Juno News - November 19, 2021


Politicians are ignoring Canada's inflation crisis


Episode Stats

Length

38 minutes

Words per Minute

191.71928

Word Count

7,469

Sentence Count

432

Misogynist Sentences

3

Hate Speech Sentences

2


Summary


Transcript

00:00:00.000 Welcome to Canada's Most Irreverent Talk Show.
00:00:06.660 This is the Andrew Lawton Show, brought to you by True North.
00:00:12.880 Coming up, housing, gas, groceries, all of it's costing more.
00:00:17.440 We do a deep dive into Canada's inflation crisis.
00:00:21.980 The Andrew Lawton Show starts right now.
00:00:25.500 Welcome to the Andrew Lawton Show here on True North.
00:00:31.580 As you've probably learned by now, we do things a little bit differently for our weekend show.
00:00:35.800 We take a big issue, a big question, and we do a deep dive into it with a panel of experts
00:00:41.180 who can give it the light and truth and honesty that it very much needs.
00:00:45.960 And one of the most pressing issues that we're seeing in Canada and around the world right now is inflation.
00:00:51.700 I don't even need to tell you that inflation is happening.
00:00:54.600 You're seeing it at the grocery store.
00:00:56.260 You're seeing it when you're filling up your gas tank.
00:00:58.560 I've, you know, typically just tried to avoid the price of gas.
00:01:01.780 But at the same time, it just brings me so much pain when I do see how much we're paying.
00:01:05.680 But here's the thing.
00:01:06.860 You look at the numbers.
00:01:07.880 You look at it in an abstract sense.
00:01:09.560 And we know that Canada has met an 18-year high for inflation.
00:01:13.760 In the U.S., they've hit a 30-year high.
00:01:16.380 And as much as we hear that number of, you know, between 4% and 5% is what we're on track for,
00:01:21.660 you look at some products and these increases that you're seeing are up by 10%, 15%, 20%.
00:01:27.520 And for a lot of Canadians, they're wondering, when is this going to stop?
00:01:31.220 And I want to delve into this, as I said, with a great panel of guests.
00:01:34.460 We have Franco Terrazzano, who's the Federal Director of the Canadian Taxpayers Federation,
00:01:39.480 Catherine Swift, who is the President of Working Canadians,
00:01:42.520 and Philip Cross, the Senior Fellow at the Macdonald-Laurier Institute
00:01:45.760 and former Chief Economic Analyst for Statistics Canada.
00:01:49.920 Franco, Catherine, Philip, thanks so much for joining me.
00:01:53.380 Happy to be here, Andrew.
00:01:55.380 I want to start with you on this, Philip, and I guess the diagnosis of it.
00:01:59.440 Because I know that we have seen a lot of talk about inflation.
00:02:03.020 We have all of the central banks talking about it.
00:02:05.460 The media is starting to talk about it.
00:02:07.040 But I do find that the conversation has been getting a little bit muddled
00:02:10.800 when people start talking about supply chain issues
00:02:13.920 as being the driving force behind a lot of these price increases.
00:02:17.680 Now, I know that the inflation is unavoidable,
00:02:20.020 but how much of an effect is the supply chain struggle having
00:02:24.740 on these increases we're seeing?
00:02:26.680 Or are they really two entirely separate discussions?
00:02:30.620 I think we should separate them out.
00:02:33.100 Certainly, supply chains are a big issue in this.
00:02:35.800 I mean, there isn't anything that I've ordered or gone into a store recently.
00:02:41.680 And, you know, the owner has complained that, you know,
00:02:44.940 I tried to buy a simple light bulb the other day.
00:02:46.860 And the guy told me, well, it's going to be a few weeks if it's in Canada.
00:02:49.700 It's going to be months if we have to get it from China.
00:02:52.180 So, you know, supply chain issues are certainly a part of this.
00:02:56.440 But I think, you know, I think people are quite right to say,
00:02:58.920 well, we'll sort out the supply chain issues,
00:03:00.880 particularly once we get past Christmas and the peak of consumer buying.
00:03:04.400 We'll see that drop down.
00:03:05.840 But I don't see overall inflation going away that easily.
00:03:08.960 I think we're already seeing inflation starting to become embedded into wages,
00:03:14.540 into people's expectations.
00:03:16.280 And I think that's where central banks really start to worry that,
00:03:19.900 yes, we're going to have to raise interest rates faster and more often next year
00:03:23.840 because this problem isn't just going to go away overnight.
00:03:26.740 I'll turn to you on this, Catherine.
00:03:29.360 Obviously, we see as consumers when we go to the store,
00:03:32.080 when we try to fill up our gas tank, even buying homes that inflation is happening.
00:03:36.440 But again, businesses are dealing with this as well,
00:03:39.120 and they've either got to pass it on to consumers or absorb it.
00:03:42.580 How are businesses addressing this?
00:03:45.120 Well, in all kinds of different ways,
00:03:49.720 and although I certainly agree with Philip that the supply chain thing is a part of this,
00:03:55.560 it is transitory, as a lot of the Bank of Canada and other monetary policy folks have been saying.
00:04:02.660 That will be transitory.
00:04:04.020 However, the policies of governments to effectively print money,
00:04:08.800 and although it's not technically printing anymore,
00:04:11.120 it's electronically creating money, I guess,
00:04:13.820 is what is going to be enduring here,
00:04:16.540 which is you've got more and more money in the system and chasing after fewer goods.
00:04:23.340 So that is going to be the lasting part.
00:04:25.960 But how businesses are dealing with it?
00:04:27.620 Well, businesses right now, by and large, are dealing with all kinds of problems.
00:04:32.340 There's horrible labor shortages.
00:04:34.060 I mean, you walk down any Main Street right now,
00:04:36.000 and you see help wanted, help wanted at every window.
00:04:39.740 They're grappling with that.
00:04:41.320 And that, of course, is inflationary,
00:04:42.760 because they're going to have to pay more to find the workers that they need in this kind of labor market.
00:04:48.440 And they're facing, of course, higher costs for all the inputs into their particular business,
00:04:55.100 whatever that may happen to be.
00:04:56.640 So it's coming at them from all sides.
00:04:58.700 And obviously, I mean, there's not, in most businesses anyway,
00:05:03.620 I guess there's some exceptions, but in most businesses,
00:05:05.660 there's not a huge ability to absorb these increases.
00:05:09.000 They pretty much have to be passed on.
00:05:11.480 So it's going to be, again, fed back into consumers' pricing,
00:05:16.660 and that will encourage inflation to increase even more.
00:05:19.840 So it is a cyclical thing, and it feeds on itself to a certain degree.
00:05:26.060 So yeah, I totally agree.
00:05:27.840 Philip, this ain't going away anytime soon, unfortunately.
00:05:31.860 I'll go to you on this, Franco.
00:05:33.500 I know a lot of people just view inflation and general monetary trends as being distinct from politics.
00:05:39.980 Even Justin Trudeau arguably takes that position in the election.
00:05:43.320 He had infamously said that he doesn't think about monetary policy.
00:05:46.440 But I know you've been very clear to call it an inflation tax that Canadians are paying right now.
00:05:51.640 Explain this and how it is, in your view, a tax issue indirectly.
00:05:56.460 Well, you know, there's a myriad of different influences that increase prices,
00:06:01.100 could even decrease prices.
00:06:02.600 But, you know, this steady march of higher prices stems from the fact that
00:06:07.100 the government can essentially print new dollars out of thin air,
00:06:09.900 but it can't print new farmland, it can't print new cows, and it can't print new houses.
00:06:14.180 So when we're talking about printing new dollars,
00:06:16.520 essentially what we're talking about is the Bank of Canada purchasing financial assets.
00:06:20.380 And we've seen the Bank of Canada create a little bit more than $370 billion during this pandemic,
00:06:26.880 which is a 300% increase in the Bank of Canada's assets.
00:06:30.840 Now, if that sounds like a lot to you, it's because it is.
00:06:33.960 It's significantly higher growth in the bank's assets
00:06:36.720 than what happened during the recession of the 70s, the 80s, and the 90s.
00:06:41.160 And in fact, it rivals in this last year and a half,
00:06:44.180 the growth in the bank's assets during the entire six years of World War II.
00:06:49.500 Now, here's how it directly ties into the deficit spending that we're seeing in Ottawa.
00:06:53.780 Now, Finance Minister Christia Freeland, back in April,
00:06:56.860 she released her budget 2021, forecasting a $3 billion per week deficit.
00:07:02.900 Now, just two days after that, the Bank of Canada came out and saying it was going to purchase
00:07:08.600 about $3 billion worth of Government of Canada bonds every single week.
00:07:13.860 Now, those forecasts have been revised.
00:07:16.120 But I mean, Andrew, that sure seems to me like that's Ottawa using the printing press
00:07:21.160 to fund its deficit spending.
00:07:23.840 Now, I think that's a very wise point.
00:07:26.140 And let's bring this back to you, Philip.
00:07:28.080 This is obviously a global challenge right now.
00:07:30.460 Canada is not unique in it, and that's unsurprising because if you do look at it
00:07:34.340 in the context of what countries around the world have been dealing with,
00:07:37.440 with pandemic and their responses to it in the last two years,
00:07:41.120 there are certainly a lot of similarities here.
00:07:43.940 But how would countries like Canada be able to fare better than this?
00:07:48.940 How do they beat the curve, if you will, and not be subject to some of these very steep rises?
00:07:54.280 I mean, again, as much as Tiff Macklem wants to say it's transitory,
00:07:57.660 he admits this is not short-lived and will continue to increase.
00:08:01.780 Yeah.
00:08:02.240 Well, the one thing Canadians should be encouraged by is that the Bank of Canada
00:08:06.360 has been relatively more hawkish about inflation than the other central banks,
00:08:12.580 certainly than the Federal Reserve Board.
00:08:14.400 Now, admittedly, that reflects that the Federal Reserve Board has been exceptionally easy
00:08:21.320 during, accommodating during this pandemic.
00:08:25.440 But in any event, Macklem certainly was the first to withdraw,
00:08:29.880 to stop the quantitative easing Franco was just talking about.
00:08:33.660 They have moved up to date.
00:08:35.960 They've acknowledged that inflation is higher than they expected,
00:08:39.160 and they've acknowledged too that that means that interest rates are going to start rising
00:08:42.900 faster and sooner than they had planned.
00:08:45.480 And it's unfortunate that, you know, nobody likes being wrong,
00:08:49.000 and it would be nice to live in a world where central banks were perfect.
00:08:52.760 Central banks made a mistake in this pandemic.
00:08:55.200 They thought that the problem was demand,
00:08:57.460 and they, along with the government, put everything into stoking demand as much as possible.
00:09:03.180 What they didn't realize was the problem really was supply and not demand.
00:09:07.220 Demand came rocketing back, supply didn't,
00:09:09.500 and that's why we have this inflationary problem.
00:09:11.460 But at least the Bank of Canada, if not the government,
00:09:15.200 is acknowledging that they made this mistake.
00:09:19.040 They're behind the ball now.
00:09:20.680 They're going to have to run a little harder to catch up.
00:09:23.300 But I don't doubt that eventually sometime next year they will catch up.
00:09:27.520 Well, I think you're right to point out that miscalculation in monetary policy, Philip,
00:09:31.900 but I was wondering if you could also speak to how much fiscal policy was aggravating that.
00:09:38.600 Well, that's it.
00:09:39.520 I mean, you know, fiscal policy, you know,
00:09:42.960 the initial reaction of mailing money across the board,
00:09:46.220 sending out checks to everybody probably was the correct thing
00:09:48.960 because we just didn't understand what we were getting into with the pandemic.
00:09:52.500 But very quickly, after two or three months,
00:09:54.360 it became obvious that most industries, manufacturing, construction, retail,
00:09:59.360 finance, and real estate for sure,
00:10:00.880 because housing came rocketing back, business services,
00:10:03.660 a lot of sectors in our economy could adapt to social distancing pretty easily.
00:10:08.480 And at that point, we should have withdrawn this global stimulus to the overall economy
00:10:13.380 and said, okay, we have a sectoral problem.
00:10:15.620 We know that certain personal services have a problem with social distancing.
00:10:19.280 We should be targeting our support there.
00:10:21.380 But instead, for over a year, we kept this blanket support out there.
00:10:24.740 And it was because of this misdiagnosis that the problem was aggregate demand.
00:10:29.640 And in fact, the problem was output in a relatively small number of industries.
00:10:36.100 But we kept this extraordinary stimulus to fiscal and monetary policy going long after we didn't need it.
00:10:44.000 And in fact, instead of focusing on demand, we should have been helping to fix various supply problems,
00:10:49.720 whether it was labor shortages in some of these industries.
00:10:52.360 I mean, it's amazing that in the restaurant industry, simultaneously,
00:10:56.120 we have this industry is operating 25% below where it was below the pandemic,
00:10:59.960 and they still can't find enough workers.
00:11:02.480 So, you know, these industries have very specific problems,
00:11:05.940 and that's what we should have been working on.
00:11:07.440 I think that's an incredibly valid point.
00:11:10.800 And I'll go to you on this, Catherine, because I would say that's still taking place.
00:11:14.840 I mean, even now when countries around the world are reopening or at least trying to reopen,
00:11:19.500 we still have a very stimulus focus, I think, in a lot of the policies that are still on the books right now,
00:11:27.360 money still rolling out without that underlying issue being addressed.
00:11:31.260 Yeah, we do to a certain degree.
00:11:32.960 I think, too, though, we can't forget about things like carbon taxes and whatnot,
00:11:38.200 because right in the midst of the pandemic, we saw,
00:11:41.280 and even after the Trudeau government said they were not going to increase carbon taxes,
00:11:44.760 they indeed did increase carbon taxes on April 1st.
00:11:48.980 Fool on you, taxpayers.
00:11:52.140 But carbon taxes naturally factor into the price of absolutely everything we buy.
00:11:57.720 So that also feeds into price increases.
00:12:00.480 But, yeah, you're right, Andrew, labour shortages.
00:12:03.520 The thing is, labour shortages were around pre-pandemic, too.
00:12:06.700 And the pandemic had a whole bunch of different effects.
00:12:09.340 Because of all the money that was sloshing out there,
00:12:12.440 some people chose not to work, or, you know, and some of it was, too,
00:12:16.480 they were concerned about going to work because they didn't want to get sick.
00:12:19.120 So there was all kinds of sort of, you know, different variables playing out there.
00:12:23.200 But there were also people that chose, you look at the hospitality industry, for instance,
00:12:26.960 people that found other things they were going to do to make a living.
00:12:31.800 So you lost a certain proportion, in certain industries,
00:12:34.420 you lost a certain proportion of their workforce, probably permanently.
00:12:38.820 And, again, you still have some stimulus.
00:12:41.180 It's not as much.
00:12:41.980 But you still have some stimulus going on out there to act as a disincentive to people working.
00:12:48.060 But, you know, labour shortages weren't, weren't, were around well before the pandemic.
00:12:52.820 And, of course, the pandemic has worsened them significantly.
00:12:55.780 And there hasn't been enough focus for policy to try to deal with that issue.
00:13:00.780 Yeah, and I know that it's distinct, as Philip mentioned earlier,
00:13:04.740 from the inflation discussion to start talking about some of the supply chain issues.
00:13:10.180 And I would also add, I think, labour shortage issues are connected,
00:13:13.300 but distinct and in their own category.
00:13:15.340 I was in Ottawa a couple of months back.
00:13:17.820 I was at an event at the Westin, and the executive chef of the Westin Hotel,
00:13:22.520 a very nice hotel in Ottawa, was working the barista shift at the Starbucks in the morning.
00:13:27.140 Because, and I asked him about it, he said they literally do not have staff.
00:13:31.140 And when these issues are reported, a lot of the times people will say,
00:13:34.820 well, just pay people more.
00:13:36.720 And that's all well and good in theory.
00:13:38.500 But if businesses are contending with all of these other issues, Franco,
00:13:42.080 where are they going to find that extra money to pay more to overcome that labour shortage?
00:13:46.280 Well, I mean, I think Catherine's already kind of touched on this,
00:13:50.280 and that we're going to see higher prices at the till.
00:13:52.760 And, you know, I think the main point from this whole discussion is to remember that
00:13:57.020 all of this inflation, it is not a stroke of accident, right, that we're seeing this.
00:14:02.300 This is from government policy, or more specifically,
00:14:05.380 from how governments have reacted to the pandemic.
00:14:07.880 Now, we've been talking about the inflation tax.
00:14:09.840 We've been talking about the printing press, right?
00:14:11.760 When the central bank prints more dollars, our dollars buy less and less.
00:14:17.180 But we also have to look at how the other forms of government policies has led to higher prices.
00:14:23.080 We've been talking about some of the subsidies that have been sloshed around,
00:14:26.280 the massively expensive ones that essentially pay people not to work,
00:14:29.780 or that we're doing that.
00:14:31.040 So we have to remember, when that's going on,
00:14:33.980 we are reducing supply by paying people not to work.
00:14:37.260 We are making it harder for businesses to actually produce, right?
00:14:42.460 But also, we have to acknowledge the fact that, of course, government restrictions,
00:14:47.200 government lockdowns are also going to reduce output of an economy, right?
00:14:51.900 So we're now we're in this situation, Catherine's mentioned it,
00:14:54.660 where we have the perfect storm of inflation,
00:14:57.160 where you have too many dollars chasing around too few goods.
00:15:00.740 And I think this is why we're seeing such big inflation right now.
00:15:04.840 And of course, there are ways for politicians to provide us with some relief at the till.
00:15:11.000 Catherine mentioned this again.
00:15:12.380 But I mean, one way to just give us a little bit of relief
00:15:15.680 would be to reduce the gas taxes that we're seeing at the pumps.
00:15:19.840 Yeah, and I think that's one that has been a long standing challenge.
00:15:24.140 I'll go to you on this, Philip.
00:15:25.800 I mean, how much of an impact would rolling back that have on these broader issues?
00:15:31.060 At this point, not a large one.
00:15:36.580 I mean, if the government has said the carbon tax will eventually rise $10 a year to $170,
00:15:41.780 at that point, you know, I don't even want to think about filling up my tank.
00:15:46.140 But, you know, the biggest, by far the biggest part of the increase in gas prices over the last
00:15:50.560 year has been the recovery of world oil prices.
00:15:53.640 I mean, West Texas Intermediate is up to $85.
00:15:55.900 That should be a positive for this country.
00:15:59.480 You know, we're a major oil producer.
00:16:02.440 So, you know, that shouldn't be as big a negative for Canada.
00:16:06.440 Although, you know, there's winners and losers as there is with most economic prices.
00:16:11.440 But I would come back to the broader story about distortions introduced by government policies
00:16:17.020 during the pandemic.
00:16:18.180 Because I think that gets into some of the deeper issues about this.
00:16:21.940 For example, we saw during the pandemic that this country now spends way more on housing
00:16:29.120 than it does on business investment.
00:16:31.080 That's never happened before.
00:16:33.040 That is a major distortion.
00:16:35.440 At the end of the day, you know, business investment is the ground, is the basis of productivity
00:16:41.600 growth in this country over the long term.
00:16:43.620 The fact that we're not investing in business is, well, A, one reason why we have shortages
00:16:49.660 in some sectors, like oil and gas, we should, we have the resources in this country to produce
00:16:54.600 more oil and gas.
00:16:56.460 That would help bring the price down.
00:16:58.200 But we erect all kinds of regulations and barriers to stop people from doing that.
00:17:03.020 So, I think, you know, when you start to look at the distortions, whether it's in financial
00:17:08.860 markets, whether it's in housing markets, whether it's in labor markets, you know, there
00:17:13.520 were a lot of impacts of government policy that were unforeseen, and they're coming home
00:17:19.640 to roost now.
00:17:20.820 And I think in the energy sector, too, and you were kind of alluding to it there, Philip,
00:17:25.120 you know, we've got Canada, we've got the U.S. right now discouraging further development
00:17:30.240 of our energy resources.
00:17:31.840 So, we're introducing constraints.
00:17:34.140 I mean, seeing Biden, you know, cancel pipelines and then ask OPEC, can you up your quotas?
00:17:39.340 I mean, come on, give me a break here.
00:17:42.720 What a ridiculous trying to suck and blow at the same time.
00:17:46.860 We're discouraging the development of these resources.
00:17:50.540 So, of course, we're restricting supply.
00:17:52.420 Of course, their prices are going up.
00:17:54.320 So, you know, we're contributing to inflation, that particular type of inflation, by our own
00:17:59.340 policy choices.
00:18:00.120 So, we can't control a lot of stuff that goes on around the world, but we can control
00:18:04.600 some stuff, and we're not doing a very good job of it right now.
00:18:07.660 Well, I would agree with that very much, Catherine, and I'll ask you, Franco, because I think all
00:18:12.660 of us are in agreement that we can't separate what's happening from government policies that
00:18:17.080 have made things worse, and when we talk about carbon taxes and other decisions, they
00:18:21.740 may not be as directly responsible for inflation, but they're certainly not helping the people
00:18:27.200 who are struggling with inflation here.
00:18:29.140 So, are we talking about something, though, that is so complex now, it doesn't really
00:18:33.100 have a simple lever that's going to ease some of these burdens that businesses and
00:18:37.920 families are facing?
00:18:39.140 Well, there are some simple levers, and, you know, you always hear these politicians who
00:18:42.780 are always talking about, well, we need to improve affordability.
00:18:45.680 We need to improve affordability.
00:18:46.860 Well, if they really wanted to improve affordability, there are easy things that they can do.
00:18:50.720 We just heard an announcement from Premier Doug Ford in Ontario that he is going to be reducing
00:18:56.080 fuel taxes. And, you know, when we talk about the pump price, when we talk about gas taxes,
00:19:00.320 it's not just the carbon tax. Yes, we have seen the carbon tax increase twice since the
00:19:05.580 pandemic started, but we're also talking about provincial and federal gas taxes. We're talking
00:19:10.180 about sales taxes, tax on taxes at the pumps. In May, the Canadian Taxpayers Federation put
00:19:16.200 out an analysis showing that about 31 to 42% of the pump price comes from gas taxes at these
00:19:23.620 two different levels, right? So there's certainly ways for politicians to help with affordability
00:19:30.460 in terms of just reducing the tax burden. Another thing that Philip talked about was the carbon tax.
00:19:37.280 Eventually, it's going to come to $170 per ton. We saw Trudeau doubling down on that when he was at
00:19:43.000 the climate change gap fest in Glasgow, right? Well, that's going to end up adding about $0.40
00:19:48.820 per litre to the price of gasoline. But he's not stopping there because he's also getting ready
00:19:53.200 to what amounts to a second carbon tax through fuel regulations. The federal government thinks
00:19:59.020 that's going to add another $0.11 to the price of gasoline. But some other analysts suggest that
00:20:04.960 it could be even higher. Some say $0.16 per litre of gasoline based on BC's second carbon tax,
00:20:11.600 right? So we're talking about a Trudeau carbon tax and second carbon tax that could cost a family
00:20:17.920 about nearly $40 every time they fuel up their minivan. So certainly, there are things that
00:20:23.920 politicians can do right now today to provide relief, but they're choosing not to.
00:20:29.220 Philip, the Bank of Canada has a 2% target for inflation. As we've discussed, we're already more
00:20:34.520 than double that by the end of the year. We could be a two and a half times that. Anything that
00:20:40.100 government were to do right now? If we were to talk about a government that's going to take a really
00:20:44.180 aggressive approach to slashing taxes and cutting regulation and cutting spending and all of these
00:20:49.840 things, it is unlikely to be able to exceed in the current climate the increases that we're seeing
00:20:55.880 from inflation. So are we at that point, to go back to the question of levers, where there is no
00:21:01.640 silver bullet, if you will?
00:21:03.120 Well, the government can make it easier on itself if it wound back some of this extreme stimulus and
00:21:10.980 distortions in the economy that we've talked about. But as long as if they leave this to the Bank of
00:21:15.780 Canada to fight, that just means the interest rates are going to have to go up more. And right now,
00:21:20.420 as I say, the Bank of Canada has indicated they're aware that they're a little behind the ball and
00:21:25.120 they'll catch up. But it's going to be even harder if they don't get any help from fiscal policy.
00:21:30.400 We saw during the pandemic, for example, that fiscal and monetary policy work hand in hand.
00:21:35.520 They were both doing everything they could to stimulate the economy. Now, as inflation takes
00:21:40.860 off, we can't just have only monetary policy working against inflation. It's got to get some help from
00:21:47.440 government. But at this point, there's just no sign that this government is even ready to acknowledge
00:21:52.360 that there's a problem, let alone take some of the tough spending reduction programs or tax hikes
00:21:59.520 that are going to be needed to address the deficit.
00:22:02.580 Sorry, can I just jump in on that real quick?
00:22:04.420 Yeah, sure.
00:22:05.000 So we're talking about, and Philip, you brought up some great points in terms of the massive amount
00:22:10.200 of spending that has been going on during the pandemic. But what I think it's also important
00:22:14.180 for us to remember is that we're not just spending a ton of money in 2021 and 2020. The federal
00:22:19.440 government was spending a ton of money pre-pandemic. In 2018, the federal government's per-person
00:22:25.360 inflated adjusted spending reached all-time highs. That means the Trudeau government was
00:22:30.500 spending more before the pandemic than the federal government did during any single year
00:22:34.520 during World War II. And so really what we need to see on the fiscal side is we need to see the
00:22:40.120 federal government, politicians, bureaucrats willing to share the tough times. Because what we've seen
00:22:44.500 during this pandemic is a tale of two pandemics, right? The private sector, businesses, workers in the
00:22:49.560 private sector, taking it on the chin. Pay cuts, job losses, business closures. What have we seen in
00:22:56.020 Ottawa? What have we seen in Parliament Hill? Well, our members of Parliament have received two pay
00:23:00.440 raises during the pandemic. There's more than 300,000 federal government employees that received
00:23:04.960 at least one pay raise during the pandemic. So we have to remember, yes, we need to rein in this
00:23:09.680 massive amount of COVID-19 spending. But there is a ton of fat on the federal government's budget,
00:23:14.820 even before considering these COVID-19 subsidies. No, I appreciate that, Franco. And I do want to
00:23:21.820 jump back to you for just a moment here, Philip, because I do think you're right to point out that
00:23:26.220 we can't look at just a monetary-only solution here, a Bank of Canada-only solution. You said in a
00:23:32.360 column a few months back that quantitative easing can sometimes be overstated in what it can achieve.
00:23:37.880 You've pointed out it's uneven and unpredictable at times. Yeah, and it's another problem that I just
00:23:46.740 want to build on what Franco mentioned is that Milton Friedman, who's the god of monetarism,
00:23:54.100 he's the guy who brought back this idea that all inflation has a monetary component. And there's no
00:23:59.300 doubt, everybody agrees that without some accommodation from the money supply, inflation cannot
00:24:03.840 take off. But he also pointed out that one reason the money supply increases, one reason the Bank of
00:24:09.240 Canada or central banks lose control of the money supply is that society cannot agree on how to pay
00:24:15.660 for things. For example, he cited in the 60s and 70s, the US, they committed the Vietnam War, the Great
00:24:21.420 Society, the deficits took off. And he said at the end of the day, since we couldn't agree on how to pay
00:24:26.600 for it, we got inflation. Because in his words, inflation is taxation without legislation. That's
00:24:32.780 exactly what we're facing today. You can see the beginnings of people are beginning to look for
00:24:37.520 who's going to pay for this. And the reflexive idea is, oh, we'll just dump this huge bill onto a few
00:24:43.200 corporations and a few wealthy people, and the average person is going to be affected. Well, history
00:24:48.540 shows that that does not work. You cannot raise a lot of money from corporate taxes and wealth taxes.
00:24:53.280 At the end of the day, it's going to be GST. It's going to be middle tax. You know, whenever the
00:24:58.960 government gets in trouble, like in the mid 90s, that's where they'll eventually have to go to get
00:25:04.380 the money. And as a society, we haven't even begun to talk about or think about who's going to pay for
00:25:10.680 this. And it's for the moment, we seem happy to buy this story of, oh, we'll just slot this off on
00:25:18.300 a few rich people. And the rest of us won't pay for it. And then frankly, that is not going to work.
00:25:23.940 That just shows we as a country are not yet willing to have a serious discussion about this issue.
00:25:29.520 Catherine, that means everyone's paying for it, right?
00:25:31.860 Well, of course, and everyone always does. We love it. Everybody loves to think there's this
00:25:37.380 fantasy. And I mean, Jagmeet Singh right now is promoting this. He should know better. He's not a
00:25:41.860 stupid guy. You know, oh, we're going to have a billionaire's tax. Well, I think there's less
00:25:46.120 than 50 billionaires in Canada. So even if you taxed all of them at 100%, which of course would
00:25:51.500 never happen, you wouldn't even come close to solving your problem here.
00:25:55.460 No, but you would significantly cut the number of billionaires in Canada.
00:25:58.820 Well, that's exactly what you would cut. They'd all be gone somewhere else because goodness knows
00:26:03.020 they can afford to go somewhere else. But, you know, and again, something Franco alluded to,
00:26:07.660 we talked about carbon tax. There's lots of other taxes out there. And we have seen
00:26:11.480 government grown under political parties of all stripes for decades now as a proportion of the
00:26:18.940 economy. Took a bit of a dip when we almost hit the debt wall back in the mid-90s with
00:26:23.960 Kretchen and Martin in power at the time. But whoever was in power then, they would have had to do the
00:26:28.400 same thing because they were being told, you're not going to be able to borrow any more money,
00:26:31.660 guys. So, you know, fix it or have a nice day. But what kills me is government is too big
00:26:36.720 everywhere in this country, federally, provincially and municipally. Why do we have people doing the
00:26:43.080 same job in the public sector earning more than the identical job in the private sector? You want
00:26:48.380 to talk about inflation? How about the only virtually the only people left with those rich defined
00:26:54.040 benefit gold-plated pensions are public sector workers. They're all inflation adjusted. Wait till the
00:27:02.000 bill comes in for all those pensions that have to be adjusted to a higher level of inflation. And the
00:27:08.540 private sector, who of course pays for government, is going to be footing that bill too. So ultimately,
00:27:14.380 we can talk about tax increases. And yep, they're undoubtedly on the horizon. But to not downsize
00:27:21.860 government, we can easily downsize government in this country. We've got way too much of it. And that
00:27:27.860 should also be a focus. And it never is, of course. The idea is always, how can we charge even more
00:27:33.400 tax? And Canadians, we are much too complacent with this. We have to push back. We're being taxed more
00:27:39.520 than enough, as it is on many fronts, income taxes, carbon, and so on. And that should be decreasing
00:27:45.240 and give some people some relief.
00:27:47.800 I just want to make it clear. Well, I raised the matter of taxes, because right now, that's where the
00:27:51.540 public discussion is. People are talking about corporate taxes, wealthy taxes. I'm quite agreeing with
00:27:55.980 Catherine. At the end of the day, you don't want taxes to pay for this. You want spending cuts.
00:28:01.280 That's what we did in the mid-90s. 80% of the deficit reduction was done through spending cuts,
00:28:06.560 only 20% through taxes. That's about the mix or even a little more 90-10. That's what economists
00:28:12.460 want. That's the most efficient way. So I just wanted to clarify that.
00:28:16.720 No, and I'm glad you did. And I think that ties into what you said earlier, Philip, which is that
00:28:21.420 no one's really thinking of the who do we want to pay for this. And this is a problem in politics
00:28:28.080 in Canada. And I know, Franco, you and I have talked about this in the past. I know the Canadian
00:28:32.280 Taxpayers Federation does a lot of work trying to get attention to national debt. And sometimes it can
00:28:37.640 be like screaming into a windstorm because people like the things that government buys and don't
00:28:42.320 actually pay attention to how it's being paid for. And looking at when the economy was doing
00:28:47.520 generally well at the beginning of Justin Trudeau's first term, and he was spending a lot and said,
00:28:52.540 well, it's because we can afford to. And then the pandemic comes around and it's, well, we're spending
00:28:56.520 because we need to. And as a taxpayer, I'm like, well, hang on. When is it we don't spend? If we
00:29:02.580 spend when times are good and spend when times are bad, I'm beginning to think we're just spending
00:29:06.640 here. But there really isn't an end in sight for a lot of this from the government's perspective
00:29:11.340 and from the fiscal perspective? Well, it doesn't seem like there's an end in sight until the end
00:29:17.600 in sight become we become face to face with it. Right. I mean, eventually, there is no way to get
00:29:22.580 around the fact that you have to pay the piper one way or another. Right. We're learning right now
00:29:27.720 with these higher prices, with this inflation tax, that there is no such thing as a free lunch when it
00:29:32.380 comes to government spending. And eventually, you have to pay the piper. Just ask Janice McKinnon in
00:29:38.220 Saskatchewan. Just ask Ralph Klein what happens in Alberta. Just ask the federal liberals back in the
00:29:44.820 90s what happens. Right. So this is this is the big thing that we're trying to get across. Either you
00:29:50.120 make some tough decisions right now or tougher decisions are going to be forced on you. Remember
00:29:55.600 back in the 90s, what happened in the 80s, the 90s when Saskatchewan kept kicking the deficit can down
00:30:00.420 the road? Well, eventually, the 90s rolled around. Saskatchewan had to close. What was it? About 50
00:30:05.300 different hospitals across the Prairie province. So at the end of the day, there is absolutely no
00:30:10.780 way to get around the fact that there is no free lunch for all this government spending. The bill
00:30:14.920 is going to become due. And if you don't want to see these massive cuts in government spending down
00:30:19.320 the road, we have to find some ways to save some money right now. And Andrew, what is so so unfortunate
00:30:25.800 is that we just got data from the parliamentary budget officer that said under the current trajectory,
00:30:31.040 we wouldn't see a balanced budget until 2070. We saw a budget 2021 brought from our finance minister
00:30:38.360 that nearly doubles the pre pandemic debt within just six years. And what did every single one of
00:30:44.920 the major federal parties in the last election want to do spend billions of dollars more. The NDP
00:30:51.380 wanted $200 billion in new spending. The liberals wanted $78 billion in new spending. Even the
00:30:57.560 conservatives could not find a penny of savings in this bloated budget. They wanted to spend about
00:31:04.100 $50 billion more than the last liberal government budget. It's absolutely detached from financial
00:31:10.040 reality. We're going to have to have a crisis. I'm convinced we're going to have to face another
00:31:14.400 crisis. Because as you say, Franco, none of the parties seem to believe that we have any constraints
00:31:20.240 on government spending. I guess the only the only kind of interesting change this time around will be
00:31:27.520 that because of the pandemic, many, many, many developed countries around the world are in very
00:31:32.400 similar situations. Mind you, we spent more than most other developed countries proportionately during
00:31:37.840 the pandemic. That that is true. And we didn't get proportionately better results either. We got about the
00:31:42.880 same results that other countries did for all that extra spending. But I think this is going to be kind of a new
00:31:48.080 new paradigm, because the whole world is in dire financial straits right now.
00:31:55.920 Let me just ask you for a moment, Catherine, about the effect on business again, to go back to a discussion
00:32:01.840 we had at the beginning, because one of the big things for businesses is that they really are getting hit on
00:32:06.920 both ends by inflation. On one hand, all the things they have to buy and do as businesses are being driven up by
00:32:13.260 inflation. And also, if you're in a business that is in a discretionary sector, for example, I mean, even
00:32:19.380 arguably, if you're in an essential sector as well, if you have to jack prices up, you're not able to sell
00:32:26.220 as many of your goods to people that are feeling the pinch on consumers. So so I do feel the businesses
00:32:31.060 are getting this small businesses in particular, are stuck between both of these aspects of it.
00:32:37.100 Yeah, absolutely. And it's going to be very, very, very difficult time. We all know that there's going to be, you know,
00:32:44.060 there's a lot of pent up demand right now, because people couldn't spend money during the pandemic. So as the economy opens,
00:32:49.580 we are going to see a temporary boost, where people say, Yeah, I really want to go out and buy that, or I really want to go to
00:32:56.020 that restaurant or whatever it happens to be. But that's going to be short lived, I believe. And that's when we're going to see,
00:33:02.100 you know, more businesses, and let's not forget, many businesses are barely hanging on right now.
00:33:08.060 Many small, medium sized businesses are by no means, you know, on a robust financial footing. So I think
00:33:14.460 we're going to see an awful lot more go under go bankrupt. I've seen early retirements of business
00:33:18.880 people that just said, you know, I was planning to retire in five years, but it's just not worth it in
00:33:23.800 the current environment. I'm going to retire now. Of course, that means the jobs they offered are no longer
00:33:28.340 going to be out there, and so on and so forth. So I think we're facing, you know, people say the while
00:33:33.500 that some of our federal politicians are saying, Oh, the economy will come roaring back. No, no, I think
00:33:39.060 it'll be whimpering back. And I think we're in for a really tough slog for a number of years for a whole
00:33:44.620 pile of different reasons. And yes, small, medium sized businesses in particular, will be bearing a lot
00:33:49.200 of the brunt of that.
00:33:50.840 Well, and sometimes this roaring back can be a bit deceptive. There was a store not too long ago, I saw was
00:33:56.220 lined up out the door. And I thought, Oh, wow, it's good. They're doing so well. And it turned out
00:33:59.940 they just didn't have any employees. So it was just moving at a glacial pace. Let's go to you,
00:34:05.540 Philip. Do you buy Catherine's prediction that it's only going to be at a crisis point that people start
00:34:10.880 to take this seriously? And what would that look like?
00:34:14.260 Oh, I think that was plainly obvious during the election. I think it was it was absolutely amazing to me
00:34:21.180 as an economist that during the election, economic issues were not in the table at all. Clearly,
00:34:26.420 inflation was starting to pick up at that point. Nobody wanted to talk about it. Nobody wanted to
00:34:31.640 talk about well, if inflation does continue to increase, what will interest rates are going to
00:34:36.680 go up? What do higher interest rates mean for an economy that has taken out an enormous amount of
00:34:41.940 debt, not just governments, but think of all the households, all that housing we bought was on debt.
00:34:47.000 This is going to be very painful when interest rates start rising next year for a lot of people.
00:34:52.180 We didn't hear a word about that during the election, because we as a country were not yet
00:34:56.680 ready to discuss these serious issues. I think very quickly, they're moving up on the political
00:35:03.280 agenda very rapidly. I suspect the next election, that will be the major issue. So we yes, we missed an
00:35:10.680 opportunity. But you know, these questions are so important are so pressing, they cannot be kept off
00:35:19.280 the agenda. I would say that oftentimes, it's difficult to get people to care about monetary
00:35:26.060 policy, even the ones who should care about it, like politicians, but but for families, Franco,
00:35:30.620 this is not avoidable. I mean, even if they don't know the terms or don't know the why they know it's
00:35:36.400 happening, right? Is that enough to get people to pay attention? I think people are already paying
00:35:41.300 attention. So so I actually disagree a little bit. Yeah, I mean, you go out with your friends,
00:35:45.600 right? What are you talking about the cost of living? Holy, how much? How much of the ground
00:35:49.720 beef costs? How much is bacon costing when I'm making eggs? So I actually think that people do care
00:35:55.360 about this. I mean, every time you go fill up your car, you care about this. Every time you put gas in
00:36:00.780 the car, you make a comment. So I think the people are ready to have this conversation. I think the blame
00:36:05.300 falls on politicians. I think it's politicians that don't want to address the $1 trillion elephant
00:36:10.460 in the room, which is the federal government's debt. They don't want to address the money printing.
00:36:14.240 They don't want to look in the mirror, because if they look in the mirror and address the real
00:36:17.780 problems that are facing Canadians, they're going to have to make tough decisions. So I think Canadians
00:36:23.420 by and large are ready to have these very serious discussions, because at least the Canadians
00:36:27.500 that I'm talking to, they're feeling the pain of inflation. They're feeling the pain of the pumps
00:36:31.960 every time they go to fuel up their F-150, every time they go up to fill up their Honda
00:36:36.640 Accord. I think it's these politicians that don't want to have these discussions. And
00:36:41.240 Andrew, too, I think these politicians are living in a bubble in Ottawa or in Glasgow,
00:36:46.800 wherever they're having these conversations. I mean, when you look at politicians that are
00:36:50.420 completely financially divorced from the reality facing their constituents, these politicians
00:36:54.640 got two pay raises during the pandemic. It's easy to see why they aren't so worried
00:37:00.400 about the higher cost of living. Yeah, very well said. And it's kind of become a running joke
00:37:05.960 on this segment. I'll always ask panelists at the end to give us a bit of hope. And every time
00:37:10.060 they all just say something terribly depressing. And I'm just not even going to ask the question
00:37:13.800 this time, because I think we're all of the same mind that things are going to get worse before
00:37:17.760 they get better. But we have to bank on that getting better happening afterwards. I want to give a
00:37:22.580 big thank you to Franco Terrizano, Federal Director for the Canadian Taxpayers Federation,
00:37:27.040 Catherine Swift, President of Working Canadians and a tremendous advocate for business owners all
00:37:32.600 across this country. And Philip Cross, Senior Fellow at the Macdonald-Laurier Institute and former Chief
00:37:38.440 Economic Analyst at Statistics Canada. Franco, Catherine, Philip, it was an absolute pleasure.
00:37:43.480 Thank you so much for joining me. Thank you. Thank you, Andrew. Thank you, Andy.
00:37:47.440 Yeah, I don't even bother asking for the hope anymore. I just cling to this idea that perhaps
00:37:51.080 diagnosing the problem is the first step to doing something about it. But a lot of really good feedback
00:37:56.600 and also some concrete ideas from our panelists there. We just have to, as they were saying,
00:38:01.400 hope that politicians start to pay attention. There was a great episode of the West Wing. I think
00:38:05.960 it was one of the very first episodes in one of the first seasons, probably season one,
00:38:10.300 where no one who was working in the West Wing, working around the President of the United States,
00:38:15.340 knew the cost of a gallon of milk. American, of course, the gallon of milk. And except it was one,
00:38:20.800 one guy, one guy, a young guy who was making probably close to minimum wage,
00:38:24.620 working in an entry-level position. But none of these other people that were affecting change
00:38:29.340 and controlling the economy knew what a gallon of milk costs. And you know what? I bet that a
00:38:34.240 liter of milk is not a price tag that a lot of politicians could rhyme off at this point.
00:38:39.800 We've got to end things there. My thanks to all of you for tuning in to the program here.
00:38:44.360 This is the Andrew Lawton Show on True North. We'll talk to you next week. Thank you,
00:38:48.200 God bless and good day. Thanks for listening to the Andrew Lawton Show.
00:38:51.980 Support the program by donating to True North at www.tnc.news.