Debt, Deficit, and Stimulus
- CHP Canada would treat our debt like a national mortgage amortizing it over 25 years. By retiring our debt in 25 years, we would create a tax break for Canadians without reducing important government services.
- The CHP would have the Bank of Canada make interest-free loans to provinces, municipalities and other local authorities for locally-chosen infrastructure projects. These facilities would improve access to resources and to markets, and the increased economic activity generated would enable the borrowing agencies to quickly repay the loans — which would then be retired, so that the injection of capital would be non-inflationary.
- After World War II, Canada enacted a plan very much like this; the construction activity touched off by that policy created the longest-lasting economic boom in Canadian history. And when the loans were repaid, the permanent infrastructure was still there. Today, it’s crumbling, and the only solution that the other Parties offer is taxing you to rebuild it. It’s time for a new infrastructure initiative—one that works and doesn’t rely on increasing your tax burden.
- The Bank of Canada would be reinstated to its former role, which controlled the amount of money created mainly by lending to the government significant amounts of new money as needed while at the same time controlling the amount of money created by the commercial banks through the statutory reserve system.
Canada’s most famous author, Pierre Berton, published a book in 2000 under the title, The Last Good Year. The year he referred to was 1967.
What happened in 1968 that changed it all? Trudeaumania swung the governing Liberal Party deep into socialism. The Progressive-Conservatives and Liberals in subsequent years competed to buy voters’ support with our own money, and the debt ballooned through habitual deficit spending and compounding interest.
A new Progressive-Conservative tax—the GST (or HST)—was supposed to be applied to the debt; but in fact it was merely another source of “slush funds” to buy votes. The Liberals promised to abolish it, but did not. The Harper Conservatives merely reduced it, while increasing spending to record levels to bribe voters—thereby increasing the debt.
The problem is exacerbated by the fact that every government since the Trudeau Liberals has given away the right to coin money—which the Constitution says belongs only to the federal government—in effect “renting” Canada’s money from the chartered banks, which create our money as interest-bearing debt. Compounding interest deepens the debt, which our children will inherit: now approximately $17,000 per man, woman and child… and rising.
The Better Solutions provided are intertwined to create solutions that correct each of these problems.
The core of the National Debt and Deficit problem is the failure of all parties— except the CHP—to recognize that deficit spending, which increases government debt, is a moral problem: stealing tomorrow’s money from our children and grandchildren, to buy votes today.
The National Debt (currently $620 billion in October of 2014) must be treated like a national “mortgage”, to be paid off at about $4 billion a month. That would make Canada debt-free in about 20-25 years (depending on interest rates). Since we already spend about $3 billion a month on interest, we only need to find another $12 billion a year to implement this CHP plan to make Canada debt-free; we’ve seen how easily the former Liberal government (and now the Conservatives) found much more than that to fund their campaign promises… continuing to bribe us with our own money (and that of our children).
In 2006-7, the CHP warned Canadians that if we do not reduce the debt when the economy is somewhat stronger, it will cause social and economic havoc when the economy takes an inevitable downturn in a year or two. That forecast was accurate. Reducing the debt would enable us to lower taxes without cutting important services. The interest we pay on past government borrowing is like “buying oats for a dead horse.” These expenditures add no services for the taxpaying public; they only serve to enrich the financial institutions from which the government borrowed unwisely. Canada must be debt-free!
The folly of the Tories’ so-called “stimulus spending” is that Ottawa borrows the money it gives to banks and industries to “prime the pump”; but every cent of that borrowing is more interest-bearing debt our children will have to repay.
The CHP would have the Bank of Canada make interest-free loans to provinces, municipalities and other local authorities for locally-chosen infrastructure projects.
This is exactly how the Bank of Canada, which is a government agency and therefore belongs to Canadians, formerly functioned in Canada. The CHP would reinstate the Bank of Canada to its former role.
When those interest-free loans are repaid, the stimulus money can be retired from circulation to prevent inflation—and the new bridges, highways, roads, port facilities, light rapid rail transit, “green” power generation, water and sewer and other infrastructure will remain.
The CHP monetary reform would be good for the economy and reduce government debt, without monetising the debt and causing inflation, at the same time this plan would provide employment for Canadians.
To make the reforms, we would stop funding government by the issuance of T-Bills (which are really government bonds)… but we would do it gradually. We start with the Infrastructure Program, funded entirely by new money created by the Bank of Canada; that money goes into circulation, and as it moves through the economy, and enlarges the economy (by providing the liquidity the banks are still reluctant to create) prosperity would return. Then, by gradually expanding the range of the program, we would simply displace more and more of the T-bill financing—which was Bank Created Money (BCM) with billions in compound interest attached to it.
Secondly, we would simultaneously return to using one of the tools which previous governments used to control inflation, the statutory reserves. Statutory reserves required the commercial banks to put a percentage of their deposits in reserve. The Bank of Canada controlled the amount of money mainly by lending to the government significant amounts of new money as needed while, at the same time, controlling the amount of money created by the commercial banks through the statutory reserve system. The federal government has the authority to adjust those deposit reserves. These reserves were abolished by Prime Minister Brian Mulroney in 1991 to bail out Canada’s banks, which had considerable money tied up in defaulted real estate loans.
The proportion of the money supply that comes from the sale of T-bills to the banks (Bank Created Money, which is actually borrowing from the banks with the interest paid up front in the form of a discount rate on the T-bills) is now 98%; we want to work it down to 50% gradually… then move to 100% Government Created Money using the Bank of Canada to serve the interests of Canada and Canadians.
The CHP would reinstate statutory reserves to control the amount of money created along with returning the creation of money to the Bank of Canada, where it belongs.
That’s a far better solution!
Overhaul the broken Canada Pension Plan with a new Personal Income Security Account.
A Personal Income Security Account would provide a portable investment portfolio, vested in the name of each worker, for health, employment and retirement income.
This plan was proposed for Canada in 1980 by a Christian politician, Dr. Robert N. Thomson. It was rejected by Parliament, but a few years later it was adopted by Chile. Chilean workers at that time were given the option of continuing on the tax-funded pension plan, or going on the new investment plan. Those who chose the investment plan are now retiring wealthy — and Chile has become an economic powerhouse in Latin America because of the pools of investment created.
How will this plan work?
Beginning with an individual’s first job, they and their employer would contribute to the plan as a source deduction, just as we do now with CPP and EI, and in Ontario, the Health fund.
Beginning with one’s first job, 10% of an individual’s income would begin to accumulate in his or her account: 5% contributed by the employee and 5% by the employer.
In the event of some unforeseen circumstance, like unemployment or illness, the individual would be allowed to withdraw up to 15% per year of what had accrued in the account. After that, government assistance would meet the needs of any individual or family.
The account would never be completely depleted, but would continue to grow.
Welfare, disability and healthcare would continue to be government programs. We will always have what we may call “the deserving poor”, and we must care for them with the utmost compassion.
It is no secret that in Canada we also have serious abuse of our social systems. The undeserving poor, those who would choose to abuse the system and thereby the taxpayer, will be motivated—for example, in the case of unemployment—to find new employment quickly so as to use as little as possible of the allowable 15% of their account. As a party we believe very strongly in individual responsibility and accountability, but not disproportionately to compassion.
This policy would inculcate an ethic of individual responsibility in the majority of people, reduce payouts as a result, and therefore allow us to care of the truly unfortunate much better.
The experience in Chile has been an overwhelming success, and voters would do well to seriously consider the CHP’s better solution for the looming CPP crisis.
Read more about the Christian Heritage Party's Better Solutions at www.chp.ca.