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Trudeau’s Alternative Universe: Claiming the Carbon Tax is Not Inflationary Defies Belief

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From EnergyNow.ca

By Jim Warren

Back in March 2019, the average price for a pound of lean ground beef at five major chain grocery outlets in Regina was $4.71. In September 2024 lean ground at the five big chain outlets averaged $7.90 — a 68% increase over the past five years…  these price increases are a far cry from the official statistic for accumulated inflation of 21% over the same period.

Kudos to the Canadian Trucking Alliance (CTA). They have provided us with some valuable insight into the inflationary effects of Canada’s carbon tax.

This past August, the CTA published a brief to the federal government which among other things called for a moratorium on the carbon tax for diesel fuel.

In commenting on the brief, CTA president Stephen Laskowski said, “The carbon tax on diesel fuel is currently having zero impact on the environment and is only serving to needlessly drive up costs for every good purchased by Canadian families and businesses. The carbon tax needs to be repealed from diesel fuel until viable propulsion alternatives are available for the industry and the Canadian supply chain to choose from.”

The CTA estimates that as of 2024 the carbon tax on diesel adds an extra cost for long-haul truck operators of $15,000 to $20,000 or around 6% of per truck in annual operating costs. The brief to government claims a small trucking business with five trucks, “is seeing between $75,000 and $100,000 in extra costs due to the carbon tax.”

Obviously, truckers striving to remain solvent will be doing their utmost to pass carbon tax costs on to their customers. If the cost of the tax can’t be recouped by some trucking companies, we can bet there will be fewer of them operating over the coming years. As Laskowksi said, the carbon tax increased the cost of virtually every product transported by truck—which means  pretty well every physical good consumers purchase.

In light of the political beating the Liberals have been taking over the carbon tax, the Trudeau government has taken a tiny feeble step toward relieving the pressure on businesses. In October 2024 federal finance minister Chrystia Freeland announced the government’s intention to provide carbon tax rebates to businesses with fewer than 500 employees. That means many of Canada’s trucking companies will be eligible to recoup some of the carbon tax they have been paying since fiscal 2019-2020. Freeland says the cheques will be in the mail this December.

It sounds okay until you look at the fine print.

The payments will not reflect the amount of fuel a business uses or how much carbon tax it has paid over the past five years. The rebates will be based on the number of people a company employs and will be paid only in provinces where the federal fuel charge applies. An accounting business with 10 employees will receive the same carbon tax rebate as a small trucking business with 10 employees. A CBC news report pulled the following example from Freeland’s press release, “A business in Ontario with 10 employees can expect to receive $4,010…”

Freeland boasted, “These are real, significant sums of money. They’re going to make a big difference to Canadian small business.”

Freeland’s statement is patently false when it comes to trucking companies.

Let’s say that the 10 employee business is a long-haul trucking company based in Ontario. After paying the carbon tax on five or more trucks for five years, the business would receive a paltry $4,010 rebate. That light dusting of sugar won’t make the carbon tax any more palatable to the trucking industry. According to the CTA’s estimates, if the 10 employee long-haul trucking firm had just five trucks the carbon tax will have cost it approximately $400,000 in operating costs over the past five years.

Carbon tax costs are not the only inflation related frustration affecting Canadians. The way the federal government and its friends in the media describe inflation presents people with a warped view of what is happening to the cost of living. Media reports on inflation rarely reflect the lived experience of people trying to pay the mortgage, feed their families and drive to work.

Governments, and their media apologists, in both Canada and the US have been taking victory laps over the past year because the rate of inflation has decreased. It’s as though people have nothing to worry about because the cost of living this year isn’t increasing as fast as it was last year. Changes in the inflation rate may be important for statistical purposes but they don’t reflect reality for people who have been coping with increases in inflation over several years. Most people measure the difficulties caused by inflation by comparing how much more things cost today than they did three to five years ago. The figure regular civilians, as opposed to statisticians, use to assess increases in the cost of living is accumulated inflation. However, we still need to be cautious about the accumulated inflation rate that we get when using government data.

If we calculate the rate of accumulated inflation based on official annualized inflation rates from 2019 up to the midpoint of 2024. The accumulated increase over that five year period is around 21%. And, it is true that this number better reflects people’s perception of inflation than a statistical comparison indicating the rate of inflation fell from 3.9 % in 2023 to 2.61% by the mid-point of 2024. The problem is the 21% number still does not accurately reflect increases in the cost of many necessary goods and services that are impacting households. This is why according to political polls voters in Canada and the US aren’t buying government propaganda when it comes to inflation.

The economy, and by extension, the high cost of living was a major issue in the recent US federal election campaign. The Democrats did not do themselves any favours claiming Bidenomics had wrestled inflation to the ground simply because it wasn’t increasing as fast as it was a year ago.  A large number of voters in the US embraced former US president Lyndon Johnson’s maxim, “Don’t piss on my leg and tell me it’s raining.”

But wait, it gets worse. The basket of goods and services the Canadian government uses to calculate the cost of living index and the inflation rate fails to identify high increases in the prices for specific household essentials including many grocery staples. Similarly, official calculations for statistically weighted national average consumption of various products used to calculate the Consumer Price Index are skewed in favour of big urban centres. Montreal, Toronto and Vancouver are over represented. There is no way that the average annual consumption of gasoline for a household in downtown Montreal comes anywhere close to the amount used in most of Canada where public transit is scarce and distances are great. The result is the official accumulated inflation rate fails to show what many people are experiencing in most regions of the country.

Here is a good example of how published statistics don’t reflect the inflation shock that consumers experience at the grocery store.  Back in March 2019, the average price for a pound of lean ground beef at five major chain grocery outlets in Regina was $4.71. In September 2024 lean ground at the five big chain outlets averaged $7.90 — a 68% increase over the past five years. The price of rib eye steak increased by even more. Rib eyes averaged $14.91 per pound at the five stores in Regina in March 2019. This September, the average price for rib eye steak was $29.40 – a 97% increase over five years. Obviously, these price increases are a far cry from the official statistic for accumulated inflation of 21% over the same period. (FYI: the data presented here was derived from  Beef Business magazine published by the Saskatchewan Stock Growers Association. Each bimonthly edition of Beef Business features a retail beef price check)

Assuming we can find similar rates of accumulated inflation for other staples like dairy products and fresh vegetables it’s no wonder smart shoppers have been incensed over what’s going on with grocery prices and the cost of living (not to mention price increases for fuel, rents house prices and mortgage interest). Consumers have discovered today’s prices of $6.50 for a four litre jug of milk and $7.00 for a pound of butter aren’t going to be reduced simply because the rate of inflation has decreased form 3.69% to 2.61% over the past year. Using history as our guide, with the exception of rare periods of deflation such as the depression of the 1930s, it is unlikely we’ll see the price increases of the past few years come down other than for sales or loss leader strategies. And, while a 72 cent dollar might boost sales for some of our exports, it will add more than 25% to the cost of imported fruit and vegetables this winter,

Furthermore, the impacts of inflation are being more severely felt by Canadians today than they would have been a decade ago. This is because our per capita national income (using GDP as a proxy for national income) has been shrinking since 2014. That was the year oil prices fell into an eight year depression and the last full year before Justin Trudeau became Prime minister.

According to a 2024 Fraser Institute Bulletin authored by Alex Whelan, Milagros Placios and Lawrence Shembri, “Canadians have been getting poorer relative to residents of other countries in the OECD [a club of mostly rich countries]. From 2002 to 2014, Canadian income growth, as measured by GDP per capita, roughly kept pace with the rest of the OECD. From 2014 to 2022, however, Canada’s position declined sharply, ranking third lowest among 30 countries for average growth over the period.”

Canada’s per capita GDP/national income for 2024 is projected to be $54,866.05. According Whelan, Placios and Shembri, that is lower than per capita national income in the US, UK, New Zealand and Austrailia.

Only one US state, Mississippi, the poorest state in the union, has a per capita GDP/national income less than Canada’s. Mississippi’s total is $53,061. Other states considered poor by US standards such as Alabama and Arkansas have higher per capita GDPs than Canada. On average, Canadians have increasingly less money with which to buy more expensive goods and services.

The challenges Canadians have faced as a result of the high cost of living have coincided with the eight plus years that Justin Trudeau has been prime minister. The decline in per capita national income also occurred under Trudeau’s watch—in conjunction with Liberal policies designed to stifle growth in Canada’s petroleum and natural gas industries. What did the Trudeau Liberals think would happen to growth in per capita national income after they handcuffed our single most important export industry?

In the final analysis it’s a tossup. Do we have an inflation problem or is inflation just a symptom of our Trudeau problem?

Business

Cuba has lost 24% of it’s population to emigration in the last 4 years

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Quick Hit:

A new study finds Cuba has lost nearly a quarter of its population since 2020, driven by economic collapse and a mass emigration wave unseen outside of war zones. The country’s population now stands at just over 8 million, down from nearly 10 million.

Key Details:

  • Independent study estimates Cuba’s population at 8.02 million—down 24% in four years.
  • Over 545,000 Cubans left the island in 2024 alone—double the official government figure.
  • Demographer warns the crisis mirrors depopulation seen only in wartime, calling it a “systemic collapse.”

Diving Deeper:

Cuba is undergoing a staggering demographic collapse, losing nearly one in four residents over the past four years, according to a new study by economist and demographer Juan Carlos Albizu-Campos. The report estimates that by the end of 2024, Cuba’s population will stand at just over 8 million people—down from nearly 10 million—a 24% drop that Albizu-Campos says is comparable only to what is seen in war-torn nations.

The study, accessed by the Spanish news agency EFE, points to mass emigration as the primary driver. In 2024 alone, 545,011 Cubans are believed to have left the island. That number is more than double what the regime officially acknowledges, as Cuba’s government only counts those heading to the United States, ignoring large flows to destinations like Mexico, Spain, Serbia, and Uruguay.

Albizu-Campos describes the trend as “demographic emptying,” driven by what he calls a “quasi-permanent polycrisis” in Cuba—an interwoven web of political repression, economic freefall, and social decay. For years, Cubans have faced food and medicine shortages, blackout-plagued days, fuel scarcity, soaring inflation, and a broken currency system. The result has been not just migration, but a desperate stampede for the exits.

Yet, the regime continues to minimize the damage. Official figures from the National Office of Statistics and Information (ONEI) put Cuba’s population at just over 10 million in 2023. However, even those numbers acknowledge a shrinking population and the lowest birth rate in decades—confirming the crisis, if not its full scale.

Cuba hasn’t held a census since 2012. The last scheduled one in 2022 has been repeatedly delayed, allegedly due to lack of resources. Experts doubt that any new attempt will be transparent or complete.

Albizu-Campos warns that the government’s refusal to confront the reality of the collapse is obstructing any chance at solutions. More than just a demographic issue, the study describes Cuba’s situation as a “systemic crisis.”

 

Havana (Cuba, February 2023)” by Bruno Rijsman licensed under CC BY-SA 2.0 DEED.
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Tariff-driven increase of U.S. manufacturing investment would face dearth of workers

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From the Fraser Institute

By Jock Finlayson

Since 2015, the number of American manufacturing jobs has actually risen modestly. However, as a share of total U.S. employment, manufacturing has dropped from 30 per cent in the 1970s to around 8 per cent in 2024.

Donald Trump has long been convinced that the United States must revitalize its manufacturing sector, having—unwisely, in his view—allowed other countries to sell all manner of foreign-produced manufactured goods in the giant American market. As president, he’s moved quickly to shift the U.S. away from its previous embrace of liberal trade and open markets as cornerstones of its approach to international economic policy —wielding tariffs as his key policy instrument. Since taking office barely two months ago, President Trump has implemented a series of tariff hikes aimed at China and foreign producers of steel and aluminum—important categories of traded manufactured goods—and threatened to impose steep tariffs on most U.S. imports from Canada, Mexico and the European Union. In addition, he’s pledged to levy separate tariffs on imports of automobiles, semi-conductors, lumber, and pharmaceuticals, among other manufactured goods.

In the third week of March, the White House issued a flurry of news releases touting the administration’s commitment to “position the U.S. as a global superpower in manufacturing” and listing substantial new investments planned by multinational enterprises involved in manufacturing. Some of these appear to contemplate relocating manufacturing production in other jurisdictions to the U.S., while others promise new “greenfield” investments in a variety of manufacturing industries.

President Trump’s intense focus on manufacturing is shared by a large slice of America’s political class, spanning both of the main political parties. Yet American manufacturing has hardly withered away in the last few decades. The value of U.S. manufacturing “output” has continued to climb, reaching almost $3 trillion last year (equal to 10 per cent of total GDP). The U.S. still accounts for 15 per cent of global manufacturing production, measured in value-added terms. In fact, among the 10 largest manufacturing countries, it ranks second in manufacturing value-added on a per-capita basis. True, China has become the world’s biggest manufacturing country, representing about 30 per cent of global output. And the heavy reliance of Western economies on China in some segments of manufacturing does give rise to legitimate national security concerns. But the bulk of international trade in manufactured products does not involve goods or technologies that are particularly critical to national security, even if President Trump claims otherwise. Moreover, in the case of the U.S., a majority of two-way trade in manufacturing still takes place with other advanced Western economies (and Mexico).

In the U.S. political arena, much of the debate over manufacturing centres on jobs. And there’s no doubt that employment in the sector has fallen markedly over time, particularly from the early 1990s to the mid-2010s (see table below). Since 2015, the number of American manufacturing jobs has actually risen modestly. However, as a share of total U.S. employment, manufacturing has dropped from 30 per cent in the 1970s to around 8 per cent in 2024.

U.S. Manufacturing Employment, Select Years (000)*
1990 17,395
2005 14,189
2010 14,444
2015 12,333
2022 12,889
2024 12,760
*December for each year shown. Source: U.S. Bureau of Labor Statistics

Economists who have studied the trend conclude that the main factors behind the decline of manufacturing employment include continuous automation, significant gains in productivity across much of the sector, and shifts in aggregate demand and consumption away from goods and toward services. Trade policy has also played a part, notably China’s entry into the World Trade Organization (WTO) in 2001 and the subsequent dramatic expansion of its role in global manufacturing supply chains.

Contrary to what President Trump suggests, manufacturing’s shrinking place in the overall economy is not a uniquely American phenomenon. As Harvard economist Robert Lawrence recently observed “the employment share of manufacturing is declining in mature economies regardless of their overall industrial policy approaches. The trend is apparent both in economies that have adopted free-market policies… and in those with interventionist policies… All of the evidence points to deep and powerful forces that drive the long-term decline in manufacturing’s share of jobs and GDP as countries become richer.”

This brings us back to the president’s seeming determination to rapidly ramp up manufacturing investment and production as a core element of his “America First” program. An important issue overlooked by the administration is where to find the workers to staff a resurgent U.S. manufacturing sector. For while manufacturing has become a notably “capital-intensive” part of the U.S. economy, workers are still needed. And today, it’s hard to see where they will be found. This is especially true given the Trump administration’s well-advertised skepticism about the benefits of immigration.

According to the U.S. Bureau of Labor Statistics, the current unemployment rate across America’s manufacturing industries collectively stands at a record low 2.9 per cent, well below the economy-wide rate of 4.5 per cent. In a recent survey by the National Association of Manufacturers, almost 70 per cent of American manufacturers cited the inability to attract and retain qualified employees as the number one barrier to business growth. A cursory look at the leading industry trade journals confirms that skill and talent shortages remain persistent in many parts of U.S. manufacturing—and that shortages are destined to get worse amid the expected significant jump in manufacturing investment being sought by the Trump administration.

As often seems to be the case with Trump’s stated policy objectives, the math surrounding his manufacturing agenda doesn’t add up. Manufacturing in America is in far better shape than the president acknowledges. And a tariff-driven avalanche of manufacturing investment—should one occur—will soon find the sector reeling from an unprecedented human resource crisis.

Jock Finlayson

Senior Fellow, Fraser Institut
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