When BIden Trumps Trump

The U.S. November election gets closer with each passing day, and it does not appear that Donald Trump has much time to turn around public sympathy. He is low in the polls and he seems directionless and unable to show leadership at a time when a leader with clear direction is needed. Instead, he complains and blames. The country needs a leader who follows the advice biblical Paul recorded in Philippians 4:8 --- a leader that draws people’s attention to excellence and whatever is praiseworthy. At a time when morale is low and people are hurting, Trump should be pointing people towards hope and the good that still happens. Even Democrats do good things sometimes, and what a refreshment it would be if Trump celebrated these things.

I think Trump’s presidency is almost done, and after the election, it will be Biden who has won. I suspect that the stock and bond markets have yet to factor in Biden’s plans for big spending and loftier taxes. I am pretty sure the markets have not considered Biden's declining cognition. When the realization dawns, I suspect the bear market rally will be over. 1930, here we come.

Unemployment and National Debt in Canada

So I heard on the CBC World at Six radio news program this afternoon that in Canada we have lost 5.5 million jobs due to the current pandemic, which was stated as being one-third of the labor force. But didn’t I just read on the CBC news app that the current unemployment rate is 14%? So I wonder how that can be. I start an internet search and find at https://globalnews.ca/news/7029601/canada-may-unemployment-rate/ that the unemployment rate is 13.7%. I also find at https://www.statista.com/statistics/787267/labor-force-size-forecast-canada/ that the labor force is 20 million, so I think there must be less than 3 million people who want jobs but don’t have any. Let’s confirm that. And https://www150.statcan.gc.ca/n1/daily-quotidien/200605/dq200605a-eng.htm agrees with the roughly 3 million.

I also learned from the news that Bill Morneau suggested that Canada’s federal debt, now measured in 13 digits, will be financed by 30 year bonds since interest rates are at such a long-term low now. Great idea, Bill…..IF you can find any buyers. Or maybe he plans on floating them with the Bank of Canada. Just another way to inflate the money supply. I expect the debt will get much higher unless we have an election soon. The subsidy tap will likely be turned off quickly after the election if the Liberals are granted a majority.

By the way, some are mentioning that our federal debt as a percentage of our GDP is the lowest in the G7 world. Not so fast……we also have massive debts at other levels of government. Add that to the total, and our national debt is at about 90%. New Zealand is about 30%. Australia: 41%. Germany: 60%. France, Italy, Japan and the USA have higher percentages than us, but let’s not think ours is low.

SRED Times, Buying Your Votes, and What's Good for Alberta?

It is not clear to me how Covid-19 has affected CRA’s processing of SRED claims. I find that assessing claims seems to be taking about 2 months now on average, except where a claim has been flagged for intermediate action such as an FTCAS. Actually, the recent processing time seems perhaps better than the norm has often been, so it could be that CRA is being less stringent in the application of review standards. The mandate seems to be to get money into the hands of business to keep the doors open and the staff employed.

I expect that the distribution of subsidies such as the CEWS will continue until the next federal election. I think that the government will simply keep extending the end dates to keep up their popularity. The Liberals have the electorate’s support now; they don’t want to lose it. Once the election is done, I think the subsidies will be also. That’s when we will hear that we can’t afford them.

How much can we afford? Well, the current PM’s dad ran a government that had some major deficits in the early 80s when interest rates were excruciatingly high. Adjusting for inflation (and the higher GDP now) I estimate that it would take a budget deficit of about 300 billion dollars to be the same burden as a 30 billion dollar deficit 35 years ago. So I think we can handle the current programs for quite awhile. I don’t say they are a good idea though. This country needs to strengthen its income statements now more than its balance sheets. We need economic activity more than savings accounts.

Jason Kenny thinks he can get the needed economic action for Alberta by lowering provincial corporation income tax rates. I think he’s wrong. The provincial rate accounts for too small of a portion of the total corporation income tax bill to make a 2% reduction in the rate meaningful. Further, the taxation of dividends paid to individual shareholders is so onerous now that a reduction in the corporation income tax rate is to a large extent offset by the tax bite out of dividends. Moreover, companies have to actually have a taxable income for a tax rate reduction to be appealing.

No, what Mr. Kenney ought to do is support the development of Alberta technology in fields other than oil and gas. Get Alberta diversified, and do it quickly. Reinstate the provincial SRED credit and the investor tax credit, and develop fundings for companies developing twenty-first century industries.