KEEN: On Public Debt: The DNPP* saves us all.
Posted: Thu Mar 10, 2011 9:39 amKEEN: On Public Debt: The DNPP* saves us all.
By John Keen DNPP - The Damn Near Perfect Party March 4, 2011
It is alarmingly obvious that the financial world, (intent on increasing profit to the maximum), will not lead the working world out of the morass. Why would a culture that exists by charging interest, and buying and selling paper, rescue the real world?
During a collapse there are huge opportunities to gain wealth by buying low priced assets, especially if governments are providing low priced money. Any improvements to general finance could mean lost profit.
Solving a problem is often not too difficult. Finding out what the problem is may be the real problem. We are told a lack of credit has caused this crisis. Au contraire, a surfeit of credit has caused the crisis. The mountain of debt, world wide, and the cost of carrying that debt, has exceeded the carrying capacity of the productive side of society.
The answer to that is simple – as indeed most answers are: reduce debt and/or the cost of that debt. But to do that means reducing the ability of those with large amounts of money to make large amounts of money by lending large amounts of money, This will not make those people happy, and they have influence. We reformers will have to convince government that wide spread prosperity is better than unstable elitism.
First we fix Canada!
To do that we need two road maps. One showing the path we followed into trouble and another showing the way out. Most of what is being said here will apply to Canada starting in 1968. But could be used widely.
We need some ground rules. For figures on government debt, interest, deficits, and surpluses, we will use the Fiscal Reference Tables from Finance Canada. To make things human, we will use some humans.
The DNPP will also use a lot of numbers. The numbers are necessary to track the huge amount of money fast tracked to "them". Don't sweat the numbers. We use them so you can see how much money went to "them". By spacing the results of the numbers (1968, 78, 88, 98, 2008)you will be able trace Canada's climb to the top of Mount Debt.
Permit me to introduce Jimmy Jones and Jennifer Johnston, the "JJ's" as they call themselves. High school sweethearts from Mythical, Saskatchewan. They were married in 1968. In June, of course, shortly after lucky Pierre became king of Canada. At the reception, the happy couple were approached by Jimmy's uncle, Socred Jones (known by his political beliefs.) "Well," said Socred, "It is nice to see another young pair shouldering their share of their country's debt and the annual interest thereon."
Socred could get away with that. He had just given them a huge wedding present. A square mile of prime land, with equipment, to be paid for by crop share, interest free, during Socred's lifetime. Sort of a retirement annuity. In a way, the paper work formalized what Jimmy and his uncle had been talking about. Socred had no other family and had raised the boy since Jimmy's parents had been killed in an accident when Jimmy was 14.
The couple would have that land plus 320 acres rented from Jenny's dad. Jimmy would work part time at the Co-op, delivering fuel, and Jenny would keep working in the accounting department of Sask. Power. Life was going to be good in Mythical, Sask.
Neither "J" paid much attention to Socred's strange comment. They had other things on their mind that day. But a few months later Jenny was working on figures to do with an expansion proposal for SPC. She noticed interest costs were rising and suddenly remembered Uncle Socred's odd remark.
An intelligent person who liked working with figures (and had a nice one of her own), Jenny decided to find out just how much she and Jimmy did owe, and what their annual interest costs were. It did not take long to obtain figures from Statscan.
And took even less time to discover there were several definitions of debt. Sorting through net debt, interest bearing debt, gross debt and accumulated deficits, Federal debt, Provincial debt, Municipal debt, Crown Corporation and hospital debt, Jenny decided to use gross debt (Federal) as a touchstone.
After all, what she wanted was an estimate. So she decided to use Federal Gross debt + 60% as an approximation of total Government debt. Interest charges were in Total Government Expenditures table (13-001). That seemed accurate enough for casual interest. She reminded herself, this was just a little game to please Uncle Socred.
Using part of another lunch hour Jenny calculated the country's total 1968 debt ($33bn Federal + 60% other) = $53bn. Divided that number by the population ($53bn/23.5m) = $2250 + per citizen. Then multiplied by 2 to arrive at $4500 for the Jones family. She was surprised to find that their share of debt was well over half of what they had paid for a nice big house on several lots in Mythical. Of course, that was in 1968.
The JJ's share of interest @ 5% was $225, or almost $19.00 a month. Remember, each of those 1968 dollars was worth more than six 2008 dollars.
For the next few years the Joneses struggled, but in 1973 grain prices took off. By their 10th anniversary they were (to put it bluntly) rolling in it. Jimmy, heeding Uncle Socred had avoided debt, so the couple, along with Jessica Jones and Joshua Jones, (newcomers in duplicate) had a fair amount of cash.
Jenny, liking her work, had stayed at SaskPower and was now also managing the family fortunes. Interest rates had risen. So Jenny was investing in Government paper.
It was then she suggested Jimmy incorporate the farm. That permitted him to hire himself and draw a regular wage. Now he could pay into Canada Pension and RRSPs. If the farm was short of money in any year, Jimmy could lend some of the wages back as an interest-free shareholder's loan.
One day she decided to see if her country was doing as well as her family.
Tenth Anniversary 1978. Doing the math was easier the second time around. Gross debt $99bn + 60%= $160bn. Bit of a shock there. Population 26.5. Per capita debt almost $6000.00 Then came a real shock. Now there were four in their household…the JJ's share was $24,000.00. Then a huge shock. Jenny knew interest rates were up. But this much? $24,000 @7.8% = over $1800.00 for the year. Jenny decided she had made some kind of an error. Things could not have changed that much without a public fuss. So she put the numbers away. And avoided them for the next ten years. She was one of the few who regretted Joe Clark wasn't able to stop our slide.
Then 1988 came along. And with the 20th anniversary returned that morbid fascination with debt and interest. The Jones were doing well. Good land makes good farmers. Grain prices were down, but that happens in next year country. And a steadily employed wife is great insurance. No interest bearing debt had meant the 25% operating loan interest of Aug 1981 passed them by. So the RRSPs were slowly filling up and all was well.
But how was Canada doing? Gross debt was…. could this be true? The debt had increased over four times in ten years. From $160bn to ($421bn + 60%) = $670bn. Population 28.5 million. Per capita debt $23,500. All the Joneses were still home. Family share of debt over $94,000.00. (Times it by $1.80 for 2008). That was way, way more than their joint income. Family share of Canada's interest : $94,000 x 9.2%=$8,648.00 For a family who avoided debt, this was dreadful. (Uncle Socred's influence lived on although, sadly, he did not).
For the rest of us, life goes on. Jessica and Josh were approaching University life. Jenny had been promoted and promoted. She was much busier at work and at home. Jimmy was farming their land and her father's. None of her friends wanted to hear about debts and deficits. So she put the whole distasteful mess to one side. Someone else could figure out why a rich country was sliding deeper and deeper into the doodoo….
Silver Anniversary, 1993, 25 years of what had been a wonder-full life. Jenny (now Jenn) had risen in the Corporate ranks before it was common for women. Jimmy had been able to repair and replace equipment and pay bills on time. Great stuff if you are a farmer. Two good kids, one studying nursing, the other going for law, and money in the bank. Jenn resisted the temptation to check on her other interest. It seemed those who should be steering the ship weren't concerned. Why should she fret?
But she did fret. In 1992, a friend in Ottawa, (knowing of her concern about debt) had sent her a copy of a study (by a P. Cross and H. Mimoto) reviewing the growth of the Federal debt. One of the two, H. Mimoto, was the Chief of Analysis, Public Institutions Divisions. That gave the study credibility.
Put simply, the study from the years 1975-1990, showed that tax cuts, not wasteful spending, had created a need to borrow, and then the interest on debt caused increased borrowing. Sort of like bailing faster instead of fixing the leak.
Jenn tried to talk about the problem with friends, but she soon realized her concerns were not shared. "Don't worry," Her friends said, "the debt doesn't matter, we owe it to ourselves". But she did worry. If she was paying over $2000.00 a year in interest, then so was every one else in the country. The interest dollars the Jones's paid they could afford.
And a good deal of what they did pay (in various ways ---gas tax, sales tax, property tax, income tax) was returned as interest (tax free) on bonds they held in (tax deductible) RRSPs. (Jessica and Joshua had joined the RRSP owners' group at the first opportunity).
That meant the JJ clan paid less taxes, and so Canada borrowed more money, and paid more interest to people like them who could afford to buy bonds. Low income families paid their share by doing without services.
The whole setup smelled to high heaven. The $8000.00 the Jones family could have afforded to pay, plus the lost services low income people did without, would make a world of difference to those who needed help.
Better health care, better housing, better schools and, yes, better farm programs. Grain prices had tanked in the mid-80s and only three years of the last ten had been decent.
But in 1995 Jenn had found another problem to worry about. Trying to raise money. In 1992 she had joined a group of people working to end child poverty. A goal that was being promoted by the Federal Government.
She was facing the dilemma of most reformers. To accomplish her group's purpose would mean taking money from her and Jimmy and all their friends. Really rich folks were not about to give up really large amounts of money and really poor people didn't have any money to give up. So the burden falls on the large group of people like the JJ's. Those we might call the "sort of well off".
Then came the revelation. Jenn began to promote a simple solution. With current (1995) Gov't debt and interest levels, only 3 to 4 cents of each interest dollar would be needed to provide the $2 1/2 to $3 billions needed to solve the child poverty problem. And since the deduction could be made at source there would be little fuss with cheques and receipts. For Jennifer and Jimmy it would mean $2.80 on each thousand dollar 7% bond. ($1000.00 x 7% = $70.00 x 4%=$2.80) Tax deductible. Of course.
No sooner had Jenny found a solution to child poverty (which was never adopted) than she had to start working on western grain farmer poverty. And all on her own time.
The loss of the Crow Benefit in 1996 had been a real problem for every grain farmer, including Jimmy. For those who don't know, the Crow rate had been a method of subsidizing the cost of moving prairie grains to tide water. It had been in place since settlement days and in 1996 was paying about $650 million a year. That money reduced shipping costs and was spread from Manitoba to Peace River.
It was almost the same solution. As Jenn pointed out to Jimmy, the interest charged on all gov't debt in 1996 ($76 billion, same as 1995 and 1997) would have paid the Crow rate for over 100 years.
Jimmy's remarks cannot be printed here. Those comments had something to do with giving that much money to rich kids instead of poor kids. It sort of escaped his attention that if you gave $76 billion to 1 or 2 million poor kids they wouldn't be poor anymore. All that time they spent learning to live in poverty would be wasted.
Jimmy's own response to the coming loss of the freight subsidy had been to expand his production of top quality oats and hay for local horse owners. Somehow, we have overlooked the fact that James Jones is one hell of a manager. Put him together with a really smart accountant and you realize why it is hard to keep up with the Jones.
But, smart though he was, Jimmy was being caught up in the whole debt exercise. "Look," said Jimmy, "if that Mimoto/Cross thing is right, the country never had to have a debt, right?
"Right," said Jenn, "And, if there had been no debt, there would have been no $700 billion in interest paid the last ten years. And, no $421+ 60%= $680 billion increase in our total gov't debt. And all that just for the last ten years -1987-96. That's a whole bunch over a trillion dollars, in just 10 years. ($1,360 billion). That is because as a country we are paying the interest by borrowing the interest from the people we paid the interest to....and Jimmy said, "People like us? "
"Yes, said Jenny,"But people like us were only given a fraction. Enough to keep us quiet. If Uncle Socred hadn't made that little joke on our wedding day, we would probably not know any of this stuff."
When Jenn thought about going back to 1975, the beginning of the Mimoto study, or indeed, to her wedding day in 1968, when Socred, (may he rest in peace) had started her on this path, her very being rebelled. Just imagine adding up all those wasted billions and trillions of dollars. She thought of a line from a Tommy Douglas speech... "til we have built Jerusalem in our green and pleasant land". As a country, we could have built several large Jerusalems. And our land could have been much more pleasant, maybe even greener.
Thirtieth anniversary. Taking the pulse in 1998. Gross debt $712bn + 60%=$1.14 trillion. With 30 million Canadians, each person owes $38,000.00 dollars. Times that by 4 and you have that Mythical family of four owing $38,000 x 4 = $152,000.00. The rumbling noise you hear is Uncle Socred rotating. At least the interest rates were dropping. Without the 3% drop since 1988 we would probably be paying another $15-20 billion on top of this year's 68 billion .... all unnecessary. Even with the rate going down the debt was still growing, although more slowly.
On the home front things were really stirring. Jenn had decided to retire. Her age, plus years of service with SaskPower qualified her for a full pension starting in 2002. Her income, topped up by RRSP withdrawals, would be more than enough to enable her to be more active in political matters, and retiring would make it easier for her to do. She had been sensitive about her position within a crown corporation. Some of the things she would be advocating (more equality) might be fairly sensitive.
Her contacts, from the early 1990s, with low income families, had been disturbing. So many people had so little, compared to her and her husband. Jimmy still had the section of land from Uncle Socred. Jenn had inherited the half section they had been renting from her parents . Between the thousand acres and the equipment, well over a million. Debt free, (of course) throw in the house and lots, and the tax sheltered bonds and the Joneses were becoming really hard to keep up with.
Jimmy tried to reassure his wife. "Jenny, (Jimmy had never accepted the corporate Jenn)" said Jimmy,"It isn't our fault we were born on second base, and the next guy up hit a double. We never cheated, or broke the law. If Ottawa takes better care of people who don't need help than people who do, it is not your fault. You are trying to make things better and I am going to help any way I can."
The whole child poverty thing had really affected Jimmy. The fact that four cents out of each untaxed interest dollar the Jones tribe (and their moderate to upper income group) received could make life better for over a million kids was wonderful. The fact it wasn't happening was horrible.
As for Jenny, she wasn't sure how her campaign to better inform the public would take shape. It would probably be in the form of web site, constantly updated, using agreed upon, easily checked, figures from Statscan. What Jenn wanted for everyone was the ability to punch a few keys and get accurate and (as far as possible) unbiased information. For example- in 1998, Federal gross debt was $712 billion, net debt was $603 billion, accumulated deficits $554 billion.
All the numbers were defensible, but how much did we owe? She had decided to use gross debt. That way there would be fewer unpleasant surprises.
Again for example, in her Province (Saskatchewan) in 1998 Government net debt was given as $9000.00 per capita. Total government liabilities as given by Fred Wendel in his fine auditor's statements were about double: $18,000.00. Both numbers defensible, nothing improper. But to that mythical family of four – 4 x $9000.00 = $36,000.00 … 4 x $18,0000.00 = $72,000.00. That is a difference!!!
Jimmy was being much more rambunctious. But, dammit he was mad!! As a farmer he was used to working alone. He felt working within a group or party would mean taking a more moderate approach. And he wanted to be noisy. He was pretty confident his wife's abilities in research and calculating would keep him from making a fool of himself. Turned out it didn't matter. None of the established parties (left or right) wanted anything to do with that "Social Credit" stuff.
That is when he stumbled across the DNPP. Not really a party. Just a web site, and few cranky people. But it was going to give James Jones a soap box.
He had been going through a bunch of material left by Uncle Socred and was certain the main argument of Social Credit had merit...a government ought to borrow from its central bank to do things of benefit to the public. Any interest charged could then be returned to whichever administration borrows the money.
Jimmy, with his wife's help, began checking. In that 1968-77 decade when Jenny began her study, almost $30bn in interest was paid by Ottawa (Fed debt only) and they got a little over $15 bn back as "return on investment". A bit more than half. So it would seem we are using our central bank. And have been ever since it was created. Sometimes more, sometimes less.
Twenty years later (the decade 88-97) the same bunch of citizens (more or less) paid $431bn in interest Federally (wow) and got back $55bn. If the earlier level of in-house financing been in place we citizens would have saved another $160 bn over that ten years. ....There's that damn difference again. ($431bn - ½ = $215bn) – deduct the $55bn we had already saved and we would have saved another $160 bn. As Jenny would point out, those numbers were just for Ottawa. For the country as a whole add 60%: $431 + 60% = $689... almost $700bn (ouch) in interest paid.
If the various administrations had used the same tools they used in that previous decade the savings would have been nearly $350 bn. In the 1990s. Wasn't that the decade we couldn't find $2.5 to $3bn a year to end child poverty?
The Return on Investment money would flow to general revenue and might be difficult trace. Jimmy thought it might just have led to further tax reductions.
He had been doing a lot of the figuring. As he told Jenny, "This is Grade 6 stuff. We'll save you for the tough bits." Which led to the question...why isn't the Finance Minister using Grade Sixers? But the problem is not a lack of ability, intelligence or knowledge. It is something deeper... our society is becoming meaner. And that meanness takes the form of concentrating wealth.
So maybe at last we of the DNPP come to the real problem – thanks to Jenny and Jimmy. A lack of common decency. How can a group of well paid, well fed, for the most part well educated people, sitting in comfortable chairs in elaborate structures, condemn one million children living in a rich country, to poor housing and lessened educational opportunities?
For several decades our legislators have defaulted on their main responsibility, Which is to do the greatest good for the greatest number. Worse, they have squandered our resources, human, natural and financial.
But all that misery comes to an end when Canada adopts the "JJ" solution as set out by the Damn Near Perfect Party. So here it is.
Stop taking money from everyone to give to a few. There must be a better reason to run for office than making rich people richer!
- 30 -
By John Keen
Riceton, SK
By John Keen DNPP - The Damn Near Perfect Party March 4, 2011
It is alarmingly obvious that the financial world, (intent on increasing profit to the maximum), will not lead the working world out of the morass. Why would a culture that exists by charging interest, and buying and selling paper, rescue the real world?
During a collapse there are huge opportunities to gain wealth by buying low priced assets, especially if governments are providing low priced money. Any improvements to general finance could mean lost profit.
Solving a problem is often not too difficult. Finding out what the problem is may be the real problem. We are told a lack of credit has caused this crisis. Au contraire, a surfeit of credit has caused the crisis. The mountain of debt, world wide, and the cost of carrying that debt, has exceeded the carrying capacity of the productive side of society.
The answer to that is simple – as indeed most answers are: reduce debt and/or the cost of that debt. But to do that means reducing the ability of those with large amounts of money to make large amounts of money by lending large amounts of money, This will not make those people happy, and they have influence. We reformers will have to convince government that wide spread prosperity is better than unstable elitism.
First we fix Canada!
To do that we need two road maps. One showing the path we followed into trouble and another showing the way out. Most of what is being said here will apply to Canada starting in 1968. But could be used widely.
We need some ground rules. For figures on government debt, interest, deficits, and surpluses, we will use the Fiscal Reference Tables from Finance Canada. To make things human, we will use some humans.
The DNPP will also use a lot of numbers. The numbers are necessary to track the huge amount of money fast tracked to "them". Don't sweat the numbers. We use them so you can see how much money went to "them". By spacing the results of the numbers (1968, 78, 88, 98, 2008)you will be able trace Canada's climb to the top of Mount Debt.
Permit me to introduce Jimmy Jones and Jennifer Johnston, the "JJ's" as they call themselves. High school sweethearts from Mythical, Saskatchewan. They were married in 1968. In June, of course, shortly after lucky Pierre became king of Canada. At the reception, the happy couple were approached by Jimmy's uncle, Socred Jones (known by his political beliefs.) "Well," said Socred, "It is nice to see another young pair shouldering their share of their country's debt and the annual interest thereon."
Socred could get away with that. He had just given them a huge wedding present. A square mile of prime land, with equipment, to be paid for by crop share, interest free, during Socred's lifetime. Sort of a retirement annuity. In a way, the paper work formalized what Jimmy and his uncle had been talking about. Socred had no other family and had raised the boy since Jimmy's parents had been killed in an accident when Jimmy was 14.
The couple would have that land plus 320 acres rented from Jenny's dad. Jimmy would work part time at the Co-op, delivering fuel, and Jenny would keep working in the accounting department of Sask. Power. Life was going to be good in Mythical, Sask.
Neither "J" paid much attention to Socred's strange comment. They had other things on their mind that day. But a few months later Jenny was working on figures to do with an expansion proposal for SPC. She noticed interest costs were rising and suddenly remembered Uncle Socred's odd remark.
An intelligent person who liked working with figures (and had a nice one of her own), Jenny decided to find out just how much she and Jimmy did owe, and what their annual interest costs were. It did not take long to obtain figures from Statscan.
And took even less time to discover there were several definitions of debt. Sorting through net debt, interest bearing debt, gross debt and accumulated deficits, Federal debt, Provincial debt, Municipal debt, Crown Corporation and hospital debt, Jenny decided to use gross debt (Federal) as a touchstone.
After all, what she wanted was an estimate. So she decided to use Federal Gross debt + 60% as an approximation of total Government debt. Interest charges were in Total Government Expenditures table (13-001). That seemed accurate enough for casual interest. She reminded herself, this was just a little game to please Uncle Socred.
Using part of another lunch hour Jenny calculated the country's total 1968 debt ($33bn Federal + 60% other) = $53bn. Divided that number by the population ($53bn/23.5m) = $2250 + per citizen. Then multiplied by 2 to arrive at $4500 for the Jones family. She was surprised to find that their share of debt was well over half of what they had paid for a nice big house on several lots in Mythical. Of course, that was in 1968.
The JJ's share of interest @ 5% was $225, or almost $19.00 a month. Remember, each of those 1968 dollars was worth more than six 2008 dollars.
For the next few years the Joneses struggled, but in 1973 grain prices took off. By their 10th anniversary they were (to put it bluntly) rolling in it. Jimmy, heeding Uncle Socred had avoided debt, so the couple, along with Jessica Jones and Joshua Jones, (newcomers in duplicate) had a fair amount of cash.
Jenny, liking her work, had stayed at SaskPower and was now also managing the family fortunes. Interest rates had risen. So Jenny was investing in Government paper.
It was then she suggested Jimmy incorporate the farm. That permitted him to hire himself and draw a regular wage. Now he could pay into Canada Pension and RRSPs. If the farm was short of money in any year, Jimmy could lend some of the wages back as an interest-free shareholder's loan.
One day she decided to see if her country was doing as well as her family.
Tenth Anniversary 1978. Doing the math was easier the second time around. Gross debt $99bn + 60%= $160bn. Bit of a shock there. Population 26.5. Per capita debt almost $6000.00 Then came a real shock. Now there were four in their household…the JJ's share was $24,000.00. Then a huge shock. Jenny knew interest rates were up. But this much? $24,000 @7.8% = over $1800.00 for the year. Jenny decided she had made some kind of an error. Things could not have changed that much without a public fuss. So she put the numbers away. And avoided them for the next ten years. She was one of the few who regretted Joe Clark wasn't able to stop our slide.
Then 1988 came along. And with the 20th anniversary returned that morbid fascination with debt and interest. The Jones were doing well. Good land makes good farmers. Grain prices were down, but that happens in next year country. And a steadily employed wife is great insurance. No interest bearing debt had meant the 25% operating loan interest of Aug 1981 passed them by. So the RRSPs were slowly filling up and all was well.
But how was Canada doing? Gross debt was…. could this be true? The debt had increased over four times in ten years. From $160bn to ($421bn + 60%) = $670bn. Population 28.5 million. Per capita debt $23,500. All the Joneses were still home. Family share of debt over $94,000.00. (Times it by $1.80 for 2008). That was way, way more than their joint income. Family share of Canada's interest : $94,000 x 9.2%=$8,648.00 For a family who avoided debt, this was dreadful. (Uncle Socred's influence lived on although, sadly, he did not).
For the rest of us, life goes on. Jessica and Josh were approaching University life. Jenny had been promoted and promoted. She was much busier at work and at home. Jimmy was farming their land and her father's. None of her friends wanted to hear about debts and deficits. So she put the whole distasteful mess to one side. Someone else could figure out why a rich country was sliding deeper and deeper into the doodoo….
Silver Anniversary, 1993, 25 years of what had been a wonder-full life. Jenny (now Jenn) had risen in the Corporate ranks before it was common for women. Jimmy had been able to repair and replace equipment and pay bills on time. Great stuff if you are a farmer. Two good kids, one studying nursing, the other going for law, and money in the bank. Jenn resisted the temptation to check on her other interest. It seemed those who should be steering the ship weren't concerned. Why should she fret?
But she did fret. In 1992, a friend in Ottawa, (knowing of her concern about debt) had sent her a copy of a study (by a P. Cross and H. Mimoto) reviewing the growth of the Federal debt. One of the two, H. Mimoto, was the Chief of Analysis, Public Institutions Divisions. That gave the study credibility.
Put simply, the study from the years 1975-1990, showed that tax cuts, not wasteful spending, had created a need to borrow, and then the interest on debt caused increased borrowing. Sort of like bailing faster instead of fixing the leak.
Jenn tried to talk about the problem with friends, but she soon realized her concerns were not shared. "Don't worry," Her friends said, "the debt doesn't matter, we owe it to ourselves". But she did worry. If she was paying over $2000.00 a year in interest, then so was every one else in the country. The interest dollars the Jones's paid they could afford.
And a good deal of what they did pay (in various ways ---gas tax, sales tax, property tax, income tax) was returned as interest (tax free) on bonds they held in (tax deductible) RRSPs. (Jessica and Joshua had joined the RRSP owners' group at the first opportunity).
That meant the JJ clan paid less taxes, and so Canada borrowed more money, and paid more interest to people like them who could afford to buy bonds. Low income families paid their share by doing without services.
The whole setup smelled to high heaven. The $8000.00 the Jones family could have afforded to pay, plus the lost services low income people did without, would make a world of difference to those who needed help.
Better health care, better housing, better schools and, yes, better farm programs. Grain prices had tanked in the mid-80s and only three years of the last ten had been decent.
But in 1995 Jenn had found another problem to worry about. Trying to raise money. In 1992 she had joined a group of people working to end child poverty. A goal that was being promoted by the Federal Government.
She was facing the dilemma of most reformers. To accomplish her group's purpose would mean taking money from her and Jimmy and all their friends. Really rich folks were not about to give up really large amounts of money and really poor people didn't have any money to give up. So the burden falls on the large group of people like the JJ's. Those we might call the "sort of well off".
Then came the revelation. Jenn began to promote a simple solution. With current (1995) Gov't debt and interest levels, only 3 to 4 cents of each interest dollar would be needed to provide the $2 1/2 to $3 billions needed to solve the child poverty problem. And since the deduction could be made at source there would be little fuss with cheques and receipts. For Jennifer and Jimmy it would mean $2.80 on each thousand dollar 7% bond. ($1000.00 x 7% = $70.00 x 4%=$2.80) Tax deductible. Of course.
No sooner had Jenny found a solution to child poverty (which was never adopted) than she had to start working on western grain farmer poverty. And all on her own time.
The loss of the Crow Benefit in 1996 had been a real problem for every grain farmer, including Jimmy. For those who don't know, the Crow rate had been a method of subsidizing the cost of moving prairie grains to tide water. It had been in place since settlement days and in 1996 was paying about $650 million a year. That money reduced shipping costs and was spread from Manitoba to Peace River.
It was almost the same solution. As Jenn pointed out to Jimmy, the interest charged on all gov't debt in 1996 ($76 billion, same as 1995 and 1997) would have paid the Crow rate for over 100 years.
Jimmy's remarks cannot be printed here. Those comments had something to do with giving that much money to rich kids instead of poor kids. It sort of escaped his attention that if you gave $76 billion to 1 or 2 million poor kids they wouldn't be poor anymore. All that time they spent learning to live in poverty would be wasted.
Jimmy's own response to the coming loss of the freight subsidy had been to expand his production of top quality oats and hay for local horse owners. Somehow, we have overlooked the fact that James Jones is one hell of a manager. Put him together with a really smart accountant and you realize why it is hard to keep up with the Jones.
But, smart though he was, Jimmy was being caught up in the whole debt exercise. "Look," said Jimmy, "if that Mimoto/Cross thing is right, the country never had to have a debt, right?
"Right," said Jenn, "And, if there had been no debt, there would have been no $700 billion in interest paid the last ten years. And, no $421+ 60%= $680 billion increase in our total gov't debt. And all that just for the last ten years -1987-96. That's a whole bunch over a trillion dollars, in just 10 years. ($1,360 billion). That is because as a country we are paying the interest by borrowing the interest from the people we paid the interest to....and Jimmy said, "People like us? "
"Yes, said Jenny,"But people like us were only given a fraction. Enough to keep us quiet. If Uncle Socred hadn't made that little joke on our wedding day, we would probably not know any of this stuff."
When Jenn thought about going back to 1975, the beginning of the Mimoto study, or indeed, to her wedding day in 1968, when Socred, (may he rest in peace) had started her on this path, her very being rebelled. Just imagine adding up all those wasted billions and trillions of dollars. She thought of a line from a Tommy Douglas speech... "til we have built Jerusalem in our green and pleasant land". As a country, we could have built several large Jerusalems. And our land could have been much more pleasant, maybe even greener.
Thirtieth anniversary. Taking the pulse in 1998. Gross debt $712bn + 60%=$1.14 trillion. With 30 million Canadians, each person owes $38,000.00 dollars. Times that by 4 and you have that Mythical family of four owing $38,000 x 4 = $152,000.00. The rumbling noise you hear is Uncle Socred rotating. At least the interest rates were dropping. Without the 3% drop since 1988 we would probably be paying another $15-20 billion on top of this year's 68 billion .... all unnecessary. Even with the rate going down the debt was still growing, although more slowly.
On the home front things were really stirring. Jenn had decided to retire. Her age, plus years of service with SaskPower qualified her for a full pension starting in 2002. Her income, topped up by RRSP withdrawals, would be more than enough to enable her to be more active in political matters, and retiring would make it easier for her to do. She had been sensitive about her position within a crown corporation. Some of the things she would be advocating (more equality) might be fairly sensitive.
Her contacts, from the early 1990s, with low income families, had been disturbing. So many people had so little, compared to her and her husband. Jimmy still had the section of land from Uncle Socred. Jenn had inherited the half section they had been renting from her parents . Between the thousand acres and the equipment, well over a million. Debt free, (of course) throw in the house and lots, and the tax sheltered bonds and the Joneses were becoming really hard to keep up with.
Jimmy tried to reassure his wife. "Jenny, (Jimmy had never accepted the corporate Jenn)" said Jimmy,"It isn't our fault we were born on second base, and the next guy up hit a double. We never cheated, or broke the law. If Ottawa takes better care of people who don't need help than people who do, it is not your fault. You are trying to make things better and I am going to help any way I can."
The whole child poverty thing had really affected Jimmy. The fact that four cents out of each untaxed interest dollar the Jones tribe (and their moderate to upper income group) received could make life better for over a million kids was wonderful. The fact it wasn't happening was horrible.
As for Jenny, she wasn't sure how her campaign to better inform the public would take shape. It would probably be in the form of web site, constantly updated, using agreed upon, easily checked, figures from Statscan. What Jenn wanted for everyone was the ability to punch a few keys and get accurate and (as far as possible) unbiased information. For example- in 1998, Federal gross debt was $712 billion, net debt was $603 billion, accumulated deficits $554 billion.
All the numbers were defensible, but how much did we owe? She had decided to use gross debt. That way there would be fewer unpleasant surprises.
Again for example, in her Province (Saskatchewan) in 1998 Government net debt was given as $9000.00 per capita. Total government liabilities as given by Fred Wendel in his fine auditor's statements were about double: $18,000.00. Both numbers defensible, nothing improper. But to that mythical family of four – 4 x $9000.00 = $36,000.00 … 4 x $18,0000.00 = $72,000.00. That is a difference!!!
Jimmy was being much more rambunctious. But, dammit he was mad!! As a farmer he was used to working alone. He felt working within a group or party would mean taking a more moderate approach. And he wanted to be noisy. He was pretty confident his wife's abilities in research and calculating would keep him from making a fool of himself. Turned out it didn't matter. None of the established parties (left or right) wanted anything to do with that "Social Credit" stuff.
That is when he stumbled across the DNPP. Not really a party. Just a web site, and few cranky people. But it was going to give James Jones a soap box.
He had been going through a bunch of material left by Uncle Socred and was certain the main argument of Social Credit had merit...a government ought to borrow from its central bank to do things of benefit to the public. Any interest charged could then be returned to whichever administration borrows the money.
Jimmy, with his wife's help, began checking. In that 1968-77 decade when Jenny began her study, almost $30bn in interest was paid by Ottawa (Fed debt only) and they got a little over $15 bn back as "return on investment". A bit more than half. So it would seem we are using our central bank. And have been ever since it was created. Sometimes more, sometimes less.
Twenty years later (the decade 88-97) the same bunch of citizens (more or less) paid $431bn in interest Federally (wow) and got back $55bn. If the earlier level of in-house financing been in place we citizens would have saved another $160 bn over that ten years. ....There's that damn difference again. ($431bn - ½ = $215bn) – deduct the $55bn we had already saved and we would have saved another $160 bn. As Jenny would point out, those numbers were just for Ottawa. For the country as a whole add 60%: $431 + 60% = $689... almost $700bn (ouch) in interest paid.
If the various administrations had used the same tools they used in that previous decade the savings would have been nearly $350 bn. In the 1990s. Wasn't that the decade we couldn't find $2.5 to $3bn a year to end child poverty?
The Return on Investment money would flow to general revenue and might be difficult trace. Jimmy thought it might just have led to further tax reductions.
He had been doing a lot of the figuring. As he told Jenny, "This is Grade 6 stuff. We'll save you for the tough bits." Which led to the question...why isn't the Finance Minister using Grade Sixers? But the problem is not a lack of ability, intelligence or knowledge. It is something deeper... our society is becoming meaner. And that meanness takes the form of concentrating wealth.
So maybe at last we of the DNPP come to the real problem – thanks to Jenny and Jimmy. A lack of common decency. How can a group of well paid, well fed, for the most part well educated people, sitting in comfortable chairs in elaborate structures, condemn one million children living in a rich country, to poor housing and lessened educational opportunities?
For several decades our legislators have defaulted on their main responsibility, Which is to do the greatest good for the greatest number. Worse, they have squandered our resources, human, natural and financial.
But all that misery comes to an end when Canada adopts the "JJ" solution as set out by the Damn Near Perfect Party. So here it is.
Stop taking money from everyone to give to a few. There must be a better reason to run for office than making rich people richer!
- 30 -
By John Keen
Riceton, SK