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Articles that didn't Get Published in Global Outlook Issue # 13 - Annual 2009 |
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Letter to Dalton McGuinty |
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22/12/09 The letter below to Premier McGuinty was sent through the Government's web site. |
19/12/09Premier Dalton McGuinty
Dear Premier:
Thank you for your letter of July 3rd and the information on the tax changes to be implemented on July 1st, 2010.
I note that the "harmonized sales tax (HST) is just one part of a comprehensive tax package that would also provide, over three years, $10.6 billion in direct payments and permanent tax relief to the people of Ontario and $4.5 billion in tax relief to businesses". These payments and tax relief will be welcome. However, they are much less than what the people and businesses of Ontario would receive if the government financed its debt through the Bank of Canada.
Financing public debt through the private sector rather than through the Bank of Canada cost Canadians, in 2008, $62.3-billion, 39% (or $24.3-billion) of that being carried by the people of Ontario. These costs are for one year whereas the savings you mention of $10.6-billion are spread over three years. In three years the cost for unnecessary interest will have amounted to close to $73-billion - far greater than the estimated savings from the HST.
Ontarians are paying $66.6-million per day, every day of the week, all year long for the interest on the public debt. That amounts to an average cost of about $5.00 for every man, woman and child, every day of the week, all year long, year after year. We are paying that cost in our taxes - GST, PST/HST, income taxes, business taxes, tuition and other user fees, through reduction in services such as education and public health, and through deterioration of infrastructure - such as roads, sewers, water lines and affordable housing.
The Bank of Canada Act, Section 18 (c), allows for provinces to borrow from the Bank, so why don't you do it? Any interest paid would go to the federal government, but it could be reimbursed to the province by the government following negotiations with the province for costs or other considerations.
Some argue that borrowing from the Bank of Canada would create inflation, but the facts for Canada show otherwise. For 30 years after the war Canada borrowed extensively from the Bank of Canada. Except for a spike in 1951 the inflation rate was pretty stable, averaging 2.4 during the 1950's and 2.5 during the 1960's. Only after 1973 was there a significant rise in the inflation rate, but by then the level of borrowing from the Bank of Canada was leveling off. From 1973 to 1982 the average inflation rate increased to 9.6, while the government's level of borrowing from the Bank of Canada decreased from 20.3% of federal government debt to 13.8%. So the claim that borrowing from the Bank of Canada would create inflation does not hold water.
One of the tools which the government used to control inflation was the statutory reserves which required the commercial banks to put a percentage of their deposits in reserve. These reserves were abolished by Prime Minister Brian Mulroney in 1991 and should be reinstated to control the amount of money created.
Your government's indebtedness to private financiers gives the private sector undue influence on government policy, leading to decisions which benefit the interests of the private sector foremost rather than that of the community as a whole. That is why community needs are always short-changed.
And now you want to sell public assets like the LCBO, Ontario Lottery Corporation and Hydro One in order to pay down the deficit. One of the reasons you have a deficit of $24.7-billion is because you are paying over $9-billion per year in unnecessary interest (estimated to be more than $10-billion by March 31, 2010).
In order to reduce the influence of the private sector and to save taxpayers billions of dollars every year it appears that we must only elect politicians who support using the Bank of Canada for financing public debt. Can we count on your support?
Richard Priestman
Kingston Chapter,
Committee on Monetary and Economic Reform* * *
Richard Priestman, Open Letter to Dalton McGuinty, December 19 2009, All rights reserved. Copyright belongs to the author.
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