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Justin Hatherly

Justin Hatherly, intern at the Canadian Taxpayers Federation during the summer of 2015. During his internship, Justin worked on a variety of issues including the FNFTA (First Nations Financial Transparency Act), corporate welfare, and the 'Pork Watch' initiative.

The case for NGDP targeting

In the aftermath of the high inflation experienced in Canada in the 1970s, the Bank of Canada (BOC), the nation’s central bank, adopted inflation targeting as its primary policy goal.  Under the inflation-targeting regime, the BOC was committed to implement monetary policy that would keep inflation within a boundary of 1% to 3%.  Since 1991, when inflation targeting was adopted, inflation has remained much lower and less volatile than in the past, unemployment has fallen considerably since its peak in 1993 and output growth has been more stable.  However, despite these successes, the Bank of Canada should consider replacing its inflation target with a nominal gross domestic product (NGDP) target.   NGDP represents the total level of nominal spending in an economy.  In essence it is total GDP unadjusted for inflation.  Under an NGDP target, the Bank of Canada would commit to ensuring that in a set time frame, say over 10 years, total nominal spending would grow by a certain rate.  For example, a 40% NGDP target would imply that the bank of Canada should aim for 4% annual growth in nominal income.   There are several reasons that make NGDP targeting a better policy to pursue than inflation targeting.   Inflation targeting has fallen short in two principle ways:  Firstly, it was a poor indicator of whether aggregate demand was adequate. Secondly, it is susceptible to “liquidity traps”, a period of near zero interest rates where central banks’ favorite tool – interest rate targeting – is rendered ineffective.   Since 2014, the BOC has consistently undershot its inflation target.  Instead of an inflation rate between 1 to 3%, inflation has often barely reached the 1% lower threshold.  This low rate of inflation signals that the Canadian economy suffered from inadequate aggregate demand, however, there is little conventional inflation… Read More

A Dangerous Budget

The new Liberal government has made much of its commitment to “evidence based” policy making.  While this is laudable in principle, it is a shame that such standards were not applied to the recently released 2016 Federal budget.  The budget is built on a series of false premises, which fail to counteract Canada’s recent economic slowdown and compromise our national capacity to respond to future economic and social challenges.   In the upcoming fiscal year, the Trudeau government plans to run a deficit of approximately $30 billion dollars.  While deficit spending is generally inadvisable, it can be justified as a countercyclical measure when a nation faces a nominal, or demand side shock.  In such circumstances, increased government expenditures or accelerated tax reductions can support both household consumption and business investment.  However, the slow growth we face in 2016 is not a product of any factors that would be responsive to fiscal stimulus.   Our current economic predicament is almost entirely a result of external factors, in particular, a deterioration in Canada’s terms of trade brought about by a collapse in oil prices.  The fall in oil prices means that for the foreseeable future, Canada will almost inevitably face lower rates of economic growth.  Contrary to conventional wisdom, the economy is not operating below capacity, but is actually in the process of adjusting to a new normal of low commodity prices, a weaker dollar and tragically, a higher rate of structural unemployment.  The billions of extra dollars the budget throws around at an unbelievable array of boondoggles and pork barrel projects will be impotent in reversing the natural ebb and flow of the commodity cycle.   To justify their spending spree, the Liberals also claim that a bout of government activism is essential to reversing stagnant middle class incomes and rising… Read More

Are we really Charlie Hebdo?

In the aftermath of the horrific Paris terrorist attacks in January 2015, the journalists at Charlie Hebdo were rightly lauded as heroes for their defence of free speech. Across the world, many took to social media proclaiming “Je suis Charlie”, or I am Charlie in solidarity with the deceased journalists. Yet despite our superficial support for free expression, at most North American Universities, something like Charlie Hebdo would probably never have been allowed to be published. Its efforts at satire would inevitably fall victim to the intricate web of equity laws and speech codes that govern our lives at institutions like McGill. At McGill, a combination of the prevailing social climate and university policy often stifles debate and leaves many students fearful of expressing their views on particular subjects. In 2014 the Justice Center for Constitutional Freedoms, a libertarian leaning legal advocacy group, awarded McGill two D’s and a F on four categories that measure the extent to which the right of students to free expression is upheld by both the school administration and student unions. On campus, the views of many students often fall victim to vaguely defined and enforced concepts like equity and safe space. For example, in March 2012, the student group, McGill Friends of Israel (MFI), tried to host an event called “Israel A Party” to counter “Israeli Apartheid week. However, before the event could take place, SSMU insisted that the event be renamed because the original name “made a mockery” of “oppressions” suffered by the Palestinian people. Similarly, in 2009, SSMU attempted to revoke the club license of the pro-life group “choose life” for the use of graphic images in promoting their message. This attempt at suppressing divergent views can even extend to the faculty. In March 2013, the prominent civil liberties lawyer and professor… Read More

Canada’s Productivity Puzzle

                  In 1994, the Nobel Prize winning economist Paul Krugman once said, “Productivity isn’t everything, but in the long run it’s almost everything”.   Krugman was right then and now.  In the long run a nation’s standard of living is inextricably linked to its ability to improve productivity, or the total output per hour worked.  Higher productivity means faster economic growth, more goods and services to consume and most importantly higher real incomes for workers.  Thus, in light of its importance, it is critical to ask how Canada is doing with regards to this important economic variable.  The results are not pretty. From the end of the Second World War to approximately the mid 1970s, Canadian productivity growth roughly tracked the United States and the rest of the developed world.  However, from 1974 onwards there was a sharp divergence.  Labor productivity has grown at around 2.2% annually in the United States, but only 1.4% in Canada. The implications of this slowdown are profound: lower productivity growth has left Canadian GDP per capita stagnant at around 80% percentage of US GDP per capita.  If not addressed, this gap could have major implications for Canadian living standards, leaving future generations of Canadian’s with lower incomes and diminished economic prospects. Twenty years ago, most economists could have given you a laundry list of detrimental factors inhibiting productivity growth.  For example, large federal and provincial budget deficits that pushed up interest rates, high tax rates on corporate income and business investment, and an antiquated and inefficient sales tax system.  Nowadays, however, most of these problems have been addressed. The federal deficit was eliminated, Canada has a reasonably competitive business tax regime, and the GST replaced the export killing manufacturers sales tax.  Yet despite making most of… Read More

In Defense of Sweatshops

I have no desire to work in a sweatshop. Given that you are likely reading this from the comfort of a computer, I assume that you have no interest in doing so either. The deplorable working conditions and low wages that many in the developing world face lead many in developed countries to call for boycotts of sweatshop produced goods. However, despite the good intentions behind such movements, if we were to boycott sweatshop produced goods on mass, we would seriously damage and compromise the livelihoods of some of the poorest people in the world. Contrary to conventional wisdom sweatshops are actually good for those who work in them. Given that any employment other than slavery is voluntary, if workers choose to work in sweatshops, they must believe that such employment improves their welfare. A worker chooses a job because they believe it to be superior to other alternatives. While a job producing NIKE sneakers for 30 cents an hour would seem like an undesirable job to you or me, for many low skilled workers in the third world, it is the best choice given the limited economic opportunity in those nations. If it were not, most workers would quit and go elsewhere. Low wages in sweatshops also are not evidence of alleged exploitation by multinational firms. The primary reason that wages in developing nations are low is because workers in those countries are not particularly productive. They are less educated and work with fewer tools and capital equipment. This makes them less valuable to employers and thus leads to lower wages. Remember that employers don’t pay their workers to make themselves feel better. They try to pay the minimal amount necessary to entice workers to take available positions. The investment brought by multinational firms leads to a greater demand… Read More
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