Tory path of post-decision criticism leads nowhere

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This article was published 28/11/2022 (1056 days ago), so information in it may no longer be current.

Marty Morantz thought he had a “gotcha” moment and wanted to share it with the world.

“Watch me question the governor and deputy of the Bank of Canada on the cost of living crisis facing Canadians,” the Conservative MP, who represents the federal riding of Charleswood-St. James-Assiniboia-Headingley, posted on Twitter last week.

The gotcha moment Morantz thought he had was getting Tiff Macklem, governor of the Bank of Canada, to acknowledge that had the Trudeau government cut its deficit spending during the COVID-19 pandemic in half, Canada would have less inflation today.

“If the deficit spending had been half of that — $250 billion instead of $500 billion — would inflation have been less today?” Morantz asked Macklem, who spoke at the House of Commons finance committee Nov. 23.

“Yes,” Macklem responded, sending the Manitoba MP into a fit of excitement as he jumped on Twitter to announce what he thought was the unearthing of some new truth.

The line of questioning from Conservative MPs is designed to support their political narrative the federal government recklessly overspent during the global public health crisis and is largely — if not entirely — responsible for today’s inflation. They still use the juvenile “Justinflation” slogan like giggling junior high school students to make their point.

Never mind inflation is a worldwide phenomenon driven by many factors, including global supply chain disruptions and high fuel costs, the Conservative caucus is hell-bent on trying to convince Canadians the expensive head of lettuce at the grocery store is all the federal government’s fault.

With the benefit on hindsight, Macklem said governments and the central bank could have pulled back on fiscal and monetary stimulus sooner. If they did, we would have less inflation today, although no one knows how much less.

Paul Beaudry, Bank of Canada deputy governor, said the same thing during a speech earlier this year.

That kind of Monday-morning, armchair quarterbacking could apply to almost any economic situation.

It’s virtually impossible to know at the time when to end or begin fiscal and monetary stimulus because there’s always a lag. We will have the same debate in a year, or more, about whether the Bank of Canada went too far in raising interest rates or not far (or fast) enough to fight today’s inflation.

Economics is a social science; it’s driven by billions of human decisions made every day around the world, the nature of which are impossible to accurately predict. That’s why most long-term economic forecasts are wrong.

What we do know is the fiscal stimulus by the federal government, and to a lesser degree provincial governments, saved the economy from catastrophic collapse amid the COVID-19 pandemic.

That was the upside to the government intervention, which politicians such as Morantz choose to ignore. Government spending and expansionary monetary policy prevented bankruptcy and unemployment from occurring on a grand scale.

When Beaudry said during a speech in September fiscal and monetary stimulus could have ended sooner, he also pointed out the economy would have been in worse shape without additional federal spending: “Fiscal policy measures clearly prevented a worse outcome.”

Critics conveniently ignored that part of his message.

The problem with the Conservatives’ position is they refuse to say where they would have cut spending during the pandemic had they been in government.

Would they have offered businesses and not-for-profits less support and allowed more of them to go bankrupt? Would they have refused to provide out-of-work Canadians with temporary financial relief?

Which government programs would they have cut? Rent relief? Support to provinces? Payments to municipalities?

They don’t say because it’s far easier to criticize after the fact than to offer solutions.

Everyone knows expansionary fiscal and monetary policy is inflationary; it’s economics 101.

Economists also know there are many factors driving today’s global price increases. There are costs and benefits when governments and central banks stimulate a shaky economy, just as there are when central banks raise interest rates to fight inflation.

Until Morantz and the Conservatives can tell Canadians how they would have managed the pandemic differently, their criticisms are worthless.

tom.brodbeck@freepress.mb.ca