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Where are the jobs in January 2017

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This presentation will look at keynesian economics as well as trickle down economics.

The importance of this presentation is to lay out issues with too much government spending as well as not enough investment by the private sector.

Published in: Economy & Finance
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Where are the jobs in January 2017

  1. 1. What is Keynesian Economics BY: PAUL YOUNG, CPA, CGA
  2. 2. Agenda • What is Keynesian Economics? • Money flow from taxation to program spending • What is trickle down economics • Money flow from a Corporation – Public Traded • Money flow from a Corporation – GBE (Government Business Enterprise) • Money flow from a School Board • Money flow from a Hospital • Issues facing economies around the world
  3. 3. What is Keynesian Economics • Keynes advocated increased government expenditures and lower taxes to stimulate demand and pull the global economy out of the Depression. Subsequently, the term “Keynesian economics” was used to refer to the concept that optimal economic performance could be achieved – and economic slumps prevented – by influencing aggregate demand through activist stabilization and economic intervention policies by the government. Keynesian economics is considered to be a “demand-side” theory that focuses on changes in the economy over the short run. Source - Keynesian Economics Definition | Investopedia http://www.investopedia.com/terms/k/keynesianeconomics. asp#ixzz4YTczh6Kk
  4. 4. Government Taxation / Spending Flow Consumers Corporations Government Entities Taxation Flow • Income Tax (Personal) • Income Tax (Corporate) • Consumption Tax • Income from GBE • Dividends (LCBO) Spending Flow • Government Transfers (Healthcare, infrastructure, post-secondary education, childcare • Direct Program • Healthcare • Education • Social Services • Public Safety
  5. 5. What is Trickle Down Economics • Trickle-down economics, or “trickle-down theory,” argues for income and capital gains tax breaks or other financial benefits to large businesses, investors and entrepreneurs in order to stimulate economic growth. The argument hinges on two assumptions: all members of society benefit from growth; and growth is most likely to come from those with the resources and skills to increase productive output. Source Trickle-Down Theory Definition | Investopedia http://www.investopedia.com/terms/t/trickledownt heory.asp#ixzz4YTi1ElxV
  6. 6. Corporation / Money Flow / Canada Tire • Source - http://investors.canadiantire.ca/English/investors/financial- reporting/annual-disclosures/default.aspx Commentary: • Employees (personal Income tax) • Spending on goods and services (domestically or internationally • Logistics • Facilities • Other spending • Corporate taxation • Sales Taxation (GST and PST)
  7. 7. GBE - LCBO • Source – http://www.lcbo.com/content/dam/lcbo/corporate- pages/about/pdf/LCBO_AR14-15-english.pdf Commentary: • Dividend flows to general revenue • LCBO buys locally produce wine, beer and liquor
  8. 8. School Board - Flow Source - http://www3.dpcdsb.org/Documents/Financial%20Stateme nts%2031%20August%202016.pdf Commentary: • 90% of the school board is supported by taxation (Provincial grants: Expenses • 76% of the school cost is payroll • Payroll taxes (CPP, EI • Pensions • Income tax • Benefits
  9. 9. Hospital - Flow Source - https://www.rvh.on.ca/account/SiteAssets/SitePages/account/2016 Commentary • Approximately 70% of funding comes the government • Doctors and Nurses compensation is tied to contracts • Many hospitals have donor programs to support either hospital expansion or new equipment • Money Flow • Spending • Taxation (Personal)
  10. 10. Starting a business • Takes capital • Many high growth companies rely on stock options as well as other deferred compensation a part of growing their business • Small business are hurt by taxation, hydro, red tape/regulations • The bulk of all new jobs created are by small business
  11. 11. How do pension funding work? • Pension funds by assets (investments) with pension funds generated contributions made by both private and public sector employees • Pension funds are looking for ways to maximized the Pension Fund returns • If you increase taxation then you actually are hurting pensions funds, i.e. less income (dividends) for pension funds • Defined Benefit Plans • Guaranteed pensioners a set amount to paid out to them.
  12. 12. Harper / Trickle Down Economics • Source – http://globalnews.ca/news/1356467/tax-cuts-since-2005- net-canadians-30b-pbo/ Fiscal Management – Harper Keynesian Examples • Harper increase program spending • Harper established dedicated funding for infrastructure • Harper honored the transfers to the provinces • Harper moved OAS to 67 • Harper is not responsible for mismanagement at the provincial level Commentary • After the 2008-2009 recession is when Canada had one of the strongest economy in the G-7
  13. 13. Risk/Issues with Keynesian Economics • Source - http://www.forbes.com/sites/peterferrara/2012/07/12/obamanomi cs-the-final-nail-in-the-discredited-keynesian- coffin/#4e241e7a2167 Forbes Video: https://www.youtube .com/watch?v=yOl37 VcG89c&t=28s Commentary: • USA tax system is complicated • USA does poor job of redistribution of wealth • USA income inequality worsening • Government waste money or about 1/3 of all spending is wasted
  14. 14. Issues facing an economy • Government Deficit and Debt • Mismanagement of government moneys • Structural deficits • Government trying to be everything to everyone • Size of the economy • Consumer spending drives 2/3 of the economy • Exports are key area for many countries (Canada drives 25% of their GDP via exports or about $520B) • People want cheat goods and services • Taxation • You cannot tax people to prosperity • Demographics • Aging population tends have different buying patterns • Part-time vs- Full-time jobs (Precarious work) • People are living longer
  15. 15. Summary • Many people misunderstand either Keynesian Economics or Trickle down economics • Private investment drives job creation (market-supply side of economics) • Personal spending drives 2/3 of the economy. • Pension funds invest pension assets into companies as part of managing the returns • It is not one policy that drive business expansion, but multiple policies

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