Monday, February 23, 2009

Gaudet Hacked, Buzz Sawed

In January 2009, the CBC hosted a special edition of the Dragons' Den in which they entertained presentations on how to fix the Canadian Economy. Among the presenters were Kevin Gaudet and Buzz Hargrove.

On the program, the Dragons were given a hypothetical $20 billion that they could spend however they thought could best stimulate the economy.

Gaudet, the national director of the Canadian Taxpayers' Federation, presented first, calling for tax reflief:

Gaudet began by suggesting there's a high level of consensus in favour of tax relief, citing support for the idea from Barack Obama's chief economic adviser, Christina Romer, citing her insistence that every $1 of tax relief stimulates an economy threefold.

More importantly, Gaudet came with specific recommendations on how that tax relief -- a full $20 billion worth -- could be implemented on a permanent, structural basis.

However, Gaudet wanted to direct that tax relief almost exclusively toward Middle Class taxpayers, with a very small portion going to business. Irene Darra's question about whether or not Canadians would spend that money or save it -- or use it to pay down debt -- seems more than a little ridiculous.

Considering that the global economy is currently grappling with an economic crisis built on defaulting debts it seems that tax relief being used to pay down debt would actually be a very positive step.

There's little question that the Canadian economy wouldn't be stimulated by the full hypothetical $20 billion. But a consumer carrying a smaller debt load is a consumer with cause for greater confidence.

Gaudet was followed by former Canadian Autoworkers Union President Buzz Hargrove, who called on the Dragons to "forget about" the CTF and forget about tax relief:

Compared to Gaudet, who arrived with a well-prepared presentation, Hargrove's presentation was poorly concieved. His delivery was worse.

Hargrove pushed hard for an exclusive push toward not only a stimulus package, but for a stimulus program that would focus largely on the auto and forestry industry.

Hargrove peddled a victim mentality, arguing that the allegedly-otherwise mighty North American automakers have been victimized by bad government policy (although he failed to elaborate on which policies were allegedly harming the auto industry), a discouraging credit market and by what he deemed unfair trade practices.

He called for stimulus of the credit market and protectionist measures -- particularly against Asian carmakers. Hargrove somehow overlooks the fact that Toyota in particular is one of the few automakers actually opening new plants in Canada as opposed to closing them.

Hargrove's suggestion that leasing may be a better model for carmakers is an intriguing idea. But Hargrove's suggestion that credit should be loosened up so consumers can take on more debt at a time of economic uncertainty is ill-conceived.

For one thing, the low consumer condfidence argument has to be considered to apply. One would be foolish to think that consumers who are leery about spending money would be interested in taking on additional debt load in order to do so.

Neither Gaudet nor Hargrove got a particularly gentle ride from the Dragons. There's good reason for this.

Gaudet and Hargrove both represent the extreme ends of the ideological spectrum that together navigated the global economy into the crisis that it's currently in.

Gaudet's focus on tax relief and allowing market forces to run their course unimpeded has already shown its toxic effects. After all, the kind of unscrupulous greed that helped precipitate this crisis should properly be considered to be a market force, likewise with the notions of anyone who thinks they should be able to earn money without producing anything of value.

Hargrove's argument that the hypothetical $20 billion should be spent heavily on the auto industry is not only clearly self-interested -- even if he isn't the president of CAW anymore, he clearly has an intrest in seeing the organization succeed -- but it also overlooks the highly questionable record of Keynesian economics over the past forty years.

In hindsight, one certainly couldn't envy Gaudet or Hargrove. The Dragons' Den seems like an extremely intense environment. Any environment that can seemingly stagger a consumate tax fighter like Kevin Gaudet cannot be taken lightly.

The propositions of both men merely reflect the alternating extremes of economic policy followed over the past thirty years. The Dragons were right to adopt the propositions of neither man, and were probably right to decline to give a red cent to the big three automakers.

Other bloggers writing about this topic:

Rick Spence - "Dragons Second-Guess Stephen Harper"

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