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Blupete's Weekly Commentary


January 25, 1998.

"Taxes"

Of the observable abuses of government power in the past two decades, the greatest has been the abuse of the governmental power to tax; without any doubt; ask any citizen.1 But to say that government taxes too much, is just another way of saying, our government spends too much. And who is to control government spending? Not us, in any true democratic sense. Government spending is under the total control of a cabal of powerful people who have a firm grip on those who are charged with setting governmental agendas, governmental agendas which go generally to serve the interests of these powerful people, not ordinary persons.

In an effort to hold their constituencies together, politicians, of all political stripes, simply spend and spend; and, what is not covered by current taxes is added on to an ever mounting government debt. This debt of ours, owned to a large extent to the moneyed interests of the world2, brought on by past government expenditures, in any given period, bears no relationship to the money it raises by the imposition of taxes, in that period. Forget, for the moment, the question as to why our children should have to pay for our spending habits, the current difficulty is this: the debt, both federal and provincial, has grown to such proportions that governments must now pay a huge part of its current revenue (taxes we pay) just on the ongoing interest to carry the debt. The facts are, as the numbers will show, that an increasingly higher proportion of the government budget is spent on interest; this forces governments to cut back in other areas, areas -- some would urge -- where we need to spend more, not less.3

Let me illustrate: the total government spending, all levels of Canadian government, in 1970, per capita, was $1,452; in 1988 it was $10,473. Next look at the composition of total government spending as it was in 1970 compared to 1988:

19701988
Education 419.1%11.5%
Interest Charges08.5%18.2%
Protection10.1%08.0%
Health13.7%13.5%

More recently interest payments topped 26.7 percent of total federal government spending (and this is a time of low interest rates). Further, the total federal debt has increased from 46.4% of GNP in 1985 to 61.8% of GNP today. Adding in the provincial and municipal debt, for 1990, the ratio goes over 100%. Now, GNP, as I understand it, is the grand total of our collective income, so, for those who are familiar with debt/income ratios (ask your friendly bank loans officer) we are way, way over the limit; the monthly payments are most worrisome, and, as I have illustrated, short of raising taxes and bringing on a revolt, we have less and less to spend on other government programs which many of us consider to be very important.

Walter Lippmann, a journalist I much admire, gave two reasons why democracies have become increasingly more unworkable: he puts it down to the growth of intrusive government, and, as a result, an enormous expansion of public expenditure; and, secondly, the incapacity for people (enfranchised, emancipated and secularized) to believe in intangible realities. "This has stripped the government of that imponderable authority which is derived from tradition, immemorial usage, consecration, veneration, prescription, prestige, heredity, hierarchy." (The Public Philosophy.) The problem which Lippmann saw back in 1955 is now more sharply and urgently posed; we must come up with an answer, an answer, we should all pray, that will come within the context of a democratic government.

And, finally, I refer you to William Graham Sumner's essay written in 1883 (but true for all times), an essay which is available for reading, new this week, at www.blupete.com.

"The Forgotten Man delving away in patient industry, supporting his family, paying his taxes, casting his vote, supporting the church and the school but he is the only one for whom there is no provision in the great scramble and the big divide. Such is the Forgotten Man. He works, he votes, generally he prays but his chief business in life is to pay. Who and where is the Forgotten Man in this case, who will have to pay for it all?
...
"Wealth comes only from production, and all that the wrangling grabbers, loafers, and robbers get to deal with comes from somebody's toil and sacrifice -- who then is he who provides it all? Go and find him and you will have once more before you the Forgotten Man."
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NOTES:

1 Taxation is now at revolting levels. On the latest statistics that come readily to hand (I suspect its currently worse), the average Canadian family income in 1992 was $74,000, of which our governments took away $23,537, of this less than $10,000 is attributable to income taxes, the rest of it is due to federal and provincial sales taxes, property taxes, excise taxes, licence fees, and on and on.

2 Much of our debt is owed to foreign interests. For example, here in Nova Scotia, a third of the debt of the province of Nova Scotia is owed to U.S. interests, 16% to Japanese and 5% to the Swiss.

3 In other words, the climbing levels of spending, resulting in corresponding climbing levels of taxation, have greatly impacted on the ability of governments to use its spending and taxing powers as fiscal tools to achieve "desirable social ends." To the extent that fiscal policy can be used to the good of society, profligate government spending leads to increasing dullness and ultimate destruction of one of the few economic tools available to government.

4 See Horry & Walker, "Government Spending Facts," The Fraser Institute.

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Peter Landry

January, 1998 (2011)