Premature aggrandization could end up biting premier in his gas tank

Hey there, time traveller!
This article was published 21/02/2024 (640 days ago), so information in it may no longer be current.

The longer that Premier Wab Kinew serves as Manitoba’s first minister, the more we learn about him. Like how his arms are just long enough to pat himself on the back.

On Monday, Kinew held a news conference to celebrate the fact that, according to Statistics Canada, Manitoba has the lowest inflation rate in the country at a remarkable 0.8 per cent, well below the national average of 2.9 per cent. For anyone concerned about high prices of just about everything, it was welcome news.

Kinew claimed the precipitous drop in inflation was due to his government’s decision to cut the 14-cent-per-litre provincial gasoline tax. On this point, Statistics Canada agreed that while prices for everything are still slowly rising across the country, the drop in the CPI here in Manitoba can be tracked back to this one policy.

Even so, Kinew had to ignore a lot of economic reality and fine print in the Statistics Canada announcement to engage in this act of self-adulation.

First off, gasoline costs less right now in most jurisdictions because crude oil prices have come down significantly. In January, when the NDP gas tax holiday kicked in, crude prices were 25 per cent lower than they had been at the peak in 2023. That means, even without the tax cut, gasoline prices would likely have been lower at the start of 2024.

And second, Kinew would do well not to conflate the Consumer Price Index with inflation.

The CPI used by Statistics Canada is the measurement of “price change by comparing, through time, the cost of a fixed basket of goods and services.” There are eight components to the “basket” used by the agency: food; shelter; household operations, furnishings and equipment; clothing and footwear; transportation; health and personal care; recreation, education and reading; and alcoholic beverages, tobacco products and cannabis.

If you follow the CPI closely, you will know dramatic increases or decreases in the cost of any of the eight components can dramatically change the CPI rate. Which is what happened in Manitoba.

That does not mean the price of everything measured by CPI is coming down.

Anyone who has bought groceries recently, bought an electric motor vehicle or travelled out of the country can attest that the cost of all these things remain alarmingly high even though Manitoba gasoline prices are lower.

This is something Kinew and his handlers obviously know. And when you realize that it has become fashionable for opposition parties to eviscerate governing parties when inflation increases through no fault of the government, you can forgive the Kinew government for taking political advantage of this highly qualified accomplishment.

However, what Kinew needs to remember is that voters and the news media will remember gratuitous acts of self-adulation. And when the needle begins to move in the other direction — which it very well might when the tax holiday is over — there will be a long line of people ready to pounce.

This is, in general terms, the problem with temporary tax relief.

Once initiated, the public rightly adopts the lower tax rate as the new normal. In the case of gasoline taxes, Manitobans have already adjusted to seeing gas prices in the $1.20 to $1.25 range, down from the previous month’s peak when gas prices were nearly $1.40 in some regions.

If and when Kinew attempts to restore the full gas tax, he will do so knowing that Manitoba drivers will reminded of his decision to backtrack every time they drive past a gas station’s posted price.

That will not only draw the ire of many among the citizenry but also provide critics — particularly those on the right side of the spectrum — with a powerful political truncheon.

And there is always the possibility that a full restoration of Manitoba’s 14-cent-per-litre gas tax will bump the CPI noticeably higher and open the Kinew government to allegations it is worsening inflation.

In Alberta, United Conservative Party Premier Danielle Smith decided that after 18 months of gas tax holiday, she would bring back the per-litre levy on Jan. 1. The previous tax was 13 cents; the restored tax was lower, at nine cents.

That attempt to ease Albertans back into paying gasoline taxes has exposed the Smith government to aggressive criticism from the Canadian Taxpayers Federation, which called the restoration of the tax “mind boggling,” and from the Alberta NDP, an allegation that Smith had betrayed her principles.

Aggravating Smith’s political suffering is the fact that the return of provincial gasoline tax helped bump Alberta’s inflation rate to 3.4 per cent — the highest in the country — from 3.0 per cent at the end of 2023. Not a dramatic increase, but a fact that will undermine claims her government is doing everything it can to make life more affordable.

The impact of the gas tax holiday on the CPI in Manitoba was worth, at most, a news release.

Trotting out the premier at a news conference to make a factually tenuous argument about the value of lower gasoline taxes is not only gratuitous, it will guarantee that Manitobans will remember exactly who is at fault when gas prices go back up again.

dan.lett@winnipegfreepress.com