Tag: GDP

The Debt Ceiling Is Pointless

From the Washington Post, Tuesday February 11, 2014
From the Washington Post, Tuesday February 11, 2014

It would seem that the Republicans in the United States have been largely de-fanged when it comes to using the debt ceiling as a political lever. Yesterday Republicans agreed to a ‘clean’ debt ceiling vote, meaning that there were no poison pills for Democrats to swallow, and that political fighting and decisions would have to happen without the threat of a total global economic meltdown.

But the debt ceiling need not exist at all. As you may know, there aren’t any other major economies that have “debt ceilings” – instead the debt ceiling was a by-product of America’s involvement in the First World War, when Congress (the group authorized to allow for debt) needed to give the treasury room to borrow. The solution was the Debt Ceiling that we know today.

But the debt ceiling isn’t helpful and doesn’t do any of the things that people intend it to do. For instance, as a way of stopping or limiting borrowing it doesn’t work. Most of what the treasury is paying goes out automatically, like paycheques and benefits. Stopping borrowing doesn’t eliminate the debt obligation, it just puts you in default.

As a method to improve the financial health of the United States its hard to see how breaching the debt ceiling would improve the American economy. Far more likely it would tank the US and much of the global markets.

As a tool to fight for social change it is dangerous and undemocratic. The financial responsibilities of the United States sit on both party’s shoulders, not just one.

Lastly, the debt ceiling has prevented more useful conversations about how to help the American economy where both parties had something to offer. Have a look at this video by historian Niall Ferguson from 2011. The economy has improved since then and the economic outlook is better than before, but it is telling that the debt ceiling offers us little and distracts people from more useful political solutions.

It’s time to get rid of the debt ceiling.

by The Walker Report of Walker Wealth Management and Aligned Capital Partners Inc

The Real Economic Impact of Rob Ford

Whether you think that Mayor Ford is great at his job, some terrible buffoon or actually a buffoon that is great at his job, there’s no doubt that we are all paying attention to his antics. But while Rob Ford’s behaviour may be giving Toronto a “black eye” internationally the reality is that it probably isn’t going to make much of a difference when it comes to Toronto’s economy.

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Rob Ford – Toronto’s besieged mayor

The real economic impact of Rob Ford will likely have nothing to do with his drug use, but more to do with his continued fight for cars against LRTs and bicycles. Mayor Ford is a car enthusiast, and he isn’t alone. In many of Toronto’s sprawling suburbs cars are king and public transit is largely relegated to buses. But the real complaint that car drivers have is in their commute.

Toronto is said to have the worst commute times of 19 major cities in a study completed in 2010. On average a round trip commute in the GTA is 80 minutes long, 24 minutes longer than drivers in LA and 32 minutes longer than drivers in Barcelona. This gridlock comes with a cost. In 2006 that cost was estimated to be about $3.3 billion, a result of travel delays, stress on vehicles, increased likelihood of traffic collisions and impact on the environment. Additionally there was also a loss to GDP from travel delays, which amounted to an additional $2.7 billion.

Since 2006 these numbers only seem to increase. In 2011 Toronto’s Board of Trade said that gridlock was now the greatest threat to economic prosperity in the region and estimated that the cost of all the gridlock was $6 billion annually and growing. That cost was updated again this year by the C.D. Howe Institute, now estimated to be about $11 billion.

In the midst of this are politicians fighting over whether we should have subways or LRTs. This is all proving to be bad both for our financial health, but also just plain bad economics. Subways, it is argued are a great investment, though they come with a high price tag. But if a subway line operates at less than full capacity it also serves to suck money out of public coffers. Maintenance for subways are also high, and while subways move many more people around you need people to make them profitable. But the other bad economic idea is the love affair with the car. Cars receive enormous public subsidies, in the form of dedicated roadways, highways, public parking spaces and mandated parking spots in new buildings. While this cost seems largely invisible it is still there, hitting our pocket book.

All of this amounts to an economic failure for Rob Ford. An inability to rally the city to one transit vision, his or anyone else’s, means that Toronto is stuck in gridlock and that is a real embarrassment.

Great Further Reading: Straphanger: Saving our Cities and Ourselves from the Automobile by Taras Grescoe

by The Walker Report of Walker Wealth Management and Aligned Capital Partners Inc