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Woodstock Hangover: Spend Now, Pay Later

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THUNDER BAY, ON - August 21, 2009 - How many can remember the summer of ’69?   was President of the United States. Pierre Trudeau was Prime Minister of Canada. Germany was two countries. The USSR was the enemy.
The Beatles “Hey Jude” was number one on the charts. The Vancouver Canucks, Ottawa Senators, Edmonton Oilers, Calgary Flames, Quebec Nordiques and Winnipeg Jets hadn’t yet played a game in the NHL. Nobody owned a cell phone, laptop, iPod or a flat screen LCD TV.  In cash, ones and twos were paper not coins.
 
The summer of ’69 played host to an event that would later define a generation. The event was Woodstock. More than 300,000 gathered near Bethal, New York, for what was dubbed a celebration of peace, love and understanding. In the long shadow of Woodstock’s ruby anniversary, it’s timely to reflect on how the young idealists of the day came to shape government policies and institutions 40 years later.

With noble intentions, much of what was advocated and popularized by the Woodstock generation involved an increased role for government in the economy. They argued that ‘smart people’ in the government would ‘manage’ the economy and ‘protect’ people from themselves. Government would run ‘temporary’ deficits and ‘create’ jobs. It was argued that society’s prosperity needed to be shared through government-administered programs, regulations and taxes.

In retrospect the wealth was shared. However, it was shared in wrong and damaging ways. Governments exploded. Not only in terms of their size and cost but also in terms of providing for people far more than was efficient or appropriate. No longer did government provide those things that people could not provide for themselves. Instead, it started down the road of providing all things to all people. It was the beginning of the ‘spend now, pay later’ attitude which prevails today.

One need merely look at a few comparisons between the size and cost of government today versus 1969 to see the negative impacts. Considering the population of Canada has slightly more than doubled, one would expect inflation-adjusted comparisons to show similar increases. Instead inflated-adjusted comparisons to 2009 reveal just how large and costly government has grown.

The federal government spends 280 per cent more today than it did back then. In 1969, program spending was $12.9 billion - $74.7 billion adjusted to 2009 dollars. It has exploded to $229.1 billion. If spending had grown at the same rate as population and inflation, then it would only stand around $150 billion. Woodstock-esque thinking has grown government by over 53 per cent.

One positive move is that business taxes are two-thirds lower than back then. However, this leaves individuals and families footing the bill for the increased scope of government. Families have seen a 58% per cent increase in their tax bill. Remember this is after adjusting for inflation! In 1969 the average family tax bill was $3,117 - $18,009 adjusted to 2009. The tax bill for the average family in 2009 actually is $28,467. What would your family do with an extra $10,000 per year?

Not only are today’s taxes paying for this large government spending but debt financing means future taxpayers also will pay later. The federal government debt in 1969 adjusted to 2009 was $111 billion. It will soon surpass the $509 billion mark. This is a 457 per cent increase. Simply put, Woodstock decisions have grown a larger government funded by high taxes and a huge and growing debt – spend now, pay later.

Some of what the Woodstock generation advocated has made our society a better place. Sadly, it also has made it over-dependent on government, reducing the importance of, people taking caring of themselves instead of first looking to government for help.

Back then those who attended Woodstock would have said ‘it was bad,’ meaning good. Today cool kids would say ‘that was sick,’ meaning it was good. Taxpayers can at least agree that the impacts of Woodstock thinking are both bad and sick, and anything but good, for our pocketbooks.

(With notes from Troy Lanigan – CTF President)

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