1.
What is Keynesian
Economics
BY: PAUL YOUNG, CPA, CGA

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.
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.
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.
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.
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.
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.
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.
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.
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.
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.
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.
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.
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.
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