In a major shock, the Conservatives are wailing about the deficit.
Pierre Poilievre, the Conservative leader, continued his one-track, simplistic argument that the budget deficit was causing inflation all by itself. Former Cabinet Minister Rona Ambrose claimed the Trudeau government has spent “far too much for far too long” and that “taxes will have to go up.” Another former Conservative cabinet minister, Perrin Beaty, now the head of the Canadian Chamber of Commerce, said that “we can’t borrow our way to prosperity” and that the government was “writing cheques on a bank account that was overdrawn.”
Every time Poilievre opens his mouth about the deficit, I become more convinced he’s as economically illiterate as Trudeau, or at least pretends to be. For her part, Miss Ambrose seems to have developed amnesia, forgetting that she was in the Harper government that ran deficits for 6 straight years (they were smaller deficits, about 0.8 percent of GDP). I don’t know what exactly Perrin Beatty’s job is, but it seems like it’s mainly to go on TV and say silly things.
Let’s have a reality check. The deficit of $43 billion is about 1.5 percent of GDP and the overall debt is 43.5 percent of GDP, the lowest among G7 countries (the US is 129 percent, the UK is 100.2 percent). The deficit is nowhere near enough to cause inflation, which has already come down significantly and which the BOC predicts it will be down to 3 percent by year end (2 percent is normal). I’ve written about how deficits actually work before. I’ll sum it up by repeating that the federal debt isn’t like individual debt, and that neither the deficit nor the debt pose any danger at this level. (This doesn’t mean we should run deficits forever.) If you want to be worried, look instead at the indebtedness of individual Canadians - 185 percent of disposable income. This is far more likely to bite us in the near future.
When conservatives run deficits, they suddenly don’t matter. For example, Trump slashed corporate taxes and racked up the biggest deficits in US history. No Republican said a word. The hypocrisy of conservatives on this issue is brazen and insulting to all of us. I generally don’t vote for people who assume I’m too stupid to do elementary school math or comprehend basic facts.
The political cost of climate denial has reached an inflection point.
Cornell University researchers recently reviewed 88,000 scientific papers on climate change and found that 99.9 percent concluded that the changes are caused by human activity. The only other theory to get this level of agreement was gravity. So if you don’t believe in man-made climate change, you should also be perfectly willing to jump off a twelve-story building. Let me know how it works out.
The government pledged - through tax incentives and money for loans through the Development Bank – to spend $80 billion on the green energy transition. This should have brought out the climate deniers in full force - people like Poilievre, Alberta Premier Danielle Smith, the Fraser Institute, the dolts that write for the Sun chain. But none of them criticized the green program directly. It seems that maybe reality has finally penetrated through their self-produced fog of disinformation and they realize that denial is a losing strategy with voters. Polls show 70 percent of Canadians are worried about climate change and its impacts.
The fact is that the Trudeau government had to spend this money, because the US recently passed a bill with $400 billion in incentives on the green transition. When Trump cut taxes on businesses in 2017, all of our esteemed business leaders said Canada absolutely had to follow suit because of “competitiveness.” Well, the exact same argument applies here. Two further points: The world runs on incentives, and so tax breaks are a very effective way to get people to change their behaviors. And these programs aren’t actually as expensive as reported - the $80 billion number is what the government estimates it will cost over ten years. In other words, it’s not much money at all, only about 0.3 percent of GDP per year.
Government flood insurance is a bad idea.
The budget included a small amount of money to start a low-cost flood insurance program. As I detailed here, government flood insurance will allow people to keep on ignoring the climate issue. The best way to achieve results on climate is to incentivize behaviors that help rather than subsidize those that don’t. Private insurance, which is priced according to individual risk instead of socializing costs among everyone, will lower our overall cost from floods, because having to pay the full cost of insurance is likely to make it much less affordable for people to live in risky areas like floodplains or on the waterfront. It’s also likely to force all the growth obsessed city councils around this country, who seemingly exist just to rubber stamp any and all construction, that they actually need to have a sensible development plan.
If this sounds harsh, that’s because it is. We are facing an existential crisis and there are going to be bills coming due. If you want to live on the water, you pay the full cost of that risk, and the government should make it clear that if you go without insurance, it will not cover you (ideally, natural disaster insurance should be mandatory, just like car insurance). When the 2013 floods hit southern Alberta, government paid for 70 percent of the damage. Should some 20-year-old renting a high-rise shoebox in Calgary be subsidizing a certain oil executive who badgered the Notley government after the 2013 flood, demanding they fix up his riverfront mansion? Duh, no.
The government is finally going after predatory lending and fees.
The Trudeau government is pledging to lower the maximum rate that the leeches known as payday lenders can charge people, from 60 percent per annum to 35 percent. Every study I’ve seen shows that payday lenders do harm to our society and economy. Less than half the users of these loans realize how much they are really paying (yes, they are guilty of ignorance but the marketing by the lenders is very misleading) and over 40 percent are using these loans to pay regular bills. Lowering the interest rate they can charge was long overdue. The government also said it would go after exorbitant fees on airline baggage, roaming charges, and most happily, the bullshit costs Ticketmaster slaps on every event they sell tickets for – which is pretty much every event. What the government should do is take a jackhammer to Ticketmaster, which is a monopoly. But hey, baby steps.
However, the government ignored bank fees, which are as big a rip as anything listed above. A recent study showed that in 2019, US banks collected $11.68 billion in overdraft charges and that 84 percent of this came from accounts with 350 bucks or less – so poor people. There are no numbers for Canada, but I doubt it's much different. Canadian banks also get away with charging “admin fees” on small TFSA and RSP Accounts, up to 125 bucks a year; there are also withdrawal fees ($50 each) and commission costs ($6-$10) on any stock transactions. It may not seem like much but if you have 10 grand in a TSFA you could be paying 1-2 percent a year to the bank. However, if you have a large account, most of these fees are waived. Welcome to the perverted logic of modern banking, where the less money you have, the more you pay. These fees are taxes on poorer people, and the government should be doing something about them.
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