Politicians are Economically Illiterate

By  | February 13, 2012 | 6 Comments | Filed under: Editorial

Do you ever wonder how we got ourselves into this mess? How western countries, rich beyond all human experience, are so broke. How countries, any country, can owe so much money, and it’s leaders can seem so blasé about the fact.

Maybe, probably even, the problem is the politicians are all economically illiterate.

Oh sure, they all know about interest rates, monetary policy, the value of the dollar and the difficulty in budget projections. But they also live in an information bubble, being fed ideas and figures from self interested sources all day, every day. Then they go to the office and make decisions to spend amounts of other peoples money greater than even the richest politician could dream of spending without access to the public purse. Even the most money conscious politician loses touch the what real money is worth.

Case in point: Currently in Toronto, there is a mayor – complete with minions – who believe that spending is out of control. Their goal, “stop the gravy train.” The Budget Chief on this governing body, i.e. the guy who’s good at the math, is Mike Del Grande .

The Toronto Sun’s Sue-Ann Levy has had a bug up her flue recently about Toronto’s public art. How can a city that is $700-million in the hole spend money on art for the park &tc. Last month she ran a story on a piece of public art she calls the Yorkville Rock. Eighteen years ago, the June Rowlands led City of Toronto spent $284,000 buying, shipping and installing a 500-tonne piece of the Canadian shield in Toronto’s uber-trendy Yorkville.

Mike Del Grande , she tells us, says the $284,000 rock would “easily be $800,000 in 2011 dollars.” That’s an increase of a factor of 2.8, or approximately 180%, roughly 10% per year (I know, I know, I haven’t taken the magic of compounding into consideration). Does that seem right?

Back in 1994 we bought our first house, a small bungalow for $120,000. Now granted there’s been a major housing bubble in the last ten years, and Canadian prices, unlike American ones, have not abated. That style of house, in that neighbourhood are currently listed for $219,000, a less that %100 increase.

We can all agree gas prices are crazy – I mean, holy crap we pay a lot for gas than we did back in the 90’s crazy? From the end of the Gulf War until almost Y2K, gasoline stayed stable at 60-cents a litre. Today, according to gas busters, it is a whopping $1.14 to $1.20 a litre, more or less double. If gas had increased $180%, it would be $1.68 a litre. Even when gas was going through the roof, did you pay $1.68 a litre? Nor would you pay $336,000 for a 1,000 square foot bungalow in Hespeler, the cost of that first house if it increased by a factor of 2.8 over the last twenty years.

I know, I know, your sitting there saying to yourself, so he cherry picked a couple of items to prove some point or another. But according to the Bank for Canada, inflation has run at 41% between 1993 and 2011. My examples are both high, not low. A $284,000 rock in 1993 should cost $400,000, half of what Mike Del Grande suggests it would cost.

Don’t get me wrong, I like what these guys are trying to do, get control over spending in the City of Toronto. But how do you do that when your fiscal hawk budget chief has no basis in financial reality? Getting your financial house in order is not just about deciding what’s wasteful and what’s not, it’s also about knowing the value of something when you decide to spend on it.

If everybody in government thinks inflation has been running at 10% a year, is it any wonder the worlds in such a financial mess?

Brian Gardiner can be found AT HOME IN HESPELER

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6 Responses to Politicians are Economically Illiterate

  1. malcolm February 13, 2012 at 3:44 pm

    Good article except I would argue, it is not just politicians who are economically illiterate, so are a majority of the masses who have high debt load, maxed out credit cards and the biggest crime of all is running lines of credit. Spending their grandkids tomorrows today.

  2. Jan Liggett February 13, 2012 at 5:46 pm

    While Levy bemoans in her Toronto Sun article that a garden would have been a better choice, “Aside from the fact that a better use of the former Cumberland St. Parking lot would have been for a wonderful seating area with flowers of the season” she fails to mention that the rock is part of a series that includes plants and water. Having spent time there a couple of years ago while waiting for an appointment nearby, it was noticeably used by the public for lunches, reading, meetings and playing. While sitting there I also was able to look over at some restaurants and ended up having dinner as well which I never originally intended to do. My bill helped the restaurant pay their taxes which in turn helps pay for the park. If you google Yorkville Rock, you will find pictures and descriptions of the gardens and the people using them. The Rock is only one part of the overall design. She also states “the original cost doesn’t include ongoing maintenance”. All public facilities including parks (as well as items in them) require ongoing maintenance such as painting and weed control.
    Levy only told part of the story and since it was a column, was her opinion. Brian, you may be right, she seems to have a bug somewhere.

  3. Jimm Hillis February 13, 2012 at 8:59 pm

    Sorry Jan, I have no idea why that comment wound up in the spam section. Better late than never i guess

  4. Facetious Lee February 14, 2012 at 8:50 am

    Jan, I feel sorry for the restaurant where you would have eaten if you hadn’t been so inspired by the Yorkville Rock.
    That’ll learn them for sticking only to serving good food at reasonable prices.

  5. Facetious Lee February 14, 2012 at 9:21 am

    It’s a slow day in the courier business. I’m parked in the Home Depot parking lot awaitng my next call.
    I’m kinda hungry. Think I’ll climb the Knobhill Rocks and see what choices I have for a place to eat at.
    Oh, I see Caz’es. Nope, too early for fish.
    I see Fast Eddies. I don’t think the Crazy Fries are cooking yet.
    Boston Pizza??? Nah.
    Oh, I see the Golden Arches in the distance. Sounds good to me.
    See ya’ll later.

  6. Jan Liggett February 14, 2012 at 4:21 pm

    Jimm,

    Did my comment today (a mystery of refinement) end up there as well?

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