Stephen Harper on Canada’s Economy: Catch the Wave!

by matttbastard

Uncle Steve is looking onward and upward:

Faced with complaints he wasn’t doing enough to soothe a nervous nation, Harper offered a detailed, if unemotional, dissertation on the economy.

“For Canada, this crisis does offer opportunity,” Harper told more than 400 people at a joint gathering of the Brampton and Mississauga boards of trade.

“Ultimately, it is an opportunity to position ourselves so that when the economic recovery comes, we’re among the first to catch the wave.”

The Prime Minister said that the government, though projecting a budget deficit for the next few years, is in the best financial shape of all G7 governments.

Harper noted that while Canada’s economy shrank at a 3.4 per cent annualized rate in the fourth quarter of 2008, it was half the decline experienced by the United States and Europe, and only a quarter of the devastating drop in Japan.

He said Canada’s stable banking system, low debt, low inflation rate and skilled workforce puts the country in a position of “significant comparative strength” to ride out the downturn.

“I say to you, as business people, as community builders, as citizens, if there ever was a time to put away that legendary Canadian modesty, it is now,” Harper said to applause.

Alas, the facts (yeah, those pesky things) belie Harper’s feigned deadpan optimism:

The parliamentary budget officer says the Canadian economy is doing even worse than published figures would suggest.

Kevin Page says in a new assessment of the economy that last quarter’s 3.4 per cent contraction in gross domestic product doesn’t begin to reflect how far Canada’s performance has fallen.

He says an even better indicator is gross domestic income, which measures Canadians’ purchasing power, and that shows a plunge of 15.3 per cent in the fourth quarter over the previous three months.

Oh, and about that 3.4 per cent figure so heartily humped by the PM?

The report says even the often-cited GDP figures which finds the U.S. economy shrinking by 6.2 per cent in the fourth quarter compared to Canada’s 3.4 per cent are misleading.

Those are annualized figures, Page notes, adding that compared to a year ago, Canada’s GDP is down 0.7 per cent and the U.S. by 0.8 per cent, almost identical records.

Yeah.

Almost identical.

Don’t opportunistically and immodestly grab your surfboards just yet, kids — the wave of economic recovery is likely to crash long before it crests.

Related: Michael Ignatieff: The Harvey Dent of Canadian politics.

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Helping Those Who Help Themselves (To Our Tax Revenue)

by matttbastard

Stephen Gandel of TIME Magazine on “The Hidden Corporate Bailout”:

While the $700 billion bailout has been the focus of attention and scrutiny, the Internal Revenue Service and lawmakers have quietly been making changes to the tax code and how it is followed in an effort to further boost the financial strength of ailing companies. At the same time, though, the changes drain billions of dollars of badly needed tax revenue at a time when the federal deficit is mushrooming. Many of the changes may lower corporate tax revenue for years to come.

[…]

In the past, corporations could deduct from their taxes only a small portion of the losses incurred by a company they acquire. The rule, commonly called Section 382, eliminated the practice of companies avoiding taxes by buying failing corporations just for their losses.

But in late September, just after Congress defeated the first bailout bill, the IRS issued a notice to change that rule to allow banks to significantly lower their taxes when they purchase other banks.
Now, after an acquisition a bank can reduce its IRA bill by claiming that loans on the books of an acquired rival are worth far less than the previous owners thought, not a hard claim to make these days. The acquirer can deduct from its taxes the full amount of the write-down. Before it could only lower its taxable earnings by a small percentage of the write-down of the pre-acquisition loans.

Jones Day lawyers estimate that the rule change could cost the federal government up to $140 billion in revenue during the next few years. But it would only get that high if every bank in the U.S. were sold and their troubled mortgage assets were all written down to zero. Still, a number of banks have made acquisitions since the rule change and are already benefitting. Wells Fargo will book an estimated $25 billion tax credit from its November acquisitions of Wachovia. PNC, which bought National City in October, could get as much as $5 billion in tax benefits from that merger. And Capital One, which bought Chevy Chase Bank earlier this month, is looking at a $500 million tax windfall.

Aww, such a heartwarming story guaranteed to put us all in the holiday spirit!  Nice to hear that, during times of great tribulation for Big Rich, the IRS is going “above and beyond what’s been allowed in the past” to help engineer a soft landing for its favourite constituents–all at the expense of, er, the broader US public.  And there’s much, much more loophole swag tailor-made for corporate citizens being stuffed in the financial goody bags, so for the complete 411 make sure to read the whole damn thing.

Just don’t call it asymmetric class war, kiddies.

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