Baraka_Guru

It still doesn't work. You're assuming that everything about the test was hunky dory. Do you think that the banking and auto industries were hunky dory? That everyone knew what was going on (i.e. what was going to be on the exam)? Examinations within post-secondary institutions are heavily regulated. The banking system in the U.S. is not.

While it's true that some decisions of government are poor, there are many that make sense. The biggest influence government has is over monetary and fiscal policy. You don't seem to know the full picture of the Canadian economic and banking systems. Canada's monetary policy has followed suit with many other policies around the world. We've had rock-bottom interest rates. Also, Canada's banking system is well-regulated. The banks didn't take on excessive risk because it's illegal for them to. Furthermore, it's virtually impossible for Canadians to do such things as strategically default on mortgages. Americans walk away from their mortgages; Canadians just don't do it.

The problem in America's system is that it's modelled too much after the free market. There isn't enough regulation, and so there's little that can stop banks from literally gambling with the assets of millions of Americans. When the shit hit the fan, it was either allow for a system-wide catastrophe or to infuse funds into it to keep it from collapsing. The fallout should have resulted in immediate regulatory practices modelled after the Canadian system, but it appears that that has failed almost completely. So, no, governments aren't always ruining the economy; they're often preventing catastrophe and in other cases, such as in Canada, they are a major partner in fostering robustness.

Furthermore, you have people like Bill Clinton who kicked the shit out of inflation. For the benefit of those who need a reminder, a low inflation has the following benefits:

• Consumers and businesses will be more confident in knowing that the purchasing power of their money will hold.
• Lower interest rates reduce the cost of borrowing. This encourages consumer spending, which bolsters the economy. It also encourages businesses to invest in order to improve productivity.
• People do not react as quickly to short-term price pressures in a low-inflation environment, which helps keep inflation low.

What's wrong with a government that enacts policies that reduce inflation?

What if taxes are already relatively low? I could see the positive impact of lowering taxes to the lower and middle classes, but even this can only go so far. Tax cuts are not an economic panacea. If they were, shouldn't the Bush tax cuts have had a bigger impact by now? How's that recovery coming along?

Why should I expect as much? I think, generally, that the Canadian government took the right steps with the monetary and fiscal policies, namely, the interest rate reduction and stimulus package. And I say this as someone who would never vote for the Conservative Party.

Companies also respond to reduced sales by reducing their prices. They do this to encourage sales increases. It's just like our bigger-picture discussion about balancing spending and savings. You want to boost sales, so you reduce prices, but you also need to cut costs, so you become more efficient. But you can only go so far in either direction. You need to strike a balance to find success and growth.

I'd like to know what sort of items you would consider as micromanaging. I'm not sure what you mean by that.

I know this about small companies. My example of the sitting on cash was just one aspect, but it's a good example of why many companies (i.e. bigger ones) aren't necessarily looking for investors. The extra cash that goes to the top earners from the tax cuts isn't really in demand from the economy in the form of investments. It's more in demand as spending, which isn't as likely to happen in the hands of the wealthiest Americans to the same proportion as the lower income earners.

But you're right about small businesses. Maybe there is a greater demand for investors there, but they are high-risk investments in this environment. So you have small companies who maybe want to expand but can't find loans or investors. Isn't this a good reason for government to step in to free up those resources?

If you want my opinion, I think Obama needs to reinforce small businesses and help them recover and thrive. They make up the lion's share of the economy and so you'd not only help with jobs but you'd help with spending as well. It's a bottom-up solution, rather than the trickle-down solution the Republicans seem to cling to.

And before you call foul regarding the government "picking winners and losers," there are ways for governments to fund programs for loans, tax credits and exemptions, and grants via arms-length organizations. It's how the cultural industry works here in Canada, for example.

See my last response above: there are other ways governments can allocate funds to aid in moving capital flow to those who need it and can't get it from the free market, and there is a way to do it efficiently and with great economic impact. As an example, for every tax dollar that gets infused into the book publishing industry in my province---via arms-length organizations---four dollars of economic activity is generated. That's an astounding return, and 100% of the funding comes from the government.

As the above will indicate, I disagree. The government should be a reasonable influencer because markets are both irrational and inefficient and shouldn't be left to its own devices. Much of the problems with America's banking system was because of being too lenient in letting the market do its thing.

If you're trying to convince me that universal health care is a bad idea, you're going to have to do better than that. I've had universal health care for nearly 35 years---my entire life. There are other ways to encourage preventative health. When the government is paying for health care, such as in Canada, a part of that includes educating the public regarding health initiatives. But I believe that's the topic of another thread.

I don't get this. Why is it good for consumers to reduce spending during a recession? Do you know what a recession actually is?

To oversimplify, we should spend during a recession and save during a boom.

I don't know the American tax code well enough, but what I will tell you is that I support a reasonable progressive tax system. As you know, small businesses are crucial to the economy. I have no problem in finding ways to minimize the taxes of small business. At the same time, I have no problem minimizing the taxes of the lower and middle classes. However, I also have no problem with a tax that increases incrementally with higher income levels. You may call this "penalizing success," but I call it doing your part to pay back into a system that has enabled you to be so successful in the first place. Wealth isn't created in a vacuum. It's created by a combination of ideas and labour. Many among the middle class are just as successful as the über-rich in what they do. The wealth they manage to generate is dependent on how the capital system works more so than the amount of effort and expertise they put into their careers. But, again, this is a topic for another thread.

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Knowing that death is certain and that the time of death is uncertain, what's the most important thing?
—Bhikkhuni Pema Chödrön

Humankind cannot bear very much reality.
—From "Burnt Norton," Four Quartets (1936), T. S. Eliot