Stephen Harper's New Taxes Could Hinder Economic Recovery

In August of 2009, CBC ran a story: Flaherty's HST pitch fails to woo holdouts.

He had bribed Ontario with 4.3 billion dollars and B.C. with 1.3 billion, if they would harmonize their taxes. Since this would help businesses by passing the tax burden from them to consumers, people began dubbing the HST: the Harper Sales Tax.

A day after Ottawa offered cash to provinces to harmonize their sales taxes across the country, the few holdouts remain cool to the HST idea. On Tuesday, Finance Minister Jim Flaherty said Ottawa was willing to offer financial support to provinces choosing to harmonize their provincial sales tax with the federal GST.

Business groups like the idea because they argue it reduces red tape and lowers the tax on investment. But harmonization detractors argue it ends up costing consumers more in real terms because the GST applies to more goods and services than the provincial levy.

Now a B.C. court last week, defines the Harper Sales Tax, and clearly lays the blame where is should be laid: Legal case could expose Harper government to HST backlash

B.C.'s populist fight against the harmonized sales tax took an unexpected twist last week, one that could pose a challenge for the Harper Conservatives. As the Gordon Campbell government has gone about implementing the widely reviled new sales tax, its cabinet ministers and MLAs have done the heavy lifting in terms of selling it, however ineptly, to the public.

And so, blame overwhelmingly has been directed at the provincial Liberals, with the Conservative government in Ottawa bobbing and weaving to keep well out of the way. The feds in fact have been successful in that endeavour, with Prime Minister Stephen Harper making virtually no public comment on the tax or the vigorous fight against it in B. C, and Finance Minister Jim Flaherty also keeping a safe distance. But last week's legal case in defence of the HST, launched by six business groups, brought public attention to the fact that the HST is wholly and completely a federal tax ...

And Jim Flaherty's new payroll tax, will again hurt Canadians.

At the end of this year, the Conservatives are going to increase payroll taxes by driving up Employment Insurance premiums – by a whopping 35%. These escalating Conservative EI taxes will become the fastest growing source of revenue for the Harper government.

What's the logic in that? Just when our economy is struggling to recover from a recession, the Conservatives impose a big new tax-on-jobs. The Canadian Federation of Independent Business says Conservative EI taxes "will kill jobs and undermine economic recovery".

And yet in order to go ahead with corporate tax cuts, they are going to have to borrow more money on our behalf. Sounds a bit odd, doesn't it?

We can no longer afford this government. They are now presiding over one of the largest , if not the largest, tax increase in Canadian history.

Stephen Harper's Economic Fairy Tale May Have an Unhappy Ending

So while the media has been ignoring the true picture of our economic position, especially when it comes to the 125 billion in sub-prime mortgages we now own, and the fact 22% of our unemployed have been out of work for more than six months; giving at least the appearance of handling the economy is tantamount to Harper's future.

But how long can he keep up the facade?

He's hoping to hold off going to election until the spring, but with the rising voices demanding his removal, it's going to be tough.

Economic growth is slowing in Canada, while the cost of living is on the rise. Should this become a trend, flat growth and higher prices, it wouldn't be good for Stephen Harper's political health. His prospects for re-election next spring, his preferred time to face the voters, depend on a continuing recovery.

But the inflation numbers, out on Friday, weren't good. The consumer price index rose 1.8 per cent in July compared to a year ago. Energy prices were up 7.9 per cent, while within that segment, electricity prices rose 9.8 per cent, with gasoline prices up 4.8 per cent. Overall, seven of the eight major components in the CPI rose in the last year. In the last month alone, the cost of shelter was up 2.9 per cent, while transportation costs were up 2.7 per cent.

And while he and Jim Flaherty are trying to duck the HST firestorm, remember that they were the ones who bribed the provinces to accept it.

I am glad that the NDP is making strides in BC. They were and are very good for that province.

Canadians Could be the Last of the G-20 to Experience Economic Recovery

Despite the chest thumping by Flaherty and the boys, Canadians could be the last to enjoy any kind of economic recovery, according to Paul Krugman of the New York Times.

Canada escaped relatively unscathed, through a combination of good luck and sound, conservative regulation of banking and consumer debt in which “it is not so easy to use your house as an ATM,” Mr. Krugman told the Canadian Bar Association.

“Canada is an example of the virtues of a relatively traditional approach, a country that did not get caught up in the euphoria of banking innovation,” he said in a speech to hundreds of lawyers.

Now this is where Krugman is wrong. Jim Flaherty did get us caught up in the "euphoria of banking innovation". The only problem is, he didn't bother to tell us that he was doing it, and the few in the media who reported on it, were pretty much ignored.

According to the Globe and Mail

In the first half of this year, as the subprime mortgage crisis was exploding in the United States, a contagion of U.S.-style lending practices quietly crossed the border and infected Canada's previously prudent mortgage regime. New mortgage borrowers signed up for an estimated $56-billion of risky 40-year mortgages, more than half of the total new mortgages approved by banks, trust companies and other lenders during that time, according to banking and insurance sources. Those sources estimated that 10 per cent of the mortgages, worth about $10-billion, were taken out with no money down.

The mushrooming of a Canadian version of subprime mortgages has gone largely unnoticed. The Conservative government finally banned the practice last summer, after repeated warnings from frustrated senior officials and bankers that the country's financial system was being exposed to far too much risk as the housing market weakened.

And when the economic crisis hit, Flaherty secretly bought up 125 billion dollars of what is being called "rotten paper". We still own them, and yet the media is more worried about what plays Stephen Harper is watching than the fact that he has us in deep water.

Here's the inevitable other side of the story. The banks were actually "bailed out" to the tune of $125 billion just before and after the 2008 election -- in the form of a massive purchase of questionable mortgages and other "rotten paper," in the words of one economist, held by them. This was done through the Canada Mortgage and Housing Corporation, a federal agency. The taxpayer is now on the hook for these mortgages, 40 per cent of which are considered at risk, with more to come if interest rates rise and the economy dips again.

But the kicker is this: Hardly anybody noticed. It wasn't an issue in the election, and the financial press said nothing. A few tried, and are still trying, to raise the alarm. Michel Chossudovsky, a retired University of Ottawa economist and head of the Montreal-based Centre for Research on Globalization, pointed out that Finance Minister Jim Flaherty had announced a $2.3-billion surplus in the offing before the election, then quickly changed it to a $64-billion deficit. He argues that the entire deficit was for the first installments of the bailout, which the prime minister described as "not a bailout" but a "market transaction."

And with more people losing their jobs and our unemployment situation the worst since 1938, we need to start paying attention.

There's something else that's interesting from Krugman's comments:

However, he warned that Canadians’ lavish spending habits, stubbornly high unemployment, and rising housing costs are potential trouble spots that could potentially turn a good news story into a bad one. “There are a few aspects of Canada that are not scary but a little disturbing,” warned Mr. Krugman, a Princeton University professor.

“Canada is by no means insulated. It’s by no means a sure thing that everything is going to be OK.” Despite better banking regulation, Canadians tend to “spend and borrow and awful lot like Americans,” Mr. Krugman said in his speech.

And even Frank Lutz, the Republican pollster and buddy of Stephen Harper's blamed the economic meltdown on:

"Government policies caused the bubble and its ultimate crash. Fannie Mae, Freddie Mac, the Federal Reserve, and the Community Reinvestment Act all had a role in the catastrophe. The government inflated economic bubbles with easy credit policies. Interest rates were kept intentionally low. Low-income families were encouraged to become homeowners despite the knowledge that many would never be able to pay them back. Government bought and backed these subprime loans, essentially encouraging brokers to find more subprime clients – risk be damned."