Fiscal Prudence vs Privileged Recklessness

Fiscal Prudence vs Privileged Recklessness

March 31, 2014

By: Terry Hand

It isn’t a sign of the times. It’s a practice that has existed for a very long time. The problem is that voters have extremely short memories helped of course by the sheer volume of information they must digest. I am referring to the practice of politicians putting their sticky fingers into the public pockets and severely exceeding their privileges.

Two years ago In July of 2012 the CBC reported on comments by BC Auditor General (at the time) John Doyle after he released a scathing review of the state of accounting in the BC Speaker’s office. “John Doyle says his audit of the past three fiscal years found the Speaker’s office, which controls the legislative assembly budget, does not produce financial statements, does not demand receipts for MLAs’ expense accounts and does not properly reconcile its bank balances.”

Here we are two years later, and in the past month we have been bombarded with media articles revealing MLAs’ and opposition members’ overspending habits, fancy hotels, expensive meals, extremely overpriced computers, and trips abroad, including tickets for accompanying spouses. At least one opposition member actually defended the idea of a spouse being able to accompany politicians at taxpayer expense. I have many friends with young families, who fly to Fort McMurray to work because there are no jobs available in BC, this in spite of the BC Jobs Plan. These young workers fly out for two weeks of 12 hour shifts plus overtime in some cases, then they fly home for one week, two days of which are spent traveling. Will these men and women workers qualify to have their spouse accompany them? Of course not!

Make no mistake politicians are very well paid for what they do, and the privileges, and perks they enjoy are not deserved. If they were in the private sector many of them would be fired based on their performance. In the past week we have had MLAs and opposition members writing personal cheques to repay the public, repayments I add which would never have been made if it wasn’t for the fact they got caught. What happens if a waitress pockets $20.00 from the cash register, or the representative who pads his meal and hotel expense? They would be fired, no excuses; MLAs, they get re-elected!

Although, I don’t want to dwell on the problem which we all know. Solutions is what BC Refed is about. We know that no other party will rectify any of this, why would they? It’s a sweet deal for all concerned no matter which side of the house you sit. Solutions is what BC Refed has, and the last bulletin earlier this month was the beginning of a scheduled release of active solutions. BC Refed’s Proposed Rules for Government was the first release, and that is a solution that no other party in Canada will offer voters.

BC Refed is also working on Fiscal Management reforms for government (all governments) which will reduce the cost of government to taxpayers. We aim to stop this frivolous regard for public trust, and we will begin with our own candidates by setting the example. We don’t simply blow this out as hot air; indeed we challenge other parties to implement the same.

There’s Trouble on the Horizon

The Bank of Canada raised its interest rate for the second time in less than two months. Financial institutions of all types will increase their rates to their customers – you and me – before the sun rises tomorrow morning.

Why does this move by the bank signal trouble?

Consider this: In British Columbia, real estate prices have been rising at a much faster pace than income. This increases the level of debt compared to income. This has created an illusion of affordability.

People have used the low interest rates to buy bigger, better, and newer homes than they could have qualified for at a higher interest rate. Looking forward, we will see that as interest rates go up, people who may have qualified for mortgages at the lower rates, no longer qualify for the same amount of money. This slows the economy. The number and amounts of  transactions begin to dwindle, which also interferes with the earnings of all participants down the line – realtors, inspectors, lawyers, moving companies, utility companies, perhaps even furniture stores, and the list goes on.

Warnings of trouble don’t end with the exponential increase in real estate prices. Shopping with credit has also escalated over time.

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Vancouver Housing Affordability

Liz

Liz Galenzoski,
Financial Agent for BC Refederation Party.

It’s an old and familiar refrain, but no one takes the time to connect the pieces of the puzzle, and no one who has connected the dots has the courage to tackle the entire issue.

Who are the stakeholders in the big picture?Let’s face it, we are not building homes for families; we are building homes for everyone but families! Construction provides jobs for workers. Every step in the process of bringing construction materials to the builders generates employment, provides taxes for government, and profits for business owners. Realtors get a piece of the pie, too, When viewed from this perspective, more construction is good for the economy – until we have a recession!

All this ‘good for the economy’ building creates a glut of housing on the market because the product exceeds the ability of the market – local residents – to purchase the production. As soon as the market begins to slow, prices cease to increase (which is often referred to as growth, but which is really the devaluing of currency) and the economy is affected. There is less construction, thus fewer jobs in a basic industry, less purchasing power, fewer sales, more layoffs, etc. Is the solution to this problem really more construction?

What keeps the price of properties relatively stable?

In spite of repeated recesssions arising from a glut on the market, the price of house does not suffer the full impact of over production. Virtually all real estate is protected from drastic drops by finance. Developers and builders require the support of the financial community to fund projects, whether they are huge complexes and condos or single family housing. Rarely is a home built on a cash basis. It even sounds ridiculous to suggest such a thing should be considered. “Use other people’s money!” Financing is an insurance policy to protect the value of property from falling below the debt held against it.

What drives up the price of real estate?

Regardless of what is happening in the economy, real estate prices increase across time. People of influence can create a demand for housing in all kinds of ways including speculation of some new opportunity, immigration, reduction of services in small communities which drives people to the city, and the list goes on. Real estate fees, sales taxes, and legal fees all contribute to the cost of real estate but not to its value. These costs are notoriously detrimental because they reoccur every time a property is sold, and every time these costs are added to the mortgage which means years of interest is added to the total cost of the property.

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