Thursday, February 11, 2010

A true plan to revive the economy

Stockwell Day is now Canada's Treasury Minister, and will have to make cuts to government spending amounting to about 8% to reduce spending by $19 billion over the next five years. To make this palatable to voters and the opposition parties, transfer payments are to be considered "untouchable". There is a lot of fat in terms of programs which are either not delivering what is promised, have outlived their usefulness or are mismanaged and can be reorganized to run more efficiently. Consider that large corporations like Canadian Tire or Wal-Mart typically only have five layers of management, while government departments have convoluted structures with multiple layers of management (reputedly as many as 30, but I'll leave that as anecdotal until I see proof)

I think the emphasis on protecting transfers is wrong headed, but that is because I don't see the idea of the State seizing wealth and property from the productive to give to political rent seekers and the non productive as being a proper role for the State.

However, given political reality, cutting transfers to individuals would be electoral suicide, so about $61 billion is untouchable.

We can still look at other areas like transfers to governments (especially governments with their own sources of revenue like offshore oil or hydro), which gives us another $46 billion to work with.

Subsidies should be cut for another @ $30 billion

Crown corporations should be cut as well, since that provides another $8 billion

Adding that up, we can get $84 billion in cuts. Sustained for six years this would allow the entire national debt to be paid off, and if the program is sustained for 12 years then all unfunded liabilities (CPP, pensions, etc.) are also covered.

Not included in this virtuous circle is the possibility of reductions in operating expenses due to the ending of so many programs, and of course the reduction of the $30 billion/year in debt payments. Real tax cuts can be made from the savings here, energizing the economy and in all likelyhood speeding up the entire process through increased tax revenues.

Here is a real program to get behind: don't leave the debt to our grandchildren but pay it off before our children leave school!

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