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Commentaries

What If Everything We Know About Economic Policy Is Wrong? Posted October 25, 2011

“[He has] twenty-six years of experience working against him. He figures that anything big enough to sink the ship, they’re going to see in time to turn. The ship’s too big with too small a rudder. Doesn’t corner worth a damn. Everything he knows is wrong.” ... dialogue from the James Cameron movie Titanic.

The policy responses honed in the past three decades of supply side economic policy lead to conundrums today. Like the captain of the Titanic, our experience may be working against us. This argues for a re-appraisal of today’s conventional wisdom—i.e., of what we “know” about economic policy. ....Read more...

The eurozone crisis: a crisis that can be resolved at the stroke of a pen is not a crisis. Posted July 21, 2011

A moderate amount of perspective is required on the eurozone crisis. Extraordinary times call for extraordinary measures (this was said in respect of previously unheard of bailouts for private companies). The eurozone has a current account surplus, low inflation and an over-valued currency (at least going by the IMF”s Purchasing Power Parity estimate — see April 2011 WEO). The European Central Bank (ECB) could monetize the excess debt of the troubled countries (for the sake of argument, define this as the portion above the Maastricht guidelines) by buying the excess debt (at the newly deflated value) and simply writing it off (debt jubilee — a millennia-honoured tradition). ....Read more...

US Steel and the Investment Canada Act. Posted January 12, 2010

An interesting case involving foreign direct investment in Canada is before the courts. The Government of Canada has launched legal proceedings against US Steel for failure to live up to commitments made under the Investment Canada Act when it acquired Hamilton-based Stelco in 2007. US Steel has counterpunched by filing a challenge to the Investment Canada Act on constitutional grounds. . .....Read more...

The Harmonized Sales Tax (HST) in Ontario and British Columbia: spot the wealth transfer.

On July 1, the Harmonized Sales Tax will come into force in Ontario and British Columbia, as both provinces piggyback their provincial sales taxes on the federal governments Goods and Services Tax (GST). From many perspectives, this is a good move in economic policy terms. But not from an income distribution perspective: there is a significant and uncompensated transfer of wealth from lower to higher income earners implied. Here is the skinny on this policy. .....Read more...

What's so hot about private pension plans?

Canada has emphasized the private sector role in providing for pensions. In fact, the recent OECD study Pensions and the crisis shows that Canada had the highest share of pension income accounted for by private plans, at 50.6%. But Statistics Canada data show that the proportion of wage earners covered by any sort of registered pension plan has been declining steadily and stood at only 38% in 2007. And the Association of Canadian Pension Management reported in a 2008 study that “only 25% of employees working for private employers have a registered pension plan of any sort”. So Canada relies heavily on private pensions to deliver retirement income security but the coverage appears to be very uneven and declining. This seems to imply sharp divergences in the experience of Canadians when they retire. . .....Read more...

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