Saturday, January 31, 2009

My 4 Major Political Issues

Recently I've had several discussions with fellow Canadians about the new Obama presidency. Everyone I've spoken with is smart and I would surmise that they've all consistently voted for either the Conservative or Liberal parties here in Canada. Each of them is a big Obama supporter.

But now the Obama Administration has signed into law a provision entitled "Buy American" that clearly and directly hurts Canada. It is almost certain to start a trade war between Canada and the U.S. Even some Americans realize how dumb it is.

This, combined with the recent strange political events in Canada have forced me to go back to first principles and clearly think about what my biggest political issues are. Though they are apt to change over time, here they are in current order of importance:

  1. Law and Order - Many Canadians have come to the realization that our judicial system is an abject failure. Much of the reason for this is our horrific "Charter of Rights", which has proved more important for criminals than for any law abiding citizens. Here in British Columbia, where I live, things appear to be the most out of control. The ridiculously light sentences given out to violent offenders who have committed the most terrible acts is an absolute tragedy.

  2. Free Speech - 2008 was the year where Canadians' lack of free speech rights came into the spotlight. Thanks to the efforts of Ezra Levant, Mark Steyn, Kathy Shaidle, and others a bright spotlight is now permanently focused on the kangaroo courts that we call "human rights" commissions. But a lot more needs to be done to restore free speech rights to Canadians. Belgium has recently provided a signpost in the distance, a perfect example of where Canada is headed if it doesn't reverse things soon (and permanently).

  3. Fiscal Responsibility - Spending is out of control by most governments and by many individuals throughout the Western world. How we ever got to the point where people felt it was okay to spend more than they can afford, leaving debts to future generations is beyond my comprehension. Even here in Canada where I thought the federal government had finally learned its lesson a decade ago, it appears no longer to be the case. Conservative Party friends of mine have assured me that things would be much worse under a Liberal or NDP government. I don't doubt them but it still doesn't relieve my unease at what is happening.

  4. The Promotion of ALL Citizens - All of my life I have believed that all people have the opportunity to be the best that they can be. Certainly each of us is dealt a different set of cards at birth: some are born into wealthy families, some are born into poverty, some are born with physical or mental disabilities, some not. But in Canada today every person does have the opportunity to achieve greatness if they're willing to work for it. Unfortunately many socialist activists have meddled with things, enacting assorted programs that promote victimhood and diminish incentive. I wholly reject any such attempts to artificially establish "equity", not because I'm insensitive or cruel but precisely for the opposite reasons.

In case it is not immediately apparent:
  • Any efforts to meddle with Free Trade (ie. add Protectionism) violate #3.

  • The NDP's policies violate in the worst way all four of the political issues that are most important to me. That's why I can never support them.

  • Where Barack Obama will take America only he knows. If he starts attacking any of the aforementioned issues in ways that I consider destructive then my earlier fears about him will prove to have been correct. Sadly.

1 comment:

Anonymous said...

Why are we encouraging Canadians to spend or go into debt to keep Rona or Home Depot in business?

Let’s take this “renovation” tax credit for instance. Here the “conservatives” are asking you to spend your money, or more likely borrow $10,000 to renovate your basement, dangling a $1350 tax credit that you get next year, while generating $500 in GST on labour and materials, payable BACK to the Federal government on this one-off. Net to you is $850.

Why not use that borrowed $10000 and buy a Canadian dividend paying stock? The interest cost on the loan is tax deductible and the dividend income generates another tax credit in the form of the “dividend tax credit”, applied against your taxable income.

The dividend income will pay off part of that loan, you apply the tax savings from the dividend tax credit to the loan and in the end you will own shares in a Canadian company who employs Canadians in the work force. You partake in the business and their profits paid out as dividend income for as long as you own the stock.

Once the investment loan is paid off, you can either borrow against the value of the stock (your property) and the stock still pays part of that loan to renovate your basement in the form of dividend income.

If the yeild on the stock is for instance (Bank of Montreal $33.10 a share Jan 30, 2009: pays 8.6% yeild or $2.80 per share annually), your borrowing costs are 4.5% in a margin account - net cost to you is +4.1%, which is a typical yield on a bank stock. You are still getting paid. Fifty percent of your borrowing costs are PAID by the dividend and you write off the dividend tax credit against your taxable income - reducing the income tax that you pay.

$10,000 will buy you 300 shares of BMO which will pay you 300 x 2.8 = $840 per year. Your borrowing costs are 4.5% x $10000 = $450. Net to you = $390. The tax credit on the $840 dividend income generates a federal tax savings of up to 27.5% of $840 = $231 depending on which province you live in.

Why risk borrowing now and non tax deductible interest costs, if the very policy that encourages you to borrow drives interest rates higher down the road, increasing your costs because of it? Get paid to borrow.

You don’t really need that basement reno, you need to employ your money to your best use to increase your wealth, not spend it away. Do the reno later.