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On cross border shopping and tax cuts

Where is the demand for lower salaries to match US salaries to match the demand for lower prices to match US prices? Why are we borrowing another $60B of interest payments against our future in tax cuts?

Our prices and our salaries are generally related; the money you are paid has to come from somewhere. In order for Canadians' demand that our prices be lowered to match US prices to be met, we will ultimately pay the price in lower Canadian salaries to match US salaries. While it is nice to get a better price by going south of the border, that money is directly leaving our economy and will also ultimately contribute to the lowering of Canadian income. If prices in Canada are lowered to match US prices too quickly and the US dollar recovers from its decline, we will be hurt again by having unaffordably low prices in Canada that consumers will not tolerate being raised. It sounds great in theory and I am not one to shun a better price, but there are greater ramifications to the national price match than just saving a few dollars at the checkout counter.

The one caveat though is if the much-feared SPP's plans include a currency integration, which I do not doubt, then the price and salary match will inevitably come sooner or later. With the dollar where it is at, if we as a country were to collectively convert all our currency to US $ at today's exchange rate as we integrate currencies, we would stand to do mighty well. But then we'd be stuck with an integrated currency, for better or for worse.

Which leads me to finance minister Flaherty's mini budget, which gives us, collectively, $60B more in tax cuts. That brings us to what, $200 billion in tax cuts in the last few years? What could we have done with $200 billion? If it were up to me, we'd have paid off 1/3 of our national debt and used the interest savings of another $10 or $15 billion a year to pay off more of the national debt. Once it's gone, then I'll take my tax cut. Until then, any tax cut is little more than borrowing against our future. Any dollar we don't put against our debt now will be two we have to pay later in interest payments and debt that remains.

When will the current governing generation stop borrowing from ours?

Posted at 10:24 on October 31, 2007

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