Rising debts: the real problems are the growing imbalances in our national balance sheet |

There are a couple angles to this debate:

  • Some say that people are in debt because they consume more than they can afford.

  • Some say that people have to get into debt because the wages did not follow inflation.

One thing to consider

Our economy relies heavily on consumer spending. If people were to live within their means, retail sales would suffer, causing more businesses to either go belly up or to layoff workers.

More layoffs means greater pressure and less contributions paid to unemployment insurance, meaning the elimination of EI surplus and maybe a deficit.

This means that Harper could not have balanced his latest budget because there would be no EI surplus to grab.

Higher unemployment can also mean more workers than there are jobs, which in turn can cause wages to fall, compounding the problem.

Less taxpayers can only hurt the government revenues, forcing it to go into debts and to cut social programs when they are most needed.

All in all

No country in the world has ever suffered from too little unemployment and from higher wages.

The problem are the low wages.

Who profits from low wages and low inflation?

Those who are on fixed income:

  • Rich people who keep their wealth in cash in a Swiss bank account and who don't want to see their fortune lose its value dues to inflation.

  • Retirees who are living off a fixed pension.

  • Those who get their revenues from a government program.

Who suffer?

  • The workers and their family.

  • Business people who invest their money in businesses and services instead of the stock market or instead of letting it sleep in a numbered account.

The entire concept of capitalism requires ever increasing wages

  • Capitalism requires a country's economy to grow constantly.

  • To grow its economy, a country must see a growth in exports and more importantly, a constant growth in consumer spending.

  • For consumers to increase their consumption of goods and services, workers must see their wages grow faster than inflation.

  • More people spending more money means that more people have a job and that more people pay more taxes.

  • More tax paid means that the government can easily maintain and improve social programs like healthcare.

  • More healthcare spending means more healthcare jobs which means even more taxes being paid.

  • At one point, when more taxes are paid than needed, the tax rates can be lowered.

The solution for lower tax rates?

Force wages to rise faster than inflation so more people spend more money, thus increasing the number of workers needed, thus increasing the business world's wealth, thus increasing the amount of taxes paid, thus increasing the government's capacity to provide for its people.

The other solution?

Communism?

/r/canada Thread Link - economyatwork.ca