little greener, make life easier for commuters, and free up the 401 just a bit.

[Brandon]

I think a stimulus package would be better for the long term. We are in a recession and it would have to have a good effect in the short term though (since tax reductions/deductions usually don't have an instantaneous effect, but usually in a year or so).

A better way (I think) it should be done is to give tax breaks for corporations (and on capital). This would give an incentive for corporations to invest more within Canada (and possibliy move to Canada if they don't already have a presence). Yes lowering taxes will reduce tax revenue for the short term, but revenue should increase in the long term (due to more companies starting/entering the market) and people would be happy in the long term as this usually means higher wages and lower unemployment (while also reducing social financial aid burden).

...but of course democratic governments don't look far into the long term benefits as it's the short term benefits that get them re-elected ;)

[sexpuppet6000]

I think a stimulus package would be better for the long term. We are in a recession and it would have to have a good effect in the short term though (since tax reductions/deductions usually don't have an instantaneous effect, but usually in a year or so).

A better way (I think) it should be done is to give tax breaks for corporations (and on capital). This would give an incentive for corporations to invest more within Canada (and possibliy move to Canada if they don't already have a presence). Yes lowering taxes will reduce tax revenue for the short term, but revenue should increase in the long term (due to more companies starting/entering the market) and people would be happy in the long term as this usually means higher wages and lower unemployment (while also reducing social financial aid burden).

...but of course democratic governments don't look far into the long term benefits as it's the short term benefits that get them re-elected ;)

Bigger paycheques for the big corporate fat cats eh?

Even so, there is (??) a problem NOW. If there is unemployment now, people want employment now, they don't care that their families will be better off in the future, because a future won't exist if there is no sustainable present. (??)

[heymike]

Are these actually 2 separate things?

How about the economic stimulus is the infrastructure improvement; whereby we build/improve things before we would naturally.

What do you guys define as a package? what would it look like, simply find the worst performing companies and write them a cheque?

[Brandon]

Bigger paycheques for the big corporate fat cats eh?

Even so, there is (??) a problem NOW. If there is unemployment now, people want employment now, they don't care that their families will be better off in the future, because a future won't exist if there is no sustainable present. (??)

http://www.oecd.org/vgn/images/portal/cit_731/20/7/36954338CANfig2_1_E.gif

Read this:
http://www.oecd.org/document/40/0,3343,en_2649_34833_36954408_1_1_1_1,00.html

Canada has already dropped corporate income tax rates in 2001 (OTOH), and plans on doing more by 2009 (as per Jim Flaherty). But yes, we're still not very competitive.

If I were a business owner, why would I choose to start a business in Canada instead of the many other countries that have lower effective corporate income tax rates?

[Brandon]

What do you guys define as a package? what would it look like, simply find the worst performing companies and write them a cheque?

How do you stimulate growth in the economy? You do it by encouraging companies to do business in Canada. One direct way is to reduce taxes. Canada has a few good things going for it to encourage business growth, we speak English and we're bordered with the US. But the US has lower corporate income tax than Canada, so most people would logically look at that as a good thing for the US and bad for Canada.

Sometimes you read in the news that a big company is looking for a location for their next big factory. They sometimes bargain with the government to get good loans or tax breaks.
http://www.dailygazette.com/news/2008/dec/09/1209_amd/

This is because those areas WANT companies to build there. A huge factory means lots of locals will get jobs for a long time (companies usually only invest millions/billions in a factory that they plan on using for a long time).

Something important to keep in mind is that "infrastructure improvements" are paid for with taxes. If more companies continue to go out of business this year, people spend less because of fear of recession and everybody is scared to invest (which promotes economic growth)... then the government will have less tax revenue... and that means you'll get less infrastructure improvements.

[FearSonic]

Are these actually 2 separate things?

How about the economic stimulus is the infrastructure improvement; whereby we build/improve things before we would naturally.

What do you guys define as a package? what would it look like, simply find the worst performing companies and write them a cheque?

They are two separate things because Jim Flaherty's "economic stimulus package" can either be tax breaks to corporations or doling out money to the people for them to spend and give the economy a boost.

Otherwise I would agree that infrastructure improvement is an economic stimulus as well.

Bigger paycheques for the big corporate fat cats eh?

Even so, there is (??) a problem NOW. If there is unemployment now, people want employment now, they don't care that their families will be better off in the future, because a future won't exist if there is no sustainable present. (??)

The problem with NOW thinking is that it is basically what got us into this mess. Everyone is worried about profits NOW NOW NOW, and never thinking about sustainability.

http://www.oecd.org/vgn/images/portal/cit_731/20/7/36954338CANfig2_1_E.gif

Read this:
http://www.oecd.org/document/40/0,3343,en_2649_34833_36954408_1_1_1_1,00.html

Canada has already dropped corporate income tax rates in 2001 (OTOH), and plans on doing more by 2009 (as per Jim Flaherty). But yes, we're still not very competitive.

If I were a business owner, why would I choose to start a business in Canada instead of the many other countries that have lower effective corporate income tax rates?

I'm not so sure lowering taxes for corporations is the best solution but I can see where you're coming from. I'd also like to see greater support from bankers and venture capitalists for new venture creators!

[konfusion666]

I think if they had a much better public transportation system, so many people wouldn't drive. As it stands right now, everybody drives because nobody wants to ride the TTC.

If it came down to road improvements versus public transit improvements, I would definitely take the public transit improvements. It would help us get a little greener, make life easier for commuters, and free up the 401 just a bit.

It takes forever to build up public transit though. If I'm not mistaken, highway improvements are "simpler" and take less time to implement.

Let's go back to my 401 example. The Ontario govt has already done an environmental assessment to widen the 401 in Mississauga (West of Dixie to Missisauga Road) from 3 lanes to 6 lanes. They already "own" the empty space on the north and south sides of the current highway. But due to their funding state, they are apparently not doing the extension for a few years (?). This is an ideal place for the Feds to step in and provide a one-time grant so the Prov can start building the extension right away. They should be able to finish it within 2 years!

[rb]

What we do is really not significant - Unless the US gets its house in order we will be hurting irregardless of any package.

[Brandon]

I'm not so sure lowering taxes for corporations is the best solution but I can see where you're coming from. I'd also like to see greater support from bankers and venture capitalists for new venture creators!

Read this...
http://online.wsj.com/article/SB118428874152665452.html?mod=opinion&ojcontent=otep

As well, a problem with getting support from bankers and venture capitalists is that our tax on capital is high... (they'd get less returns on their investments in Canada than other counties with lower taxes on capital).

Read this...
http://www.fraserinstitute.org/researchandpublications/publications/2651.aspx

[Think]

http://www.oecd.org/vgn/images/portal/cit_731/20/7/36954338CANfig2_1_E.gif

Read this:
http://www.oecd.org/document/40/0,3343,en_2649_34833_36954408_1_1_1_1,00.html

Canada has already dropped corporate income tax rates in 2001 (OTOH), and plans on doing more by 2009 (as per Jim Flaherty). But yes, we're still not very competitive.

If I were a business owner, why would I choose to start a business in Canada instead of the many other countries that have lower effective corporate income tax rates?

I have to agree. Infrastructure is as bad as an indebted homeowner borrowing money against his mortgage to build a deck or to add a solarium. Government should of known by now that controlling expenditures is key to a strong government and by reducing corporate taxes would aid in corporate investment.

Continue to spend frivolously and dry up the tax base only causes homeowners to fall further into debt, loose jobs and to create a false sense security.

[FearSonic]

It takes forever to build up public transit though. If I'm not mistaken, highway improvements are "simpler" and take less time to implement.

Let's go back to my 401 example. The Ontario govt has already done an environmental assessment to widen the 401 in Mississauga (West of Dixie to Missisauga Road) from 3 lanes to 6 lanes. They already "own" the empty space on the north and south sides of the current highway. But due to their funding state, they are apparently not doing the extension for a few years (?). This is an ideal place for the Feds to step in and provide a one-time grant so the Prov can start building the extension right away. They should be able to finish it within 2 years!

You're right, subways and rail lines might take a while, but I guess I'm always stuck on thinking in the long run...

Read this...
http://online.wsj.com/article/SB118428874152665452.html?mod=opinion&ojcontent=otep

As well, a problem with getting support from bankers and venture capitalists is that our tax on capital is high... (they'd get less returns on their investments in Canada than other counties with lower taxes on capital).

Read this...
http://www.fraserinstitute.org/researchandpublications/publications/2651.aspx

No, I definitely agree that lowering taxes is a necessity to bring in new ventures and large investments from companies, I'm just not a HUGE supporter of it. In retrospect though, the taxes in Canada ARE exorbitantly high!

[konfusion666]

I have to agree. Infrastructure is as bad as an indebted homeowner borrowing money against his mortgage to build a deck or to add a solarium.

Poor comparison! Building infrastructure such as roads and highways helps businesses and individuals alike.

[Shimso]

I think if they had a much better public transportation system, so many people wouldn't drive. As it stands right now, everybody drives because nobody wants to ride the TTC.

If it came down to road improvements versus public transit improvements, I would definitely take the public transit improvements. It would help us get a little greener, make life easier for commuters, and free up the 401 just a bit.

Too bad the ATU would fight many TTC improvements and modernizations. Why should we pay 25/hr + unlimited overtime (unless its changed since that strike) for someone who can't compute basic math and can never understand what you're asking for, when most major cities have this process automated?

[sexpuppet6000]

Poor comparison! Building infrastructure such as roads and highways helps businesses and individuals alike.

Building a solarium and deck helps businesses and individuals as well.

Contractors get jobs
Materials are required
Individual gets a deck and solarium :D

[Think]

Poor comparison! Building infrastructure such as roads and highways helps businesses and individuals alike.

Depends if it's frivolous as many of these projects tend to be with tax payers money - boarding on social welfare work or creating civil jobs instead of REAL jobs in a province that has more government employees per capita then any other country.

[FearSonic]

Too bad the ATU would fight many TTC improvements and modernizations. Why should we pay 25/hr + unlimited overtime (unless its changed since that strike) for someone who can't compute basic math and can never understand what you're asking for, when most major cities have this process automated?

I assume you're a proponent of automated token collectors for stations then? I wouldn't mind that, as long as they have people who can be asked questions as well, once in a while.

[Peckerwood]

Infrastructure improvements aside, my Sensei gave out an interesting idea at lunch yesterday.

Take the 3.3 billion and put it towards retraining in the form of apprenticeships and college tuition for the ensuing 500,000 jobless folks.

Just an idea. :)

[Think]

Infrastructure improvements aside, my Sensei gave out an interesting idea at lunch yesterday.

Take the 3.3 billion and put it towards retraining in the form of apprenticeships and college tuition for the ensuing 500,000 jobless folks.

Just an idea. :)


Shhhhhh, you're not suppose to make sense...it's not the Canadian way;)

[cuongp]

I always though that the trickle-down effect learned in economics class never worked, at least to what they described it as.

From my obvservations, usually the optimum is a mix of both worlds. e.g, the mixed market economy, absolute free markets don't work and absolute controlled markets don't work. We have a little of both. How much we should have of each is a whole other discussion.

But in my honest opinion, it's ridicuolous how much some CEOs are making as well as other high-execs. I understand their talent, time, and money put towards reaching their current positions but seriously, nobody really needs to make more than 200k/year. And even that is a princely sum.

[konfusion666]

But in my honest opinion, it's ridicuolous how much some CEOs are making as well as other high-execs. I understand their talent, time, and money put towards reaching their current positions but seriously, nobody really needs to make more than 200k/year. And even that is a princely sum.

But who are you to determine how much money another man may or may not make?

[FearSonic]

I always though that the trickle-down effect learned in economics class never worked, at least to what they described it as.

From my obvservations, usually the optimum is a mix of both worlds. e.g, the mixed market economy, absolute free markets don't work and absolute controlled markets don't work. We have a little of both. How much we should have of each is a whole other discussion.

But in my honest opinion, it's ridicuolous how much some CEOs are making as well as other high-execs. I understand their talent, time, and money put towards reaching their current positions but seriously, nobody really needs to make more than 200k/year. And even that is a princely sum.

Sorry mate, CEOs are making quite a bit more than 200k a year. 200k a year is along the lines of doctors and lawyers.

[cuongp]

As I said, in my OPINION.

But who are you to determine how much money another man may or may not make?

I am quite aware of how much CEOs make. To clarify, 200k was my opinion on the limit that CEOs and high-execs should be allowed to make in my imaginary world.

Sorry mate, CEOs are making quite a bit more than 200k a year. 200k a year is along the lines of doctors and lawyers.

[Peckerwood]

http://usera.ImageCave.com/peckerwood2/youwouldntbuyour.jpg

[Maxman]

How about providing an economic stimulus to successful business to continue, expand, relocate to Canada. Don't invest in failures.

If two businesses approached you for a loan, and one was highly successful, produced products that people demanded, had a cost-effective business model with predictable labour costs and the other business was declining, with high costs that management couldn't control, and the product wasn't really that good and then the guy at your door arrived by chauffeur and said that he was making $20M a year - who would you invest in?

As for infrastructure investment - if should go into creating a more efficient country. Replace buildings that have operating costs that are too high (hospitals, arenas, water/sewage treatment plants). Consolidate buildings/infrastructure. Invest in things that will reduce long-term costs or impact the environment.

Pumping billions into the auto sector and then pumping billions into public transit? Well, that would defeat the purpose - wouldn't it?

[Odysseus_Maximus]

http://usera.imagecave.com/peckerwood2/youwouldntbuyour.jpg

lol!!!