Welfare argument full of holes

Posted on June 5, 2011 in Social Security Debates

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TheStar.com – opinion/letters – Re: Restraining the welfare state, Opinion May 29
Published On Sat Jun 04 2011.

Michael Boskin talks about restraining the growth of the welfare state in Canada. Exactly what growth is this?

Certainly, Western Europe has just come off two decades of massive investment in people and infrastructure. But what has been happening here in Canada over the last quarter-century?

First, we had Brian Mulroney and Michael Wilson and their simultaneous inflation fight and implementation of free trade at the height of a global recession.

Next, we had Jean Chrétien and Paul Martin with their fight against the deficit. They gutted programs and services but promised to begin investing in people again as soon as the deficit was gone. They broke that promise and opted instead for a program of accelerated debt reduction.

Then came Stephen Harper and Jim Flaherty, who wish to reduce the role of government in the lives of Canadians. For the Conservatives, any dollar which helps the poor, the sick, the unemployed, or the children in our schools is one dollar too many. Investing in people interferes with corporate tax cuts.

So where has this left us? We are now number 26 among 30 OECD nations in per-capita social spending, number 6 in the percentage of our population living in poverty, number 1 in the rate at which income disparity in increasing. Less than 40 per cent of unemployed workers are covered by Employment Insurance, and there is no comprehensive worker retraining program.

We are number 20 in UNICEF’s index of maternal and infant health, dead last out of the 25 most developed nations in Save the Children’s study of child care and early childhood education. Our health care and education systems are under constant attack from the right. Our transportation systems are a half-century out of date, and our cities are literally, physically disintegrating.

Astoundingly, about one Canadian in 10 doesn’t even have enough food to eat. (Get a load of that — a serious hunger problem in what claims to be a first world nation.) The plain fact is that while industrial democracies outside North America were becoming better places to live, we had a quarter-century of austerity.

So what do Michael Boskin and Stephen Harper do? They stand the truth on its head, act as though we are coming off a quarter-century of Lucullan over-indulgence, and call for still more austerity — except for corporate executives and shareholders.

After a quarter-century of right-wing government, Canada has become little better than a semi-industrialized banana republic where corporate-owned right-wing political hacks sit around handing out Yankee Republican-style tax breaks to the corporations and the rich while every program, every service, and most of our infrastructure simply fall apart.

Great nations do not just happen as a by-product of corporate activity, whose sole purpose is to enrich executives and shareholders. They are built. Unless we start rebuilding Canada, we can count on losing our status as a first world nation by the middle of this century.

Stephen Langevin, Toronto

Writer Michael Boskin says that the 40 per cent of Canadian voters who cast their ballots for Stephen Harper in the recent federal election were “demanding at least a pause, and perhaps some reversal, of the growth of the welfare state.” He claims that “the size of the welfare state — and the erosion of incentives to work, save and invest owing to high taxes and bloated transfer payments is a major impediment to faster income growth.”

Boskin, a professor of economics at Stanford University, apparently hasn’t noticed that over the past three decades there has been a massive transfer of wealth from Canada’s middle and lower classes to the rich, as Linda McQuaig pointed out in the Star last Dec. 28 (“Canada discovers trickle-up economics”).

Since 1980, the real median family income in Canada has barely grown at all while the top 1 per cent of earners have almost doubled their share of national income, from 7.7 per cent to 13.8 per cent in the same period. And the wealthiest 10 per cent now rake in a 58 per cent share of total income.

And, as David Olive pointed out in a March 5 column (“Corporate tax breaks don’t pay”): “Canada is already one of the most tax-friendly regimes for corporations in the world, with a business tax rate of 16.5 per cent, down from 22 per cent a decade ago.”

In spite of that, Olive noted that reports by the TD Bank and the Canadian Manufacturers & Exporters Association both found no job-creation impact since the Harper government began further lowering of corporate taxes in 2007. On the contrary, he said, the non-financial sector of corporate Canada is sitting on nearly $500 billion in idle cash and the corresponding figure for the U.S. is more than $2 trillion.

On top of that, the world’s richest corporations and individuals have used some 70 tax havens around the world to deprive global governments of more than $500 billion in annual tax revenues, according to the Canadian Centre for Policy Alternatives. The CCPA also notes that Canada’s tax system has become so regressive that — all taxes included — the poorest 10 per cent (those earning $13,500 or less), pay out 30.7 per cent of their incomes in taxes, while the top 1 per cent (earning $300,000 or more) expend 30.5 per cent for taxes.

Finally, given the recent world-wide, multi-billion dollar public bailouts of private sector banks and financial institutions, to rescue them from their own greed and recklessness, one can only conclude that what we have today is welfare/socialism for the rich and capitalism for the rest.

If the welfare state is a problem, professor Boskin needs to lay the blame where it belongs — on the wealthy, not the wanting.

Terry O’Connor, Toronto

Canada, the U.K., and the U.S. already have the most undeveloped welfare states among wealthy developed nations and have the statistics to show for it: high infant mortality rates, low or stagnating life expectancies, uniquely high teen pregnancy rates, and in the case of Canada and the U.S., high murder rates. Do we really want to accelerate these trends by making life even more difficult for our citizens?

<Dennis Raphael, Professor of Health Policy and Management, York University

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