Deficits and Future Taxes

Deficits and Future Taxes
Posted on February 29, 2016 | Larry Kazdan | Written on February 29, 2016
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Publisher

Publisher:
Calgary Herald

Re:  Editorial: Liberals double down on debt,  Calgary Herald Editorial Board, February 23, 2016

The assertion that federal deficits today necessarily means higher taxes tomorrow is false. Under Quantitative Easing for example, a country's central bank purchases government bonds by using newly-created money.  In essence, the public debt can be retired by means of a journal entry.  Every future government can also decide to lower future tax rates, just as did the the Harper government even though our national debt increased by $150 billion during Conservative tenure. Owning the Bank of Canada which issues a floating, fiat currency gives the Canadian government financial flexibility to spend and tax as desired regardless of any existing debt.

The greatest gifts to future generations are good schools, good transportation, good hospitals and an experienced, well-trained workforce. The burden on future generations will come from those willing to tolerate a stagnant economy, willing to let our infrastructure crumble, and who urge the federal government to do less today than what is required to create the prosperous society that can be left to our grandchildren.

Larry Kazdan CPA, CGA

Footnotes:

1. Warren Mosler is an American economist and co-founder of the Center for Full Employment And Price Stability at University of Missouri-Kansas City
http://moslereconomics.com/2012/04/20/people-who-reject-free-lunches-are-fools-liquidity-trap-part-ii/

"The public sector deficit/debt is nothing more than the net financial assets of the non govt sectors. And these net financial assets necessarily sit as balances in the central bank, as either clearing balances (reserves) or as balances in securities accounts (treasury securities). And ‘debt management’ is nothing more than the shifting of balances between these accounts.

(and there are no grandchildren involved!)
(and all assuming floating exchange rate policy)"

2.  MMT: What it Means for Canada
http://www.progressive-economics.ca/2011/08/12/mmt-what-it-means-for-canada/

"For example, in the debate over how to address the aging population, it should be obvious that the only way to address this issue is to increase future productive capacity. This involves the application of real resources now to research, infrastructure development, education (including in areas relevant to servicing an aging population), etc. So while more resources will probably be needed in the future to attend to a larger cohort of elderly people, it does not follow that if the government “saves” money now, this will somehow help to address the needs of the aging population in twenty years time, say. Indeed, why on earth would cutting spending now increase the availability of the real resources required in the future: workers, buildings, energy, or metals and plastics for joint replacements?"

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Modern Monetary Theory in Canada
http://mmtincanada.jimdo.com/

About The Author

Larry Kazdan has undergraduate degrees in history and sociology, is a retired Chartered Professional Accountant and runs the website
Modern Monetary Theory in Canada.... More

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