Sunday, December 11, 2011

A Simple Solution for the Deficit that Might Please Both Progressives and Neo-classical Economists

Given the record profits of and incentives paid out in Cdn banks recently, there is no credible argument that says they can't afford a financial service transaction tax, and, as we know, it is the financial sector that is largely responsible for the economic mess in which we find ourselves.  It seems only fitting, then, that the revenue from this tax be used to pay down the almighty deficit about which neoclassical economists dream frettfully every night. This is a simple, easily doable solution, but one, alas, never mentioned in a Canadian context in public economic discourse for fear of upsetting our sacrosanct banks, who will claim, yeah, okay, we'll absorb your tax but you can count on us to pass it on to investors. 

Of course paying down this debt would do nothing directly for ordinary households which are leveraged at a 150% ratio to income and approximately $26,000 in debt over and above mortgage obligations.  But it will allow those poor neoclassical economists to get some sleep at night.

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