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University of Guelph
Political Science
POLS 2250
Tim Mau

Explanations for the Growth of Government January 14, 2013  (1) War and Military Expenditures o Main accost after both World War‟s  (2) Social Conscience/Entitlement o Offering social support to those who cannot help themselves, rapidly growing aging population  (3) Technological Change o Modern goods, highways for more cars, etc. o Larger highly skilled and highly educated population  (4) Population Growth o Many Canadians live in an urban environment, about 80% and growing o Service provisions, local services (social housing, social welfare, police and fire, etc.)  (5) Keynesian Theory o When the economy of a country naturally takes a drop, it is the governments responsibility to spend in order to stabilize o It is also important for the government to make significant cutbacks with the economy naturally hits a high within its cycle  (6) Government Expenditure Growth Theories o Wagner‟s Law (Adolph Wagner)  As the economy of the state grows, a larger proportion of it will ultimately be dedicated to the public sector o Displacement Effect (Peacock & Wiseman)  Displacement effect; crisis or event that causes governments to spend more money, however once the governments spend more it makes it harder to cutback o Higher public tolerance for taxes to fluctuate continuously  (7) Political Process o Theory suggests that we are the problem; government grows based on what citizens of the state require and desire o Demands for more state intervention and programming typically comes from a variety of different public interest groups within society  (8) Public Bureaucracy o Begins with the premise that individuals are rational self- interest economic actors; for the politicians their self-interest is to ultimately get re-elected  To do so, you must differentiate oneself from the competition; in turn political parties are willing to offer more in order to gain votes o Bureaucracy side of the equation; budget maximize theory  Managers and context of the public sector don‟t receive the same rewards as the private sector, the way they would compensate for that was to maximize their budgets in means of enhancing their power and prestige  A combination of a number of these different factors can provide a reasonable understanding for the growth of the government itself o There‟s no question that the state has become more pervasive in most western states in the post-war period o Late 1960‟s to 1998 the liberal government balanced the books and demonstrated that we had been running with a continuous deficit Fiscal Situation & Government Agenda  Government did grow quite dramatically in post-war period  Deficit and public debt o On an annual basis we‟re spending more money than we‟re bringing in o An accumulation of all of your annual deficits; over time that net result is your public debt  Debt peaked at $563 billion in 1997/98, the year the liberals produce the first surplus since 1969/70 o Paul Martin as the finance minister; for nearly 30 years were had been spending more money than we had been bringing in o 14.5 cents/dollar to pay debt charges ($33.9 billion)  Era of Post-Deficit Politics o Various options  Increase expenditures  Cut taxes  Government has to be wary of taxing large multi-national corporations in fear of them leaving and starting business somewhere where taxes aren‟t so high  Pay down public debt  Some combination of the three  Jean Chrétien‟s government  Global Economic Recession of 2008 o Economic stimulus; return to deficits  Harper government launched a fiscal stimulus package; encourage Canadians to continue to spend money and home renovation projects to keep people employed Government Priorities 2008-2012  Budget 2008 – „Responsible Leadership‟  Maintain Strong Fiscal Management o Debt reduction o Delivering on tax back guarantee - $2 billion in interest savings by 2009-10 going to personal income tax reductions o Keep spending focused and disciplined o Focus on core federal responsibilities  Strengthening Canada‟s tax advantage o Introduction of the tax-free savings account o Support for SMB through R&D tax incentives  Investing in People o Develop best-educate, most skilled and flexible workforce in the world o Enhancements to grants and loan programs for students o $25 million over 2 years for new Canada graduate scholarships o Establish 20 Canada global excellence research chairs  Investing in knowledge o Money for science and technology  Supporting communities and traditional industries o Attenuate negative effects of economic downturn – ie. Forestry sector; farm programs and older workers  In
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