The economy under pressure
The Prime Minister’s idea of ‘fairness’ as he has titillated us with new budget spending (Budget Day April 16) lays the table for smaller slices of a smaller economic pie. I’m not sure if it’s an unrecognized side effect of the pandemic or just political nerdiness gone awry, but short sightedness has become epidemic. Short term fixes will not heal the economy.
Let’s define the playing field: Globally we are a strong and wealthy nation with magnificent natural resources and a strong and diversified economy.
But day-to-day we don’t compare ourselves to South Sudan or Burundi and say “hallelujah”. We compare ourselves to what we think we had in the fairly recent past or what we think we deserve now. On that basis, many of us are increasingly vocal about being short-changed.
Without question there are inequalities in the distribution of wealth and wellbeing in Canada. But Canada’s economy is not growing fast enough to satisfactorily redistribute income or to provide other perks. The unemployment rate is ticking upward, even as job vacancies rise. New immigrants are being welcomed less enthusiastically because so many of them in such quick succession is overtaxing our ability to house them or provide public services like education and healthcare. More people are using their credit cards more and higher interest rates are making that debt harder to pay down. Delinquency rates and loan defaults are rising. People with debt are not as optimistic about the future as people without debt. A different disconnect is that some of us are getting richer and the gap between rich and poor is widening. That leads many to anger when too many bills come in.
The last four years of the pandemic have deprived our youngest citizens of both an academic education and the life lessons learned from socialising with each other. There’s evidence that several hours devotion a day to Tiktok, Youtube and X has changed the way adherents think. It’s not yet clear that the economy will respond to the same policy stimuli as it has in the past.
Ruling politicians’ reaction to all of the above is self-serving: they will be booted out of power if they don’t cater to short-term complaints of being short-changed. Demonstrations of this mindset is becoming hysterical. The federal government has chosen to consistently run deficits since the onset of the global financial crisis more than a decade ago. In the last decade-and-ahalf, combined federal and provincial debt has grown by over $1.0 TRILLION, or 85 per cent. Despite this, and in the interests of ‘fairness’, the federal government is offering $1 billion in low-cost loans, grants and student loan forgiveness. It is tripping over itself and the Constitution in its anxiety to quiet the restless masses. It’s usurping provincial rights when it offers better rental conditions, more daycare spaces, dental care for seniors, pharma for specific diseases. This doesn’t auger well for smooth federal-provincial relations and seamless federal-provincial policies to actually fix what ails the economy.
There are more studies than you would care to read that provide convincing evidence that the more governments borrow to spend, the less economic growth there is. This makes sense. Government debt expands borrowing costs. Higher borrowing costs reduce money available for government programs like healthcare. Private capital investment goes where incentives to invest are higher and interest rates are lower. Declining capital investment reduces productivity and future economic growth. Government now accounts for one-quarter of Canada’s economy; business spending, the prime driver of productivity, represents eight per cent.
No question the economic pie is shrinking. Mexico has overtaken Canada as America’s biggest trading partner. The value of what we produce each year is declining while that of our American neighbors is growing. Countries that used to be poorer than us are now richer.
The feds are teasing out their budget measures to appeal to younger Canadians who are most vocal in declaring that they are getting the shortest end of the economic stick. As presented, the measures will provide very little positive for the long term -all Canadians whether new, young or old can attest to that.
Without question there are inequalities in the distribution of wealth and wellbeing in Canada. But Canada’s economy is not growing fast enough to satisfactorily redistribute income or to provide
other perks.