Pierre Poilievre has outrageous ideas about the Bank of Canada. His party — and the country — deserve better
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Hey there, time traveller!
This article was published 12/05/2022 (392 days ago), so information in it may no longer be current.
Pierre Poilievre finally went there.
At the first Conservative leadership debate, he said out loud what he had been saying privately, calling for the firing of Bank of Canada governor Tiff Macklem — and simultaneously sucking all of the oxygen out of the room, leaving no air for anyone else to come up with better ideas for the economic recovery.
The promise — or threat — to axe Macklem was the logical extension of many months of Poilievre lashing out at the central bank, accusing the institution and its leader of collusion with the Liberal government and the deliberate exacerbation of inflation for political purposes.
Never mind that there’s no logic in the call for Macklem’s head, in and of itself. It’s such an outrageous and irresponsible idea, with so many implications for Canada’s economic stability and reputation — let alone prosperity — that the candidates and the thinking public just can’t leave it alone.
Let’s set aside Poilievre’s nonsensical statements for a moment to consider what we’re left with if the Conservative party wants to hang onto its reputation as good economic managers.
Despite all of the animosity among the leadership contenders, there seems to be a vague consensus that the Conservative party of the future would stand for cutting taxes and somehow balance the budget in short order.
The consensus stops there, though, and even under the pressure of Wednesday’s leadership debate, voters looking for a small-c conservative approach to recovery and economic stewardship were likely left feeling empty-handed.
Patrick Brown called for major increases in immigration, Jean Charest sees national unity as the prerequisite to everything, Roman Baber wants to end federal equalization payments. They are all upset about the cost of housing, and the cost of living more generally, and they all want the world to appreciate Canada’s natural resources.
But strip away the Macklem mayhem and the bite-sized promises, and the Conservative vision of the future economy that we’re left with is a vague, tax-cutting, deficit-reducing notion that is meant to eventually lead to more prosperity — we’re just not sure how.
That recipe of cutting taxes and balancing the budget is missing some key ingredients which could make all the difference.
For one thing, the recipe doesn’t always stand up when voters get involved. Erin O’Toole competed in the last Conservative leadership race on similar ideas, but he edged away from them when he had to put together an election platform, which showed deficits and spending that rivalled those of the Liberals.
And regardless, the only ways a government can cut taxes and balance the books at the same time are by dramatically reducing the size of government, significantly boosting growth over the long term, or some combination of the two.
That’s where the Conservative candidates need all of the oxygen in the room they can get. As numerous governments and small-c conservative political leaders have shown over time, simply cutting taxes does not automatically imply growth, prosperity or smaller deficits.
The theory — a traditional approach to supply-side economics practised by the likes of Ronald Reagan and Margaret Thatcher — has it that by cutting taxes, especially corporate taxes, companies and investors will invest more, boost growth and productivity, and be in a position to make more money, create high quality jobs, and make their country more competitive. Eventually, the tax cuts pay for themselves, because companies are creating so much wealth.
But it hasn’t really worked out that way.
Reagan’s tax cuts led to big deficits, and endless studies have found there’s often ambiguous correlation between cutting taxes and economic growth. Charest has touted his record as premier of Quebec on that front, but he also paired tax cuts with huge spending on infrastructure, even as the province’s debt load remained high.
So if you’re going to cut taxes and bet the deficit and debt will shrink at the same time, governments need do a lot more than just hope that growth will take care of the shortfall.
But they’re not really discussing growth, and Canada’s tepid record on that front. Should federal incentives be used to attract investment? Should Ottawa subsidize desired industries or struggling national treasures? Should governments move aggressively beyond subsidies and put themselves at the centre of production and demand, like the Liberals are doing with electric vehicles? Will simply cutting red tape — the Conservatives’ traditional go-to answer — result in more economic activity?
The candidates haven’t really explored these issues yet — although they’re quick to say there’s loads of time left in the leadership race, and they’re only just getting their feet wet.
Fair enough. The thing is, the Conservatives’ economic agenda is being driven right now by the controversy around Poilievre and his views on the Bank of Canada, inflation and bitcoin. This is a culture war within the Conservative party itself, rather than a contest to see who can best rekindle the economic credentials that stood Conservatives well electorally in the past.
The Liberals, after six years of governing and more recently lurching through the pandemic, have half-heartedly adopted a growth stance. They have set aside billions of dollars for clean energy companies, are designing a couple of new growth funds, and their most recent budget sets out improved productivity as a priority.
But fiscally minded Liberals and progressive conservatives have both felt neglected over the past few years, seeing an inclination to spend on social programs rather than growth on the left, and a populist, reactive narrative on the right.
The political opportunity for a sensible, growth-oriented Conservative leader with solid ideas about how to reshape Canada’s economy as we emerge from the pandemic is large. But that opportunity will be squandered if Conservatives can’t catch their breath after their Poilievre-inspired hyperventilating.
Heather Scoffield is the Star’s Ottawa bureau chief and an economics columnist. Follow her on Twitter: @hscoffield