NDP ‘affordability’ measures politically wise but misdirected

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This article was published 19/11/2024 (354 days ago), so information in it may no longer be current.

It is not known whether Premier Wab Kinew is a fan of Isabella M. Weber, a University of Massachusetts associate professor of economics. But even if he does not know about her, Kinew seems to be on the same wavelength.

Last week, Weber wrote a definitive analysis of inflation and its impact on politics for the New York Times. Although it’s worth reading all the way through to the end, the best line was the first one.

“Unemployment weakens governments. Inflation kills them.”

Given his obsession with affordability measures — amplified once again in Tuesday’s speech from the throne — it’s not hard to imagine that underneath Kinew’s modern-cut suits, he is wearing a T-shirt with that adage printed in bold letters.

At a news conference Tuesday just an hour or so before the throne speech was delivered in the legislature, Kinew made it clear his government has a laser-like focus on battling the issue that is ravaging incumbent governments all over the planet.

To add to previous affordability measures, starting in 2025, the Kinew government will freeze Manitoba Hydro electricity rates for one year.

“The major theme for us this year is affordability,” Kinew said even before the reporters in attendance had a chance to ask a single question.

The freeze on electricity rates is the second major affordability measure introduced by Kinew’s government. In his first year, he pinned his affordability hopes to a much-debated gasoline tax holiday.

Even though the premier’s decision to remove the 14-cent-per-litre provincial levy on gas cost the treasury more than $300 million — money desperately needed for things such as health care, education and infrastructure — Kinew has defended it as an affordability silver bullet, the sole reason why Manitoba has had the lowest inflation in Canada.

There is little doubt that removing the gas tax provided some relief, but it’s hardly the only reason inflation receded.

Inflation is a global phenomenon that doesn’t rise or fall in lockstep with any single government’s policies. Kinew knows this, but he also knows political opportunity when he sees it. Connecting the dots on gasoline taxes and inflation was just too good to pass up.

It is important to note that, notwithstanding the premier’s arguments, freezing Hydro rates and the gas tax holiday are more political strategy than affordability tool. These policies help to defuse allegations by the opposition Progressive Conservatives that Kinew is overseeing just another tax-and-spend NDP government.

By lowering taxes and freezing electricity bills, Kinew has given his government a powerful counterpoint to any hollow Tory attacks.

In fairness to the premier’s argument, could it not be argued that these measures also have a practical value in making life for Manitobans more affordable? Unfortunately, there is a fundamental flaw in the premier’s logic as neither gesture is targeted to help the people who most need relief from inflation.

The reality of the affordability crisis is that it has not impacted every Manitoban. Recent analysis by the Parliamentary Budget Office showed that over the last four years, the top 60 per cent of tax filers actually gained buying power during the so-called inflation crisis thanks to higher wages and investment income. The bottom 40 per cent of tax filers, and those who don’t earn enough to pay taxes, are the ones who have been hammered by inflation.

And what of those on the bottom rungs of the income ladder? If you’re having trouble paying your electricity bill now, a freeze on rates is a questionable benefit. Life isn’t necessarily getting more expensive, but neither is it getting more affordable.

Kinew could have targeted both the gasoline tax holiday and freeze on electricity bills to the people who needed it the most. We know this because in their first budget, Kinew and Finance Minister Adrien Sala redesigned the former PC government’s much-celebrated and maligned education property tax rebate by capping the value at $1,500.

This prevented the wealthiest people with the biggest homes from getting many thousands of dollars in rebates and focusing the rebate on the lower-income homeowners who really needed it to make ends meet.

It would have been more complex to target the Hydro rate freeze by income, but it could have been done as a rebate payable to, say, everyone who already qualifies for a federal GST rebate. Gasoline tax rebates could have worked largely the same way.

These affordability measures are all about buying political insurance against future opposition attacks. The NDP is vulnerable to right-wing arguments that it’s made up, essentially, by a bunch of “tax-and-spend” socialists with no fiscal credibility.

And, if all the other things the Kinew government is doing are worthy and just, then perhaps taking some liberties with concepts such as inflation and affordability is no big deal.

Still, if the premier wants to really help Manitobans battle the high cost of living, he could do everyone a favour and spend some time identifying the people who really need the help.

dan.lett@freepress.mb.ca