Wednesday Morning Links

Assorted material for your mid-week reading.

- The Globe and Mail is the latest source to analyze whether corporate tax cuts have produced the promised returns over the past decade. And the result should come as no surprise:

(A)n analysis of Statistics Canada figures by The Globe and Mail reveals that the rate of investment in machinery and equipment has declined in lockstep with falling corporate tax rates over the past decade. At the same time, the analysis shows, businesses have added $83-billion to their cash reserves since the onset of the recession in 2008.
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In 2000, the combined federal-provincial tax rate was just over 42 per cent, ranking Canada near the top among industrialized nations. The combined rate has since fallen to 28 per cent, placing the country in the middle of the pack, and Conservative Leader Stephen Harper’s goal is to reduce it to 25 per cent by fiscal 2013.

Businesses were widely expected to use the extra money from successive rounds of tax cuts to build factories and offices and buy new machinery and equipment. At one time, they did just that. From 1960 until the early 1990s, corporations invested almost every penny of their after-tax cash flow back into the business.

But the tax cuts appear to have reversed decades of tradition. Investment in equipment and machinery has fallen to 5.5 per cent in 2010 as a share of Canada’s total economic output from 6.8 per cent in 2005 and 7.7 per cent in 2000, The Globe analysis shows.

- Which explains why Marc Lee's call for some Robin Hood tax policy figures to be just as beneficial on the economic front as the social one:

Unemployment is still just under 8%, which is good compared to the double-digit unemployment of the early 1990s, but not great compared to the expansions of the late 1990s and 2000s. Too much of the employment gains that have come are in part-time jobs, so added to the 1.5 million unemployed are another half-million or so who are under-employed.

That is not good for businesses in Canada. Nor is the fact that one-third of the gains in income over the past decade have gone to the top 1% of households. The super-rich use this income as a means of keeping score, but it is not spent in the real economy. Canada’s wealthiest could have $100,000 fall out of the trunk of their Porches and not even notice. Yet, further down the income ladder, we see record levels of household debt that are contraining spending.

Again, not good for business. A good business climate is one in which demand is strong, where people have good incomes are spending them on good(s) and services...

(A) little Robin Hood in our economic planning would do a lot of good, and as the economy rises so the deficit would fall. Adding in some new tax brackets for very high incomes, as the AFB has recommended, would be even better. Remember that corporate income tax cuts are tax cuts for the richest Canadians. Our economic policies should be judged by whether they increase inequality or not. We know that lower levels of inequality are better not just in stronger demand, but also in terms of broader health and social outcomes. A simple test: does this policy further enrich the already wealthy? If so, it must be rejected.

- Meanwhile, the Cons' caricature of a threat to the economy is no more accurate than their spin as to what's supposed to improve it:

Contrary to federal election campaign rhetoric, neither a minority nor coalition government would necessarily be a detriment to the Canadian economy, economists and political science experts say.

In fact, many argue that deficit reduction will have more lasting impact on the economy that than corporate tax cuts and other short-term spending decisions.
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“No matter who is in power we feel there is a consensus in Canada among the major political parties that deficit reduction is desirable. For us the bottom line is that reduction and elimination of the deficit over the next several years will be the goal of no matter which government is there.”

Federal debt ballooned to nearly 70 per cent of GDP. But that fell to 29 per cent by the end of 2008. It currently stands at about 34 per cent.

Any new budget introduced after the election is likely to show a similar path toward eliminating the budget deficit by 2016, which would be positive for the country’s credit rating, according to Moody’s.

- For those wondering whose side is worth listening to in Fox News North's latest attempt to pick a fight with a more reputable news source, Andrew Potter provides the quote of the day:

It’s amazing what sort of character assassination you can get away through chickenshit use of question marks (in Levant’s case). Or in Lilley’s case, through the deliberate withholding of facts. As Peter Loewen himself told Lilley when Lilley interviewed him for his March 31 story, Loewen did the same sort of work for Harper in 2004 that he later did for Ignatieff. Loewen was also a staffer for a Nova Scotia Progressive Conservative leadership candidate in 2005. And he once donated money to Pierre Poilievre’s nomination campaign.

This information was available to Brian Lilley, his editor, and to Ezra Levant. It is thoroughly despicable that it was not included in the stories that were published. What is going on here? In yesterday’s Globe and Mail, Simon Houpt suggests that Loewen just got caught up in a broader anti-CBC campaign by Sun Media, as it prepares to launch its new television station.

If so, that’s disgraceful enough. But I actually think something more basic is at work here: Intellectual prostitutes like Brian Lilley and Ezra Levant are so used to selling their brains on the cheap in journalism’s back alleys, they find it literally incredible that everyone else’s intellect is not similarly for sale.

- And finally, Dan Gardner reminds us how we got into a federal election campaign, and why the Cons' contempt of Parliament matters.