The concept of farm subsidies seems to be a topic rarely discussed these days by politicians, and for good reason. Fiscal liberals support government assistance for farmers, and the fiscal conservatives who are technically against assistance, get most of their support from rural areas. This allows farm subsidies to get out of control, with little discussion or push for reform.

Currently the industrialized nations are spending well over $350 billion dollars a year into farming subsidies (most of which used to compete against each other). This huge influx of capital investment and notorious trade barriers, block all poorer countries from entering the marketplace. For those interested in how much of that money actually makes it to farmers, it is less than 1 in 5 dollars spent; not a huge benefit to our society.

These excessive government handouts don’t stop at traditional farming, but also the dairy farmers where $2.5 billion was given to the dairy industry propping dairy prices 155% above the world price of the commodity.

What is the solution to this whole mess? Simple; eliminate the subsidies. The New Zealand case would be a prime example of how the agriculture industry can work without the need of government handouts. Before the reform, subsidies accounted for 30% of the value of production; higher than current North American subsidies. The government made this commitment expecting 10% of all farms to go out of business, nonetheless they understood the need for independence. Today, after implementation of this hard-line stance; the expected mass bankruptcies never happened with only 1% of the farms going out of business, the economic output has increased 3% and the value of the farm output rose to a staggering 40%. The OECD (Organization for Economic Cooperation and Development) confirms New Zealand is the least subsidized farm sector in the industrialized world, and subsidies only account for 1% of agriculture value (mostly scientific research funding), compare that to 22% of US farm production value.

It’s time for the first world to wake up and quit looking out for its own rich citizens through unproductive government waste. Protectionist policies have time and time again shown to be quite negative to our society; it’s interesting to see something given as aid turn out to be so destructive.

As you are well aware, our governments are capable of running deficits, surpluses and debt. Many believe it is the government’s job to strive for surpluses and to minimize our debt, such that our children are not paying for our spending habits. With this piece I want to explain the positives and negatives of both deficits and surpluses; how they have an effect on our lives and what we should do about them.

The first thing I want to address is the effects money has on our way of life. When government gives money to departments, to administer social programs, funds are given to people, education, and infrastructure in the forms of schooling, hospitals, roads, and defense. When government gives money back to its citizens through tax cuts; funds again are used for goods, services all requiring people, education, and infrastructure.

Our economy as a whole is highly dependent on growth, investment and maintenance of those important factors; people, education, and infrastructure. Trying to reduce funding of these essential areas will have a significant impact on people’s lives. This is the main reason I condemn policies used to stop deficit spending (see Clinton, Harris), as it will have no effect other than creating sub-par education, medical care, over taxation, and other infrastructure in times of recession. Much like bull economies are cyclical, people’s livelihoods will become cyclical as well. Over time, as long as our country’s wealth, productivity, and quality of life increase; and our debt to gdp ratio goes down, there should be no reason to worry about temporal effects of deficits and surpluses.

Now lets fast forward to today. Canada currently has record surpluses, just had its 8^th consecutive year in the black and is touted as a shining light of fiscal balance in the first world. The US on the other hand is in the red with record deficits and is seen by people around the world as being in serious fiscal trouble. Just the sound of these two assessments alone it seems Canada is ahead of the game.

Looking closer, Canada as a whole has a debt to gdp ratio of 67%, compared to the US’s 65%, EU’s 76%, and Japan’s 164%. This means that the US is generating wealth at a far greater rate than its debt accumulation; interestingly, with all the deficits the US has posted over the years, the debt to gdp ratio has been declining as the nation invests more money in people, education, and infrastructure. Another aspect one must consider is the US’s phenomenal GDP growth; over the last 5 years, the economy has been growing at a pace of 2 to 5%. The Canadian economy on the other hand has been largely stagnant besides the increase in Oil prices from $20 to $60 in the same time period. This shift in economic focus is easily seen in the recent elimination of the Albertan debt, and the large fiscal deficits in Canada’s manufacturing regions.

It’s easy to compare the US to Canada; but in the end, Canada is the most overtaxed nation in the first world, our surpluses are creating a stagnant economy due to our lack of investment and our surpluses are will make it more difficult to generate wealth and raise our standard of living over the long term. Don’t get me wrong, large deficits can really hurt an economy, but the long term benefits can significantly outweigh the satisfaction of having money in the bank for a rainy day. Our government is really putting a stranglehold on our struggling manufacturing sector and denying hardworking people the ability to be productive individuals.

For those obsessed by the US deficit, and want to know how much too much is, there really is no answer to that. What I can do is show different country’s deficits (-) and surplus (+) relative to their productivity; Canada +0.7%, US -2.7%, UK -3.5%, France -4.3%, Germany -4.2%, Italy -3.1%, Japan -9.3%. As you can see, even though the US has a ‘massive’ deficit, it is in no more fiscal trouble than many other first world countries.