The Energy Sector in the Canadian Economy masks the High Cost of their Public Sector

Posted by PITHOCRATES - July 7th, 2012

Week in Review

The economic numbers in Canada are pretty good.  Even better than America.  And there is one reason for that.  Canada embraces the energy sector.  And they are bringing to market what all modern economies need.  Fuel.  And the economic growth in this one sector makes up for a lot of bad policy elsewhere (see Unions out of sync with economy by DANIEL FONTAINE posted 7/7/2012 on Vancouver 24 Hours).

If it were not for the extraction of natural resources such as oil, coal and natural gas, would Canada really be an economic powerhouse? Many leading economists remain skeptical.

Strip out raw material exports and Canada suddenly becomes just a middle-of-the-pack nation struggling with a serious productivity problem. That’s why this is not the time for any level of government to open up the wallet book and undertake a massive spending spree.

Unfortunately, the need to keep costs in check appears to be lost on a growing number of public sector unions in the Western world. That includes right here at home in British Columbia.

For example, unionized liquor store employees belonging to the B.C. Government and Service Employees’ Union are on strike this week demanding even higher wages and better benefits. This is despite the fact union officials openly admit unskilled employees in government liquor stores make starting wages and benefits well above similar jobs in the private sector.

The BCGEU argues that liquor stores are making Victoria lots of money; hence they deserve a bigger slice of the pie. But what they fail to acknowledge is that government makes profits off the taxes they charge on alcohol, not on who actually sells the product. Having public versus private sector employees sell liquor actually cuts into government’s bottom line.

FDR, liberal icon and America’s 32nd president, opposed government workers unionizing.  He was a fan of unions in the private sector.  But not the public sector.  Because there was a lot of political capital in attacking industrial fat-cats oppressing their workers to make a buck.  But the government pays their workers with taxes.  Meaning the greedy fat-cats oppressing these workers are the taxpayers.  And when you’re trying to grow the size of government it doesn’t help to attack the people paying those taxes.  Especially when you’re trying to raise their tax rates to pay those higher wages and better benefits.  For it just doesn’t sound right calling someone greedy when they refuse to enjoy their lives less so others can enjoy their lives more.

And it just can’t continue.  Forever granting higher wage and benefit packages.  Paid for with ever higher tax rates.  Because to generate tax revenue you need two things.  You need a tax rate.  And economic activity.  Higher taxes, though, reduce economic activity.  Which reduces tax revenue.  Keep doing this and you end up like the social democracies in Europe in the throes of a sovereign debt crisis.  Unless you are blessed with vast energy resources for export.  And your government embraces the energy sector to bring those resources to market.  Like they have in Canada.  The one truly bright spot in their economic picture.

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Unlike the Obama Administration, the Canadians Understand the Energy Sector

Posted by PITHOCRATES - November 5th, 2011

Week in Review

The Obama economic policies are a failure.  Everyone knows this.  Even the Canadians (See Energy sector powers Canadian economy by John Morrissy, Financial Post, posted 10/31/2011 on The Vancouver Sun).

Canada’s economy expanded for the third straight month in August, driven by a rebound in the energy sector and raising expectations for solid growth in the third quarter…

The August data “suggest that the underlying trend in growth is still strong, as the economy appears to have shrugged off dents to confidence stemming from eurozone fiscal jitters, a U.S. ratings downgrade and equity market volatility,” said CIBC World Markets economist Emanuella Enenajor…

If not for the energy sector’s 2.8 per cent advance, GDP for the month of August was unchanged, Statistics Canada reported.

If it wasn’t for energy there would have been no GDP growth.  In other words, if it wasn’t for the energy sector GDP would be as anemic as it is in the U.S.  Because unlike the Americans, the Canadians haven’t declared war on energy.  Oil isn’t a 4-letter word in Canada.  Like it is in America.  Under the Obama administration.

If only we were as capitalistic as Canada we, too, could expand our energy industry to meet record demand.  But no.  Instead the Obama administration wants to finance windmills and solar panels.  Where there is no demand.  Why?  Politics.  And in the Obama administration, politics trumps the economy every time.

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