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Summary
As Parliament resumes, Prime Minister Justin Trudeau announced the first five projects to be fast-tracked through the Major Projects Office, and we took note that the Conservative opposition has been more focused on cost-of-living issues than major projects. With all that power, what could a budget possibly look like? What is the outlook for industrial development that is important but doesn't qualify as a major project? With me today to talk about it is Dr. Tim Sargent.
Transcript
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Good evening, Western Standard viewers, and welcome to Hannaford, a weekly politics show.
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It is Thursday, September 18. Parliament resumed earlier this week, and a budget is set to be
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tabled on November 4, the first budget we've seen since April 16, 2024. The Prime Minister also
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announced the first five projects to be fast-tracked through the Major Projects Office that he has
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established, and we took note that the Conservative opposition has been more focused on cost-of-living
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issues than major projects. I'm sure a lot of Canadians would like to think that adults are
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back in charge. Perhaps they are, but what are they doing with all that power? What could a budget
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possibly look like? What is the outlook for industrial development that is important but
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doesn't qualify as a major project? With me today to talk about it is Dr. Tim Sargent,
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an economist and former Federal Deputy Minister who is now Director of Domestic Policy
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at the famous McDonnell Laurier Institute in Ottawa. Dr. Sargent, welcome to the show.
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Dr. Tim Sargent, welcome to the show. Thank you for having me.
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Dr. Tim Sargent, five mega projects roll out of the Major Projects Office as Parliament resumes. How impressed
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are you? Well, this isn't just low-hanging fruit. This is fruit that's fallen to the ground and it has
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been neatly arranged in piles for people to pick it up. The reality is that these five projects were already
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through the system. Darlington and Makovena are already being built. That's how far along they are.
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Kitimat, it's an issue of financing. ContraCare is almost done. So there's really nothing special
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about these projects. There's not a lot that really needs to be done. The risk, of course, is that some
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of these project proponents may turn around and ask the government for a financial contribution given
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how important the government thinks they are. Now, of course, you did also have other projects
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talked about in that press release, but they are really at the other end of the spectrum.
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The government's talking about the Pathways Project, Port of Churchill, High Speed Rail. I mean,
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these are projects that are really not thought out at all. I mean, some of them are just a glint in a
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politician's eye at this point. They all have massive cost overrun written on them. So for me,
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I was hoping to see projects that are in the middle of the spectrum, projects that are rail prospects,
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where the proponents have put them forward, but it is still trapped in the environmental assessment
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system that we have in this country. Take a project like Delta Port, for instance. This assessment
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started about five years ago. It's still only in stage two of the five-stage process for environmental
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assessments. The time limit that the Impact Assessment Authority has put on that is 2028. So we're talking
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about eight years for approval for a major expansion of the Port of Vancouver that could have enormous
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economic benefit for the whole country. Well, I thought the idea of the major projects
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office would speed things up. So I guess not necessarily.
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Well, it's certainly not being used for that right now. Perhaps they'll have a role, but the
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challenge is you're adding a level of bureaucracy onto a bureaucracy that already has lots of levels.
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So you're just introducing a new character into this play, as opposed to a wholesale reform of the
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system. And so what we're ending up with is, yes, there's a couple of projects that end up on the
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wish list that the prime minister likes, prime minister's office likes, some provincial premiers
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like, and the system is focused on them. But what about all of the other projects that are out there
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that could really provide quite a big boost to the economy if they were all able to move forward a lot
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faster? Well, that, of course, is one of the things that we thought right from the very beginning.
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And I think sort of from the economic studies that we took 50 years ago or 20 years ago,
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there's an assumption that the big projects will start the ball rolling and all the little
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projects will just get swept along with it because it's spinoffs, isn't it? So, but that's not what
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I'm hearing you say. These major projects may or may not go far fast, but the other ones are getting
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left behind. Well, that's it. And the reality is what Canada needs to do is it needs to change
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the investor sentiment towards Canada. It needs to change the story about Canada out there in the
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world, which is that you just can't get projects done. And if we're going to convince people that
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we really have turned the page and that we really are now serious about moving ahead and developing our
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resource sector and our energy sector in particular, we're going to have to show people that all of the
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things that got in the way of projects, all of the political opposition, that we're willing to
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stand up to that and actually say, no, we're making a choice as a country that we're going to value the
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resource sector more and we're going to work a lot harder to develop it. And we're going to stand up to
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people who, for various reasons, don't want development to go ahead. And the FAD projects
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that are announced, this isn't showing that Canada has the intestinal fortitude and the government has
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the intestinal fortitude to stand up to all of these special interests, because they're all ones
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that everybody supports. Well, one of the special interests is obviously the Indigenous interest,
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and it's indeed built into the major project's office. It seems to me, and has seemed all along,
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that Mr. Carney is very good about stating an intention, but then putting a condition on it.
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And so when we come to these very large projects that we want to see, and would be good for the
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country, would be a great flywheel to generate activity, nevertheless, there's always, well,
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there's an Indigenous office that has to be satisfied. There are provincial interests that
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need to be satisfied. Does he have a plan for getting around that, or is that his actual get
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out of jail free card when he finds himself confronted with something that's not in accord with his green
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plan, but which he has sort of promised to do? What do you think is going on there?
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Well, I think the Prime Minister has made the transition to being a politician in the sense that
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politicians like to be all things to all people. And they don't want to annoy anybody, they want
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to live in a world where everyone will be happy with the decisions that they take. And that's not
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the reality of governing. The reality is that, as the French Prime Minister once said, to govern is to
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choose. I'll put another way, Thomas Sowell, the great economist once said, there are no solutions,
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there are only trade-offs. So at the end of the day, you're going to have to, if you're wanting a
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lot of projects to get done, you're going to have to make some of those trade-offs. At the moment,
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though, what we seem to see is, you know, a project needs to, not only do all Indigenous people anywhere
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near the project have to agree to it, we also have to have provincial agreement, certainly as the
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province of BC, has to sign off on any pipeline that goes to tidewater from Alberta. And there's
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also Greenlands. So you've got these three constraints. So I don't think there's a lot of
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camels that can go through the eye of that needle. And I think the instinct from politicians, and I
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think, you know, the Prime Minister is in this space is, well, if there's a problem, we're going to throw
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money at it. And so, you know, we're just going to provide a subsidy here or a subsidy there to move
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the project along. So a year ago, as we all remember, Mr Carney was advising the former Prime Minister,
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Mr Trudeau. So many of the things that he has inherited are the consequence of the years during,
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decisions taken during the time that Mr Trudeau was Prime Minister. And I myself am still wondering
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whether Mr Trudeau was given good advice that he ignored, or that the advice that he took came from
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Mr Carney, and we are now witnessing the consequences of that advice. Do you care to speculate upon that?
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Well, you know, at the end of the day, what matters is the actual results. And, you know,
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we have, you know, a system, an environmental assessment system that is very, it was already
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complicated. The Trudeau government made it even more complicated, even more inaccessible. Certainly,
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you know, Mark Carney, before he was Prime Minister, was pressing very hard for Greenlands to
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to worry very much about climate change impacts. You know, we haven't really heard him backtrack
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on that. So, you know, in some ways, yes, I mean, this is a system that he has certainly been involved
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with. But I will say that it's probably only now that he's getting to grips with exactly what this
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system is doing to resource development in this country. And, you know, you see him with the Bill C5,
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for instance, look for a way to get around the system. But the reality is what's really needed
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is a wholesale reform in this system. And a big part of that would be getting the federal government
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out of a lot of areas where it's really the province's responsibilities.
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Do you think Mr. Carney is behaving like somebody who thinks there is a business case for selling
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Yes, I think we are, you know, we're talking about somebody who has obviously a lot of a lot of
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economic experience, a lot of financial experience. And I think who gets that the resource sector is
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important to Canada's economy. If you look at the objectives that he laid down in the letter that
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he sent to all ministers in the speech from the throne, I mean, they're the right objectives. They
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are developing the resource sector, talks about cutting the size of government. There's a bunch of
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other things that I think every economist would agree with. The real question is, how are you going to
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get there? And, you know, if you're going to make this omelette, you know, what eggs are you willing to break?
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Sir, everybody has, before he became prime minister, everybody liked to call him a technocrat. And
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certainly somebody who has managed two, not one, but two national banks probably is something of a
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technocrat. If we then translate technocracy into running a country, would you
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do you see in the things that he says and the actions that he has so far taken the mind at work
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of somebody who thinks that government is best advanced when decision-making is concentrated
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in a small group of people, but that small group of people are the most competent and the cleverest and
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of course the most virtuous, then that they will make good decisions and everybody else will come
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along. I mean, this is a government that seems to want to make investments decisions that would normally
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be made by private companies. Again, what do you think his game is here?
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Well, I mean, prime minister comes from central bank world. I mean, that's kind of the pinnacle of
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technocracy, right? You have a very, very small group of people that are deciding on interest rates,
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which is crucial for the economy, very much shielded from political input. And there's a lot of good
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reasons to do it that way. But that's in the context of the Bank of Canada or the Bank of England.
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These are elite institutions, they're full of PhD economists. And you know, at the end of the day,
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you're looking at just one segment of the economy. The federal government is a very, very different
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beast. It's huge. You're talking about more than 400,000 public servants. And of course, he's not
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just thinking about interest rates. There's a whole range of policies, tax transfers, substitutes, all kinds
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of things. So you're dealing with something that's an order of magnitude more complicated. And, you know,
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I think certainly, you know, he certainly a very confident individual, he has a great CV, as we all
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know, but you just can't manage the government of Canada even the way you manage a central bank. And you
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can't, the federal government can't manage the Canadian economy the way a central bank can manage
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interest rates. Just too big is just too complicated.
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Okay, I want to turn shortly to the budget that's coming on November the 4th. But before we go there,
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two things. The United States has backed away from the green agenda. Even Europe is backing away from
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it. But Mr. Carney seems to want to stay green, even as everybody else is changing their minds. Does he know
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I think it's more that, you know, Mark Carney has written a whole book in which climate change
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featured very strongly. He spent a lot of years invested in a climate change issue, especially since
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he left the Bank of England, putting together coalitions of businesses to advance net zero.
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So, you know, when you invested a lot in an idea, it's hard to move away from it, certainly hard to
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move away from it very quickly. But, you know, the reality is, as you say, the rest of the world,
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by and large, is moving away from it. And, you know, we've seen the Prime Minister having to move
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away from some of the elements of that agenda, like the EV mandate, for instance, because he's
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reduced the consumer carbon tax to zero. But we haven't yet seen him go, you know,
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all the way on a lot of that agenda. I think he's still hoping that by making these kinds of
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concessions, by making a few changes like this, that he'll still be able to have something that he
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can hold up as a proper green agenda. But he's going to be in a pretty lonely spot, internationally,
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In Alberta, we have some hopes of what Premier Daniel Smith calls the grand bargain. And that is where
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somehow we find a way to bury enough carbon dioxide to achieve net zero as we increase production
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of oil and natural gas. I'm told that it is technically feasible. Do you have any sense of whether
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that – and this is something that Mr Carney is advancing, not just a Premier Smith – do you think
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they can actually make money at it? Or is this just another exercise in bait and switch?
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Well, the last price tag I saw for this was 16.5 billion. And I don't think anybody believes that
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that would be the final number. I'm sure it would be much higher than that. Technically feasible
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is not the same thing as economically feasible. The reality is companies are only going to get
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involved with this if the governments pick up the tab for that carbon capture and storage.
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And I wouldn't be surprised if Premier Smith thinks the federal government is going to pay that tab,
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and the federal government thinks the Premier Smith is going to pay that tab. And I think the reality
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is fiscally provide a level of government, that's just not on. So the thing about carbon capture and
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storage is it's this mythical beast that will solve everyone's problems. It allows the Prime Minister
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to be able to say he's still fully on with the net zero agenda, while at the same time providing
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Premier Smith with a way to providing that social license from the federal government to ship hydrocarbons
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to Tidewater. So the politicians very much want this to exist. They want it to be feasible. But at the
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end of the day, I'm not sure anybody's really willing to pay for it. Well, it's pure speculation as
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to what it might do to the price of a barrel of oil. But one thing is for sure, it would apply to
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Alberta oil. But I'm not aware of any plan to apply it to oil that is imported from places where net zero
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is not a consideration, which of course would be the case in Eastern Canada. Do you know if there's any
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plan to square things up and make it a fair fight?
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I don't think so. I mean, you hear ideas from the European Union was thinking about putting
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tariffs on things that come in that have a high carbon content. But in the current environment,
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I can't see us putting tariffs on imported oil. And even if we did, we'd just be shooting ourselves in
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the foot because we're just making life more expensive for our businesses and for our consumers. So as you
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say, it's just putting a disadvantage on Alberta oil, unless some fairy government is going to come
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Okay, Dr. Sargent, let's switch to the budget. Obviously, we've all been told to expect that
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it's going to be a frightening announcement when it comes. Hundreds of billions of dollars in deficit,
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accumulated deficits are already north of $2 trillion. How much worse is it going to get?
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But really is the question, confronted by this kind of enormous cost overrun,
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it seems like any government, this one in particular, has the choice between raising taxes,
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cutting expenses, or allowing inflation to run its course and pay off what they owe in devalued dollars.
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From all that you have seen, what do you think is the most likely strategy to be followed by this
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I think the most likely strategy is going to be the latter. I mean, that's what governments usually do,
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at least for as long as they can get away with it. You have higher inflation, that reduces the real
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value of your debt. Your revenues go up, it enables you to pay your debt. The other things are really
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hard to do. Raising taxes, I think the Prime Minister is smart enough to know that taxes are already
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pretty high in this country, and the higher you raise them, the more people are going to find ways
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around paying those taxes, or just simply not work, simply not invest. Cutting spending, I mean,
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most economists would say that would be the place to go, but it's this government, certainly a lot of
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the Prime Minister's Cabinet colleagues, are the ones who helped massively increase spending over
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the last 10 years, because we saw public service grow by about 40%, or zero percent over that period.
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So it's hard for me to see that they're going to drastically reduce the size of civil service,
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even putting it back to, even on a per capita basis, back to where they were. So I suspect that
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the easier roads will be, the politically easier road will be the one that they follow in the near
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term, until the financial markets say, enough, and that's usually how this ends.
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Well, it's hard to make a cheerful picture out of any of that. So let's just say the average person
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who's got a little bit of financial flexibility, is there anything, what do they do, buy gold? What can
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a person do to insulate themselves somewhat from this tide of bad news that's coming our way?
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Well, they don't call economics the big old science for nothing. And I don't have a lot of good news for
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people. I mean, it used to be that, you know, the US Treasury bills, for instance, where US debt was
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a state haven, but you look at the US now and their deficit is huge. You know, I don't think the US is
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going to default, but I think they're seeing the inflation creep up as well. So there aren't really
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a lot of good places left to put your money. I mean, gold could certainly be one, but even that,
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you know, can be quite volatile. You know, the first best would be that we actually had a sensible fiscal
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policy. And so people could invest with confidence in Canada. But, you know, during the financial
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crisis, when it was really the property sector, which was ground zero, you know, you could move
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into government bonds. I mean, those were relatively safe. But, you know, I think this time around,
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it's government itself that's the most vulnerable to financial markets.
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Well, isn't this a cheerful way to conclude an interview? We're all doomed.
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Dr. Sargent, I suspect that people will be buying gold or buying silver. I'm not recommending it,
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but it is, there seems so few options, unless you trust Bitcoin. But it is, perhaps we can have you
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come back again on November the 5th after the budget has been presented. And we'll just go over and see
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whether all our doom and gloom was justified. Thank you so much for coming on the program.
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Well, it's been fun. For the Western Standard, I'm Nigel Hannaford.