The Blueprint: Canada's Conservative Podcast - Subsidy Shock; Billions for Batteries

00:00:00.000 Hello and welcome once again to The Blueprints. This is Canada's Conservative Podcast. I'm your

00:00:10.800 host, Jamie Schmael, Member of Parliament for Halliburton Corps at the Lakes Brock.

00:00:13.920 On today's show, we are talking about the inflation rate. It's on the way back up again.

00:00:18.360 We're going to talk a bit about the Conservative Convention and much, much more, including the

00:00:22.260 Canadian Union of Public Employees calling for the Flaherty-Harper tax reductions for

00:00:27.900 corporate interest rate to go on the way back up to 21%. This and much, much more. We ask that you

00:00:33.260 like, comment, subscribe, and share this program. Important information, of course, you can download

00:00:37.620 and listen to it on platforms like CastBox, iTunes, Google Play, and Spotify at your convenience to

00:00:42.760 talk about this. We're going to bring on a good friend of the show, Rick Perkins. He's coming back

00:00:46.220 on, Member of Parliament for St. South Mary's. Sorry, St. Oh my goodness. South Shore St. Margaret's. I

00:00:53.080 don't know how I messed that one up. Also, the industry critic. Thanks very much for coming back

00:00:56.220 on. My pleasure to be here, Jamie. All right. Inflation rates on the way back up, largely

00:01:00.240 driven in part to gasoline prices. Groceries are back up. According to CBC here, groceries

00:01:05.840 increased at 6.9% at the annual pace. This is hurting Canadians right in the pocketbook.

00:01:12.780 You know, the compounding of the grocery interest the last six months has been about 20%. That's

00:01:18.940 a 20% increase in groceries over the same period last year. And that's why Canadians are hurting.

00:01:26.220 Our leader, Pierre Polyev, talks about that. The Prime Minister talks about people being angry.

00:01:30.860 They're not angry. They're hurting. They're hurting because of the cost of everything going up,

00:01:35.660 driven by the policies of this Liberal government. But Justin Trudeau summons the grocery CEOs to

00:01:41.940 Ottawa to give them a stern warning. A stern warning. A stern warning. A stern warning.

00:01:46.100 He convened a meeting. He convened a meeting. The Canadians are good at convening, according to

00:01:51.280 Melanie's early. Yeah, they convene meetings. Like most things with this government, it's all about

00:01:56.640 appearances and input, but it isn't really about output, about actual results. The results are that

00:02:04.560 it is not grocery margins that are driving up food costs. Grocery margins have stayed stable,

00:02:10.880 according to Statistics Canada. They're about two to three percent on fresh food and produce. They

00:02:16.560 haven't changed pre-COVID, COVID very much. What's driven up the cost is all the inputs into producing the

00:02:24.320 things they sell, right? Everything they sell. The fresh food, the fertilizer to grow the food,

00:02:30.880 the energy used to harvest the food, the energy used to transport the food to processing.

00:02:38.880 The processed food then has to be transported to market. Everything that goes into grocery store

00:02:45.440 operations, all of those costs, like your home, have all increased. That's what's causing it to go up.

00:02:51.120 So every time we see an inflation increase like this, that means more food inflation. That's why food's

00:02:56.960 going up. The cost of fuel keeps going up, we all know. In my province, Nova Scotia, at the end of

00:03:02.880 June, the price of a liter of gas was, guess what, $1.49. Seven days later, it was 20 cents higher,

00:03:13.040 and it was 20 cents higher because of the two carbon taxes. And now, today, it's at $1.90 a liter.

00:03:19.040 That's only a couple months. It's gone from $1.49 to $1.90. That cost gets built into the production

00:03:27.200 of food and our goods and is driving up inflation. And so we see worries, of course, about housing and

00:03:35.760 about the housing costs that the Bank of Canada is causing by increasing interest rates. And we know

00:03:43.760 last month, when the CPI, when the inflation rate last month went up to 3.3%, Statistics Canada said that

00:03:52.800 almost 1% of that was actually the mortgage index inflation rate. So the amount that inflation

00:04:02.640 was being impacted last month was almost a third by increased interest rates. So you compound on top

00:04:09.280 of that the increased cost of food, the increased cost of transportation. The Bank of Canada feels

00:04:13.760 compelled to put up interest rates, which is going to put up the mortgage interest inflation rate, which

00:04:20.640 compounds the issue. We end up in this spiral up. And Justin Trudeau doesn't seem to understand

00:04:25.440 any of that. He doesn't look in the mirror and actually say, maybe I've caused quite a bit of

00:04:30.000 this. The housing market, we told them all, that printed cash, that keystrokes that created all

00:04:36.320 this currency out of thin air would have an effect. There is a cause and effect. Now, the tax increases

00:04:42.480 through the carbon tax and others, the escalator tax on alcohol and beer, that's having an effect.

00:04:47.840 It's all because of poor government policy. The thing that really scares me is the same people

00:04:53.840 who created this cycle that we're in are being asked, as they're in government, to solve the problem.

00:05:00.160 Yeah. Well, and their spending, let's not forget their spending, because eight months ago in the

00:05:05.760 economic statement, the Minister of Finance, the Liberal Minister of Finance, Christia Freeland said,

00:05:11.920 you know what, we're going to have a balanced budget within five years. And then six months later,

00:05:17.040 when she presented her budget, there's no sign of a balanced budget. In fact, the spending and the

00:05:24.720 deficit will be and remain at about $44 billion and growing under the Liberals. And there was some press

00:05:30.560 over the summer that they were cutting $15 billion out of a $450 billion budget, $15 billion over the

00:05:38.480 next five years, not in one year, over the next five years. Well, it turns out even that wasn't a cut

00:05:42.720 to reduce the spending, because when the government spends, that puts more money into the economy. And

00:05:49.440 when they put more money into the economy, that helps cause inflation. And so $15 billion, turns out,

00:05:56.560 all they were doing was, we want to claw that money back from things that you don't think are necessary,

00:06:01.600 or they don't think are necessary, so they can spend it on something else. So it wasn't actually

00:06:06.720 an attempt to restrain government spending. There are two aspects of trying to battle inflation. One

00:06:12.880 is monetary policy, interest rates, the Bank of Canada. The other is fiscal policy. And there have been

00:06:19.520 many economists who have commented that on fiscal policy, the government's not doing its job,

00:06:24.560 they need to rein in spending. Without rein in spending, what happens is, interest rates go

00:06:31.840 higher than they would have to in order to try and fix inflation. And all of that is a result,

00:06:39.200 then, of this compounding issue that the Liberals are creating, that is causing interest rates to be

00:06:44.720 higher than they need to be. But they won't take ownership of it, because I don't think they

00:06:48.640 understand basic economics. We know the Prime Minister doesn't understand interest rates, because he doesn't

00:06:53.040 spend time thinking about it. Although most Canadians are spending pretty much every night

00:06:57.760 thinking about how to meet their mortgage payments when they come up, or the rent costs that are going

00:07:03.040 up and being forced up as their leases roll over. What really concerns me, and I think as we've seen

00:07:09.040 through the past few years, real estate is really driving a lot of the Canadian economy right now, but

00:07:13.600 the endless government subsidies that you're seeing the Liberals deal with, the overspending, the deficit

00:07:18.640 spending, it almost creates that false economy that if you ever have to take it back, as you said,

00:07:24.160 they said they were going to take it back, they really didn't. But once you start to do that,

00:07:28.240 without that foundation, without the anchors of our economy, our strong oil and gas sector,

00:07:32.640 our mining sector, natural resources, lumber, you're really putting the country on thin ice,

00:07:38.240 so to speak, because you do not have the structures in place when you do decide to bring down that spending level.

00:07:44.640 Well, you know, after us talking about this for years in the House, and the

00:07:50.320 Liberals living in denial and blaming everyone, including their dog, for the situation, it's Europe's

00:07:56.320 fault, it's the war, it's somebody else's fault. You know, there were wars during Stephen Harper's

00:08:02.000 time, there were actually more wars during Afghanistan, very expensive war in many ways for the world, and

00:08:09.600 that happened. But we didn't have inflation like this, because we had a government understood basic

00:08:14.960 economics. And so, so the, the responsibility lies with them. And you think after the summer,

00:08:21.680 that they heard from Canadians, as we all did when you were home, knocking on doors and meeting with

00:08:26.080 constituents and going to barbecues and going to parades and all the community events that we do as MPs.

00:08:31.200 And they all came back anxious. We all read that in the press. And, and their, their response is not

00:08:37.120 actually to fix the things that caused the problem. Their response is, well, let's spend more money.

00:08:44.400 Another government program. Right. Let's just increase checks to people. Let's spend more money, 0.99

00:08:50.560 because it's just a question of spending. We created an $82 billion program for housing that has not built a

00:08:57.840 single house two years ago, but let's put more money in that program that hasn't built anything. 0.97

00:09:03.680 Yeah. And that's the thing with these endless government programs, like the question always can

00:09:07.840 be, and in my opinion, seldom gets asked, what if the government is wrong? Right? Is it just more time,

00:09:14.880 patience and more money thrown at the problem? They, it's never a acceptance of responsibility.

00:09:20.720 So, you know, budgets are an art, right? You have to put together things. And, and the presumption

00:09:25.360 that we would have a $44 billion debt this year. Remember, the government is now spending twice

00:09:31.920 as much today as it was in 2015. So the, the idea of meeting even that insane target of a $44

00:09:42.160 billion deficit, irresponsible target, depended on this year, the average interest rate, or the average

00:09:49.280 CPI being two and a half percent, the average inflation rate being two and a half percent.

00:09:54.800 Well, as we know today, it's gone up to 4%. Last month, it was up to 3.3%. It's going back up. In order

00:10:01.600 for the government to have met its inflation rate projections, July, August, September, October,

00:10:09.360 November, and December, inflation would have to be 2% to counter what's already happened in those months

00:10:14.560 beforehand. But that's actually going nowhere near to it's going the opposite way back up.

00:10:19.360 So the federal government's budget is already blown out of the water, because the cost of everything

00:10:25.920 is increasing. And that eventually affects the cost that the government pays in interest payments,

00:10:31.680 like your mortgage, the government has a mortgage, which you have to pay on all of that debt. And this

00:10:38.960 government has doubled the debt of the entire country in only eight years. They've added more

00:10:47.840 debt to Canada than all previous governments since Confederation. Imagine that. Like, do you think our

00:10:56.160 150 year plus history, that that was blown out of the water by Justin Trudeau and these liberals in

00:11:03.920 eight years that they spent more than all of that? Are we double better on our services? Are our roads

00:11:10.160 better? Is our health care system better? Are we able to produce better passports faster? Do we have

00:11:16.240 a better military? Do we have anything in this country in eight years that's operating better other than

00:11:22.240 banks making a lot of money off the interest payments that the taxpayer now pays for all this debt?

00:11:28.800 Well, okay, there's a whole bunch of things I want to expand on in there. Going back to what you're just

00:11:34.320 talking about, the banks doing well, but in terms of the Prime Minister and even Judg Nixon, the leader

00:11:40.480 of the NDP, saying that, you know, grocery store CEOs have to account for the record profits. Take a step

00:11:46.080 back too, and you alluded to as well, just right there, the government's never been so flush with cash as

00:11:51.280 well. They've had record profits, right? Like, when are we going to look in the mirror here and just see this

00:11:57.840 hypocrisy? Well, yes, that's a great point, Jamie, because here they say, you know, because the revenue,

00:12:06.000 which is not profit, the revenue of grocery stores have gone up because inflation is driving the price

00:12:11.920 of groceries up, that somehow it's the grocery stores that are responsible, not all those things we've

00:12:17.040 been talking to the government about. Meanwhile, government spending has almost doubled in eight

00:12:21.920 years, and there are now over 102,000 more public servants working for the federal government than

00:12:31.760 eight years ago. Imagine that, 102,000. Do you know any business in this country that has grown

00:12:38.320 their workforce by more than one-third in eight years, which is what this government has done? It's

00:12:44.880 insanity. But they're not getting the results, but that's always been the benchmark of this government,

00:12:48.560 how much money we've spent on something. It's not exactly getting results, because as you just

00:12:53.520 mentioned, everything seems to have gotten worse under this federal purview. So that's the benchmark.

00:12:59.920 How much can we spend? And look at us, we're heroes. Well, you know, it extends to all kinds of things.

00:13:05.520 Their only solution is taking our competitive advantage as a country, which is our natural resources.

00:13:11.840 That's our oil and gas, our mining assets, our renewable resources, agriculture, forestry,

00:13:18.080 fishery, and taking them and trying to shut them down for some other mythical green jobs. 1.00

00:13:23.600 And in order to do that, the only way the government can make it happen is by massively subsidizing

00:13:30.000 industries that don't really have a market-based economic model for profitability and sustainability

00:13:38.400 and moving forward and removing all those things that we have as competitive advantage over the

00:13:43.200 world that pay for themselves and actually pay for our healthcare system and pay for our roads.

00:13:47.360 The profits from our natural resources are the great natural advantage that we have over every

00:13:52.480 nation on earth, yet we have a government that has focused its efforts on shutting down every single

00:13:58.480 one of those industries in order to get some mythical job. A perfect example is these VW and Stellantis

00:14:04.960 contracts. They're a production contract. So in the past, we've subsidized, governments have subsidized

00:14:11.920 the flip over of a plant from one vehicle to another in order to keep those actual assembly of vehicle

00:14:19.040 manufacturing jobs in Canada as part of the North American auto business. But that's not this. This is

00:14:25.200 a production subsidy for a piece of a car. So this is a production subsidy, which we've never done before in

00:14:32.240 this country. We've never subsidized actually producing the product and in essence nationalizing part of our auto industry.

00:14:41.120 But it's not really nationalizing our auto industry because it's only the assembly of EV batteries. It's not

00:14:48.160 manufacturing anything. Most of these parts for EV batteries are made in China. They hold most of the

00:14:53.760 world's critical minerals. They refine most of the world's critical minerals and they make most of the world's

00:14:58.320 cathodes and anodes for the world's batteries are mostly 80 percent plus made in China. So we're

00:15:05.520 subsidizing to the tune of 30 billion dollars, according to the parliamentary budget officer,

00:15:10.640 and it's going to take 20 years to get that money back.

00:15:13.760 An investor would say, yeah, that's where I'm putting my money.

00:15:15.600 The prime minister and the minister of industry said, we're going to get a payback on this in five

00:15:19.360 years. I kept asking them, how, when, where's the calculation? And a return on investment was the term,

00:15:26.160 meaning you make a profit. Return on investment means you make an investment and you get it back

00:15:31.680 plus a return on it. That's return on investment. They said, this will have a return on investment in

00:15:36.480 five years. Well, in fact, this doesn't have any return on investment. And it's going to take 20 years

00:15:41.600 if you believe these plants will stay here. And if you believe that technology will be relevant in 20

00:15:46.240 years. It could be the Betamax. It could be the Betamax.

00:15:49.360 Right. The Blu-ray of car batteries. And the fact is that the subsidies last for five years.

00:15:57.040 And when those subsidies are gone on the heaviest part of the car, I doubt that those jobs are going

00:16:02.320 to stay here. Because why would you truck these massive heavy EV batteries from Ontario,

00:16:09.520 in the case of Volkswagen, to Tennessee to be assembled in a car without a government subsidy?

00:16:14.640 So, subsidizing production doesn't work. Let me put it to you. No, it prolongs the inevitable.

00:16:19.040 Yeah, let me put it to you this way. Let's say, you said, we wanted to become the world's leader in

00:16:28.480 making laptop computers. But the only way we could do that is to say, we're going to subsidize

00:16:35.840 Dell to come here and open up a factory. But why would Dell do that even with the subsidy, right? Because

00:16:42.960 there's a lot of things that go into this. But if you said, you know, for the first number of years

00:16:48.320 that Dell comes here, the taxpayer will pay 100% of the production costs of every one of those

00:16:55.280 computers, maybe Dell would come for that. But when that 100% subsidy on the production ends,

00:17:02.800 what do you think is going to happen? Do you think they're going to stick around?

00:17:05.760 They're going to either say, keep giving us a subsidy, or we're going to move.

00:17:08.400 Yeah.

00:17:08.960 Well, in this case, that's the kind of subsidy we're talking about for Volkswagen and Stellantis.

00:17:13.440 We're talking about a subsidy on the production, a massive subsidy on the production of every

00:17:19.200 battery over five to six years. And when that stops, that $30 billion investment, as they call

00:17:26.000 it, to me, it's an expenditure to create 3,000 jobs is gone because those plants will disappear down

00:17:32.880 to the U.S. Yeah, or the next technology will take over. See, that's the big problem with these

00:17:37.760 government grants. It's not which company is making the best product of big service. We talked

00:17:42.400 about this before, right? It's the company that aligns itself best with what the government believes

00:17:47.440 is true, right? In this case, it's the EV batteries. Not to mention the other technologies

00:17:52.000 that are being developed out there. They just completely sidelined them.

00:17:54.960 You know, often I hear when we talk about this, you know, well, what would you do?

00:18:00.720 Well, what we would do is say, you know what, if you believe that we should go to zero emission

00:18:07.120 vehicles, which is a laudable goal, that the government should set regulations about when to

00:18:11.680 do that. But let the private sector figure out the various technologies that can get us there. And it's

00:18:17.040 not just one. And let the market decide which technology they want to buy. Do they want to buy

00:18:22.560 Blu-ray? Yeah. Or do they want to buy another technology? Or if you live in a rural area,

00:18:27.120 maybe you want a hybrid or you want some other type of zero emission vehicle. But why? Government's

00:18:32.960 got a perfect record in picking winners and losers. And its record is usually failure, 100% failure

00:18:39.040 of picking the right technology. In my part of the world, Nova Scotia, we have a long history of

00:18:44.320 government trying to pick winners and a perfect record that everything has failed, whether it's

00:18:48.800 Sydney steel, making steel, whether it's heavy water pants, whether believe it or not at one time,

00:18:54.880 automatic lifting toilet seat covers, all of these things got massively subsidized by government to

00:19:01.040 be in Nova Scotia. And of course, when it didn't work, they all disappeared, including the taxpayer money.

00:19:05.520 Absolutely. And something we can all visualize, if we're talking about the automobile industry,

00:19:10.320 in the 80s and early 90s, was anybody clamoring for a Russian made car?

00:19:15.760 There were a lot of cars, but nobody was saying, yeah, we should get them over here.

00:19:22.160 Yeah, I had a friend's parents who bought one because it was the ugliest car they could find.

00:19:26.160 It was basically a box. And they figured their teenage son would refuse to drive it,

00:19:30.800 which was true. He wouldn't drive it. I don't think many Russians wanted to. 1.00

00:19:34.160 It was too embarrassing to drive up to high school in Elada. But you didn't have any choice. So

00:19:39.520 they were all clamoring for mainly American and North American Canadian made vehicles.

00:19:44.000 Right. Because there was a competitive market.

00:19:45.920 And so we're not making EV vehicles in this great strategy, a liberal government with these

00:19:51.120 record setting $30 billion plus subsidies. We're assembling a small piece of it. The cars are

00:19:56.800 still being made elsewhere. They're being assembled in where the value add. There's no R&D required as

00:20:02.800 part of this. So we own none of the technology. So there's no value added in our productivity. It's

00:20:07.760 just a few 3,000 assembly jobs. When ministers say we're saving the 100,000 people in the auto

00:20:14.640 industry in Ontario, well, this $30 billion subsidy is only committed to create 3,000 jobs for the

00:20:21.200 duration of the contract, which is five to six years. So that's not saving 100,000 jobs.

00:20:26.640 No, it isn't. I have so many other things. Blacklock's reporter here, headline, the seeking

00:20:32.240 the repeal of the Flaherty tax cuts, 750 union members, well, I guess the executive is asking

00:20:38.480 parliament to remove the tax breaks, which brought the corporate tax rate from 21 to 15,

00:20:46.400 lowering the cost of doing business here. Again, if we're talking about lowering the cost to consumers,

00:20:51.840 doing this will only make prices more expensive. So let's talk about business taxes. All right,

00:20:56.720 we got to do it quickly because we got to get out of here. Business taxes. The NDP, 0.54

00:20:59.440 Liberal government, of course, is going to probably be big on, you know, sticking it to the big

00:21:04.000 corporations. But the reality is there's only one taxpayer, everybody out there. So I wrote business

00:21:09.760 plans for businesses for 25 years, big and medium-sized businesses. And you know what your tax rate is,

00:21:16.080 and you build it into your cost of production, and you pass all those costs on. So if the

00:21:21.520 union wants the tax rate to go up, that will create more inflation, it will force the cost

00:21:28.000 of everything up. Companies don't eat those taxes, they get passed on in the pricing of the goods and

00:21:33.120 services they produce. So what they're asking for, ironically, is inflation. Yeah, more price increases

00:21:40.000 for the average person. And it's not as if we're just shelling for the big corporation, we're shelling for

00:21:46.880 a competitive environment. Because the more regulations, the harder it gets to make money,

00:21:51.920 the less small businesses start up. Well, we're also promoting the idea that government policy

00:21:56.240 shouldn't cause inflation. Well, that too. That too. All right. We got to get a question period.

00:22:01.200 So much more I got to talk to you about. I appreciate you coming on. My pleasure. Always a

00:22:05.360 pleasure. I love our conversations. Rick Perkins, Member of Parliament for St. Margaret's South...

00:22:09.360 South... No. Oh my goodness. South Shore St. Margaret's. I can't believe I keep getting this wrong.

00:22:13.600 We're gonna have to come for a visit. Absolutely. Also, the industry critic,

00:22:16.640 we appreciate your time, Rick. We appreciate yours as well, as we have the second episode in

00:22:20.720 the new studio, new logo, new look, but same energy. And we ask that you like, comment,

00:22:24.720 subscribe, and share this program. Also download it, listen to it, tell your friends they can too,

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00:22:33.920 single Tuesday, 1.30 p.m. Eastern time. Until then, low taxes, less government,

00:22:38.240 more freedom, that's the blueprint.

The Blueprint: Canada's Conservative Podcast - September 22, 2023

Subsidy Shock; Billions for Batteries

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