Government can’t solve affordability crisis

Hey there, time traveller!
This article was published 11/09/2023 (769 days ago), so information in it may no longer be current.

Why is the problem most discussed by all parties in the Manitoba general election campaign — affordability — the one problem government has the least ability to fix?

The way all the parties are obsessing about affordability, you would think they actually think they could, with a wave of their newly elected hands, reduce the cost of gasoline, lower the cost of groceries and get you a great deal on your next mortgage.

However, the truth is that government has actually had very little to do with creating the affordability crisis we see today. And as a result, government has few tools to fix this problem.

Inflation, which has hammered the cost of both goods and services, is the result of complex economic dynamics that have little — if not nothing — to do with government policy.

A prolonged period of pre-pandemic economic growth, combined with historic wage increases and bottlenecks in the global supply chain when COVID-19 was in full bloom, set the stage for inflation. Central banks responded with interest-rate hikes that curbed inflation but added to the affordability crisis.

Can government do much to lighten the load we’re all feeling now? Not really.

Can government do much to lighten the load we’re all feeling now? Not really.

That’s obviously a concern to a lot of Canadians. But it’s particularly concerning if you’re on the lower rungs of the income ladder.

Most middle and all upper income earners can still “afford” to heat their homes, feed their families and put gasoline in their vehicles. Those in lower income brackets, however, cannot pay for some or all these things.

Unfortunately, the parties vying for supremacy in the Manitoba election do not seem to understand that the affordability crisis looks much different depending on how much money you make.

Of all the parties, the Liberals have probably done the best job of focusing their affordability measures on people who really need the help.

Liberal Leader Dougald Lamont has advocated policies to improve access to daycare and control rents. And the Liberals have proposed a sliding scale of income tax cuts to ensure “those who have smaller incomes will receive larger rebates.”

The NDP has also promised more access to daycare and tax credits and protections for renters. However, the NDP has not been able to resist the siren call of tax cuts.

NDP Leader Wab Kinew started in the pre-writ period with pledges to temporarily cut gas taxes and freeze the price of electricity. Although both would have only modest benefits to individuals, they would both have significant impacts on government revenues.

It’s important to acknowledge that all Manitobans, regardless of income, are feeling a pinch from the high cost of living.

The gas tax holiday would cost $165 million, which is a significant sum when the NDP is also pledging hundreds of millions of dollars in new spending and a balanced budget within four years. And the electricity rate freeze would require an NDP government to forego about $40 million in income Manitoba Hydro contributes to general revenue.

The Tories have been most aggressive on tax reduction, with cuts to income tax and the payroll tax that employers are charged to support health and post-secondary education.

Payroll taxes currently generate more than $440 million a year — a huge sum to cut out of general revenues. The Tories promised to eliminate this tax over eight years, but even on that schedule, the treasury will be lighter by hundreds of millions of dollars each year.

Will all this make life more affordable? In eliminating billions of dollars in current and future tax revenues, the Tories will provide little or no benefits to the lowest-income earners but significant benefits to Manitobans who are, for the most part, successfully carrying the higher cost of living.

It’s important to acknowledge that all Manitobans, regardless of income, are feeling a pinch from the high cost of living. But the proposals made in the campaign to date really do not address the needs of those people who are not making ends meet.

One reason for that failure is that the parties are pandering to higher-income Manitobans because — and there’s no way of getting around this troubling reality — they are more likely to vote than lower-income citizens. For any party that’s in the election to win it, there is only so much you can accomplish by focusing on people who don’t or won’t vote.

The worst part of the affordability obsession is that it really ends up reducing both the scope and effectiveness of core government programs.

If that seems incredibly cynical, it is. But then, so is electoral politics.

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The worst part of the affordability obsession is that it really ends up reducing both the scope and effectiveness of core government programs, something that should be of concern to every Manitoban regardless of income level.

Less revenue in the future means fewer funds available for health care, public education and support for such things as infrastructure and local government. Long wait lists for elective surgeries, increasing fees charged at the classroom for school supplies, bumpier roads and shakier bridges, and higher property taxes are ultimately the cost of indiscriminate tax cuts.

And let’s also remember that less revenue in the future means fewer protections against unforeseen existential threats, including natural disasters prompted by climate change, public health crises such as COVID-19, or global economic slowdowns that require government supports and stimulus. Less revenue means fewer protections against those scourges.

Making life more affordable by making government less viable is, in the end, not much of a promise.

dan.lett@winnipegfreepress.com

Dan Lett
Columnist

Dan Lett is a columnist for the Free Press, providing opinion and commentary on politics in Winnipeg and beyond. Born and raised in Toronto, Dan joined the Free Press in 1986.  Read more about Dan.

Dan’s columns are built on facts and reactions, but offer his personal views through arguments and analysis. The Free Press’ editing team reviews Dan’s columns before they are posted online or published in print — part of the our tradition, since 1872, of producing reliable independent journalism. Read more about Free Press’s history and mandate, and learn how our newsroom operates.