Questioning ‘Justinomics’ and the new Liberal math of the COVID-19 pandemic
“We took on debt so Canadians wouldn’t have to,” Prime Minister Trudeau told reporters at a news conference on July 8. Whoa! Full stop.
“What does that even mean?” asked Senator Yonah Martin, deputy leader of the Opposition in the Senate. “Does the prime minister not understand public debt must be repaid by public money which comes from taxes?”
Perhaps someone needs to sit down with the PM over a plate of sushi and explain how this stuff works. Economics may not be an exact science, but — Modern Monetary Theory notwithstanding — “Justinomics” wouldn’t make sense to even the most delusional Keynesian.
Trudeau has abandoned all fiscal anchors. In theory, that means that Canada’s debt-to-gdp ratio can continue to climb unfettered until a deteriorating credit rating eventually puts a stop-payment on the last Liberal cheque — saddling future generations of Canadians with crippling debt and loss of global prestige.
Fitch and other agencies downgraded Canada’s coveted “AAA” rating to “Aa-plus” in June, due to mounting debt.
Back in January, well before the economic effects of COVID-19, Trudeau had already abandoned previously committed fiscal anchors. Conservative finance critic Pierre Poilievre asked whether the PM was still committed to reducing the debt-to-gdp ratio, or “… is he just going to put our future on the Mastercard?”
Now, 10 months into COVID-19, the PM has not altered his approach. Speaking to the Canadian Chamber of Commerceon Oct. 26, Trudeau said that the promised budget update will not contain any fiscal anchor, as it would be “premature.”
What has the PM been smoking? The flawed underpinning principle of “Justinomics” seems to be that low interest rates justify borrowing beyond national means — not dissimilar to the subprime mortgage thinking which lead to the global financial collapse of 2008.
This unhinged strategy was confirmed by Finance Minister and Deputy PM Chrystia Freeland on Oct. 28, telling the Toronto Global Economic Forumthat Canada can afford its current spending spree because interest charges, as a share of GDP, are at 100-year lows.
In his Sept. 23 address to the nation Trudeau said, “I know some people are asking how awe can afford to do all this for Canadians. That’s fair. Low interest rates mean that we can afford it, and in fact, doing less would end up costing far more.”
Again, whatever that means. Responding, Poilievre said, “This is 1984, and we have a government engaged in ‘doublespeak’ about the meaning of money.”
The Liberal “Economic and Fiscal Snapshot 2020” presented in July estimated a $343-billion federal deficit for 2020, and over $1 trillion in federal debt — now expected to increase further.
These are not magical COVID-19 Kumbaya bucks that the Liberals have conjured up in a benevolent land. This is real debt that will have to be repaid … by Canadian taxpayers … just like a mortgage or a car payment — and if you don’t make your payments, the lender is going to send people over to collect. And, at some point on the COVID-19 recovery horizon, interest rates are going to go back up.
Poilievre addressed the House on Oct. 26, “We support the wage subsidy, emergency benefits to Canadians, emergency loans to businesses — but they only account for only $175 billion of the $380-billion deficit. In other words, the majority of the money is not going to everyday Canadians. If it were, every household would have $40,000. That’s their share of the deficit. But the money has gone missing. So where is all that money?”
While it would be only fair if taxpayers knew exactly what they were mortgaging their futures for, the Liberals aren’t exactly saying.
According to Parliamentary Budget Officer Yves Giroux, it has been “much more difficult to get information out of the minister’s office” since Parliament returned with Chrystia Freeland as minister of finance.
On Oct. 26 opposition parties united, against strenuous Liberal objections, to pass a Conservative motion directing the government to turn over documents, emails and other records pertaining to the COVID-19 response to the House of Commons Health Committee. The investigation will cover a variety of topics, including the country’s level of preparedness for another pandemic.
Many Canadians feel that a finance committee investigation is long overdue.
We are indeed through the looking-glass.