Merry and Happy

A week ago Monday, the Governor of the Bank of Canada, Mark Carney, made a speech to a Bay Street gathering. It was entitled Growth in the Age of Deleveraging and it’s been the talk in business and government circles since.
It’s far from your traditional Christmas message of peace, harmony and good will toward men, but it fits with our troubled times. More than that, it’s a message of hope and a way forward as the world teeters on the brink of what some are calling the death of democratic capitalism.
To paraphrase Carney, Canadian households are underwater, with over $1.50 of debt for every dollar earned. We’re now more indebted than the British or the Americans. To get ourselves under control over two years, we’d have to chop $37 billion in spending. To counter the punch the Canadian economy would take, we’d need to grow exports by three percentage points, government spending by four points or find seven percentage points of business investment growth. When Canadian exports to the U.S. are $30 billion off what they were last year and China’s demand for our stuff dropping, the time for self-congratulation is past. There are no guarantees.
Carney’s formula: Canadian households have to stop living beyond their means and Canadian companies must start investing in global expansion. If we don’t, all that private debt will become public debt, with nothing to pull us out of the same spiral sucking the Eurozone toward ruin.
It’s doubtful most of us will take time out from the holiday frenzy to digest what Carney is saying, so we’ll give it a try at the micro level.
The average Vaudreuil-Soulanges family moved here five years ago and bought a house they could afford. Downsizings, layoffs, a drop in business, the cost of raising kids and looking after parents have left them struggling. They’ve gotten into the habit of borrowing against their home equity to pay for the things they feel entitled to — a new car, boat, clubs, cottage, vacation, renovations. It doesn’t take long to fall $1.50 in debt for every dollar they bring in.
Carney’s inference is that lack of personal control got us here. Far it be from us to suggest he’s wrong, but consider, if you will, the grasping hand of government, an extra $5 billion in non-tax fees a year just on the part of the Quebec government. And that grasping hand on our wallets and purses is found at every level, from Ottawa to the province, regional government and on down.
Take municipal tax bills. Hudson, Rigaud, St. Lazare, Vaudreuil-Dorion, Pincourt, Terrasse-Vaudreuil and most of the municipalities we cover are delivering tax hikes of between 3.5 and 4 percent for 2012. They’d like to have us believe that is in line with inflation, but if you check out the Bank of Canada total consumer price index, the total CPI is running 2.9 percent over a year ago. Call it whatever you want, but it’s not inflation.
The handful of residents attending this month’s budget meetings know something’s wrong. They question why municipalities project surpluses, a fancy way of saying “we’re taking money out of your pocket that we don’t need.” They question why municipalities are hiring more people. The pat answer: “Because citizens demand more services.” That’s pure fabulation; citizens demand a consistent level of service; municipal bureaucracies use that as an excuse for what we like to call payroll creep – more people, paid more, doing less, demanding more entitlements.
“It’s nothing,” say our elected officials, “mere pennies per $100 valuation.”
Wrong. It’s the drop that overflowed the bucket, the straw that broke the camel’s back — and a major reason why Canadians are trapped underwater. It’s too bad the governor couldn’t bring himself to be that honest.