February 1, 2025
November 25, 2023
HERE'S MY TAKE
A finance minister’s formal economic statement is simultaneously an exercise in economics, politics, and communications. Achieving the differing objectives requires significant needle-threading prowess. Cutting through the spin provides important clues as to what might actually lie ahead.
The government’s intent with Tuesday’s Fall Economic Statement (FES) was well-telegraphed by strategic leaks in past weeks. “The plan is working,” touted Minister Freeland, “building a strong economy that works for everyone, with great jobs that Canadians can count on.” The minister tried to convince us multiple times that this government was fiscally responsible, with Canada “maintain[ing] the lowest deficit- and net deficit-to-GDP ratios in the G7.” Data regarding foreign investment, IMF predictions, and the unemployment rate are sprinkled through government materials, seeking to reassure the markets in particular, and Canadians in general, that there are stable hands at the political-economic wheel. The government's implementation of a cap on federal deficits at one percent of GDP (although not taking effect until 2026-27) gives an additional proof point intended to demonstrate responsibility, a word that is mentioned 18 times in the FES. And yes, there is a 141-page document complete with pretty charts to buttress the case.
If the government’s economic purpose was to maintain confidence, its communications objective was to reassure Canadians that the government has heard their concerns about affordability in general and housing in particular. A proposed mortgage charter tells Canadians that the government is protecting them from the big bad banks. Consumer protection measures target manufacturers who refuse to repair stuff “in an anti-competitive manner.” The phone companies and airlines are specifically targeted. Thirteen mentions of the government’s grocery affordability measures (those big bad grocers are part of the problem) all reinforce the not-so-subtle message, “we hear your affordability concerns and you can count on us to protect you against all of the bad guys creating that problem.”
These messages land in interesting political times. The NDP has committed its support through the Supply and Confidence Agreement which formally extends until June 2025. The signature reward for their support is a proposed Canada Pharmacare Act to be passed by the end of 2023. The word “Pharmacare” does not appear in the FES. NDP leader Singh downplayed this, noting that he still expects at least proposed legislation that establishes a Pharmacare framework by year’s end. Pharmacare will cost at least $11 billion although NDP leader Singh cautioned he wasn’t counting on the Liberals to attach money. He argued that the Liberals did not really believe in Pharmacare, and they are only doing this to keep NDP support. This all sets up the NDP’s pitch in the next election: “If you want Pharmacare, we’re the ones to make it happen.”
The post-FES response by the NDP seemed designed to create distance between them and the Liberals, making one wonder if the NDP is looking for a way out of the Supply and Confidence Agreement. Assuming that the Liberals table (and not pass as required by the agreement) Pharmacare legislation by year’s end, the NDP’s hand is then forced. The two parties’ polling numbers are within the margin of error of being equal, so breaking the agreement (but not forcing an election) could make political sense for the NDP. Their attacks would not immediately have to answer the objection, “If they are so bad, why are you keeping them in office?” The Liberals likely would continue to govern (political parties don’t prompt elections that they are likely to lose) and the composition of this Parliament with the Bloc’s seats certainly make that possible. Prime Minister Harper managed a minority government for five years without any formal agreements; it would not be impossible for Prime Minister Trudeau to do the same until 2025. (A colleague reminds me that February 25, 2025 marks the sixth anniversary of Mr. Singh’s election to Parliament in Burnaby South, a riding that is volatile and by no means a “safe” NDP seat. So, could Mr. Singh’s personal qualification for a pension on that date be a factor in the timing?)
The official opposition has very different economic, communications, and political objectives. Conservative leader Poilievre called the statement a “disgusting scheme” and focused on inflation rates making life less affordable. The reliability of the government numbers are called into question by the fact that the projections in every budget and economic statement increase from the previous ones, highlighting that the FES includes over $20 billion of new spending not accounted for in last spring’s budget. Columnist Andrew Coyne noted that the only restraint was increasing spending by a lesser amount than previously projected. Spending has still increased and it is still a projection which, as Coyne wryfully notes, is a “revision that will revise itself” in the next fiscal update. The opposition is highlighting that the various measures targeting housing are unlikely to have much immediate impact on affordability (not that they are proposing alternatives that would have an immediate impact) and blaming the government for being “too late with these measures” given that the Liberals are in the eighth year of office.
Budgets and economic statements are clouded by political rhetoric, pro and con, but they are one of the few occasions where there are some hard numbers (though not all the ones we wish). Perhaps Sean Speer’s pre-statement piece suggesting that “a fiscal reckoning is coming for Canada” captures the moment best. He notes that the key legacy of the Harper government years is a series of tax reductions that decreased the government’s share of GDP from 16% to 14%. Prime Minister Harper, even after the spending blip following the 2008 financial crisis, managed to bring government spending in line with revenues by the end of his term. The Trudeau government (even setting aside the pandemic spending blip) is projecting spending that exceeds revenues and, even if the one percent cap on deficits were to be followed, that still would amount to a $32 billion deficit. The question, as Speer frames it, is that it’s unsustainable to live “in a world of Stephen Harper’s tax rates and Justin Trudeau’s spending preferences.” In other words, the size and expectations of government will emerge as the critical political choice that Canadians will have to make.
To be sure, that will be a sub-theme of the next election. In 2015, Trudeau campaigned on a short-term deficit plan to the left of the NDP, who under then-leader Mulcair was arguing for balanced budgets. (Remember that "budgets balance themselves"?) In the upcoming election, it would seem that the left will be divided between the NDP promoting additional spending for Pharmacare; the Liberals trying to run a “We’ve got your back in protecting you from everyone else, but that requires responsible deficits” message; and the Conservatives running on a “We’re the fiscally responsible, balanced-budget folks.”
A week is a long time in politics. The two years between now and the required date for the next federal election is a very long time. But the political messaging of this past week foreshadows how each of the parties is thinking about its own political prospects.
WHAT I’M READING
A Heartbeat Away from WWIII?
Foreign Policy is an influential journal, so their publishing of A. Wess Mitchell’s suggestion that “global war is neither a theoretical contingency nor the fever dream of hawks and militarists” is sobering. Weiss suggests that if China decides to attack Taiwan, the United States as the major western superpower would be facing simultaneous challenges in Ukraine, Israel, and Taiwan. This would spread American resources too thinly and put the U.S. “a heartbeat away from a world war that it could lose.” Interestingly, a few days later, commentator Tasha Kheiriddin posted a Substack making a similar argument about the multiple fronts on which the United States is facing challenges.
Muslim Voices for Peace
The loud pro-Hamas rallies that have received extensive coverage since the October 7th attack on Israel can drown out different perspectives that are also evident among Canadian Muslims. This National Post piece by two Muslim leaders who are part of the Council of Muslims Against Anti-Semitism is an important reminder not to make blanket stereotypes. The authors provide a helpful reminder that we must call out extremism that comes from “our side” of a difficult or controversial issue. Leadership is not speaking out against what your tribe already opposes, but pointing out the dangers that your side is most likely to ignore.
Roots of Anti-Semitism
Father Raymond de Souza’s National Post column explores the historic roots of anti-Semitism and wonders whether the contemporary version has something to do with the aggressive secularism of our present age. Contemporary progressives, he explains, have “drifted into secular fundamentalism” adding that they “have a religion problem and ‘the Jew’ remains inescapably, at least in part, a religious category. It’s more complicated than that, but it cannot be adequately understood apart from that.”
Sixty Years Later
November 22nd is a significant date, remembered by many as the day that JFK was assassinated. It’s been noted that two other recognizable names–C.S. Lewis and Aldous Huxley–also passed on the same day. A regular reader passed along this decade-old legacy.com piece which reflects on the impact each of these people made.
Real Dollars and A.I.
Traditional power and dollar dynamics may explain the saga regarding Sam Altman’s dismissal, and then reappointment five days later, as OpenAI’s CEO. This Atlantic Monthly piece parsing the process does highlight that while computing power and lofty mission statements have their influence, decision-makers still have to contend with the specific power that is exercised through the application (and withdrawal) of human and financial capital.
MEANINGFUL METRICS
Canada is the second largest country in the world measured by land mass; 38th by population. However, according to the Institute of Chartered Accountants in England and Wales, we rank largest (by a considerable margin) in terms of the size of the federal cabinet (or comparable governing institution) compared to other countries. Sir John A. MacDonald’s original cabinet had 12 members. However, cabinet size has steadily grown to a high of 40 ministers led by Prime Minister Mulroney. There was a shrinking in the 1990s (Prime Minister Chretien led a cabinet of 23 ministers in 1994) but the number grew under both Prime Ministers Harper and Trudeau to the recent norm of the high 30s.
TAKE IT TO-GO
An Ode to Miss Elleaneous
My recall of suitable wordplay items is usually like a photographic memory, but alas, even the best memory is not always fully developed. This means I need a backup file of potentials to use when the occasion calls for a lighter interpretation. (I learned a while ago that over-exposure of the same word pictures doesn’t cut it.) So no attempts at elegance here—just a straightforward sharing of a few wordplays that I’ve collected. Trying to weave them together into a neat narrative would be like trying to propose a step-by-step manual for falling down the stairs–too painful even to think about.
More pleasant was the banter last week on the sports podcast 32 Thoughts. Is the word “tie” always redundant when sportscasters report the score? What else could a 2-2 game be? And isn’t every picture by definition of someone’s “younger self?" Is that about to change with technology that might take pictures of people into the future? And then there are those geography mysteries: When the fog lifts in California, do U.C.L.A.? If the French were English, would it give them the crepes to think that they have a Liverpool but no kidney bank?
“Stop!” I hear someone saying. Ok, I’ll quit while I’m ahead. After all, a thief who steals a calendar gets 12 months; a newsletter writer who can’t stop might get a life-term cancellation. I like puns but it has dawned on even me that they should not go on all night.
So I’ll try to slip away with one that I hope even the skeptics will like. After all, isn’t a well-placed pun like the sound of music?
So long, farewell, auf Wiedersehen, goodbye—at least until next Saturday!
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