Saturday, February 26, 2011

What is the tipping point to economic strangulation?

That is the question posed at the end of an article in the National Post by Kevin Libin. Apparently in Egypt more than one-third of the working population was employed by the state. That may have been the tipping point that brought down the Mubarak regime earlier this month.
The same kind of situation is happening in many jurisdictions around the world. When the size and cost of the public sector is factored together with their near and longterm entitlements, and the private sector is so burdened and disadvantaged, something has got to give. That maybe what is playing out in Wisconsin and what prompted an article in the New York Times to ask: Is Wisconsin the Tunisia of collective bargaining rights? Talk about mixing metaphors.
In Canada the same kinds of problems occurred in the 1990's when the Liberal government of the time instituted severe cuts to the size and spending of the federal government with very positive economic results. These same problems are beginning to appear again (see the graph); the Conservatives are in power now, but no matter, they spend like Liberals. This of course provides ample evidence that all the major parties in Canada are identical in power - spend and tax or borrow from the future. They all do it.
Even in smaller jurisdictions like cities in Canada or the US something will have to give and soon. The City of Toronto has frozen municipal taxes for 2011, but he future looks bleak for the new cost conscious administration, with a possible $770 million dollar shortfall for 2012. I'll predict an interesting and possibly violent next few months/years.


  1. A not unrelated observation:

  2. Thanks Troy, thats a good article. I'll be reposting and linking it.


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