Sunday, January 30, 2011

Sunday Afternoon Links

A leisurely stroll through the intertubes to end your weekend.

- Mark Thoma raises the question of whether inequality itself may serve as a barrier to long-term growth:
We’ve given the market economy 40 years to solve the problem of growing inequality, and the result has been even more inequality. Markets do not appear to be able to solve this problem on their own, at least not in any reasonable time frame. Some people say education is the answer, but we have been trying to reform education for decades, yet the problems remain. The idea that a fix for education is just around the corner is wishful thinking.

If we want to preserve a growing and socially healthy economy, and avoid moving to lower growth points on the inequality curve, then we will need to do much more redistribution of income than we have done over the last several decades. We must ensure that the rising economic tide lifts all boats, not just the yachts.
- And it looks like the public is starting to catch on. Though I do have to wonder if the results would have been any different if there had been a meaningful debate over, say, the previous decade's worth of cuts.

- Meanwhile, Erin takes a closer look at Canada's corporate tax revenues since the Libs started slashing rates in the early 2000s, and finds no apparent link between lowered rates and any desirable results:
CIT revenues were buoyant through 2008, despite rate reductions, because corporate profits surged. But CIT cuts would have paid for themselves only if they caused this surge.

Did lower rates prompt multinationals to report more of their profits in Canada? If so, the largest inflows would have occurred when rates changed. In reality, profits increased as much during the three-year period when the general rate was stable (+32.7 billion between 2004 and 2007) as during the four-year period when it fell (+32.2 billion between 2000 and 2004).
CIT cuts did not cause much, if any, of the increase in pre-tax profits before the economic crisis. But they have significantly reduced the share of profits collected as public revenue. Therefore, the fiscal cost of CIT cuts is substantial.
- And speaking of wasted public resources, who wants to defend the argument that there's any benefit to the public in the Cons' latest round of parliamentary secretary appointments?

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