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PM Trudeau’s “Monetary Policy” gaffe could cost the Liberals the election. But will it?

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8 minute read

Back in 1993 things were not going well for Canada’s Progressive Conservative Government.  Brian Mulroney’s government had served 2 mandates and Canadians were clearly ready to move on.  The Conservatives decided Kim Campbell would be the best leader to bring a renewed excitement to their reelection hopes.  Campbell was a fresh face and that was important to the party which was losing support quickly.  She was also from Vancouver, which was a nice change for the party normally represented by leaders from Ontario or Quebec.  Even more importantly, when she won the leadership she would become the first female leader of a country in North America.  As Canadians would discover just a few months later though, no one cared about any of that.  That campaign did not go well.  The Conservatives not only lost.  They were decimated right out of official party standing.  The governing party won just 2 seats in the entire nation (Jean Charest in Quebec, and Elsie Wayne in New Brunswick). Kim Campbell did not even win her own seat.  Henceforth the Reform Party represented the Conservative voice for the next two elections.

For one reason or another, Canadians simply did not connect with Kim Campbell.  One of the biggest gaffes of that election campaign came when a reporter pressed Campbell for details on an issue and she replied “The election is not a time to discuss serious issues.”  That was the wrong answer.  Despite what she may have truly meant, all Canadians heard was “I don’t need to explain anything to you.”.  That was exactly the wrong thing to say at the worst possible time.

Why bring this up now, 28 years later? Well Prime Minister Justin Trudeau has made his first major gaffe of this election campaign.   And for those who care about monetary policy (which should be everyone who pays taxes and works or has savings, etc) it’s very likely as stunning a statement as Kim Campbell made three decades ago.

First some background.  In 2021, Canadians find themselves in an astounding situation.  When the covid pandemic hit last year governments all over the world shut down their economies for weeks, and then months.  Government stimulus was the order of the day and Canada’s was among the most generous in the world.  People were paid to stay at home.  Businesses were paid to continue to provide jobs to people working from home.  Landlords were paid to keep tenants afloat.  All in all, government money is being spent at unprecedented rates.

To pay for all this the Trudeau government attempted to pass a bill through Parliament which would allow it to raise taxes at will without a budget and without even coming back to ask Parliament to present a plan or ask for approval.  That didn’t go over so well.  But instead of turning back the taps, or introducing a budget with higher taxes the government worked out a plan with the Bank of Canada.  How this works basically is that every month the Bank of Canada prints out a few billion dollars, and the government uses that to pay for all the stimulus they want.  Over the first year of covid that totalled about 350 Billion dollars!

The Bank of Canada has left the core function expressed in its mandate in order to print all this extra money.  Despite it’s best efforts to decouple inflation from the printing of extra money, it’s not working.  Canada’s inflation rate has been blowing through the target of 2% month after month after month.

This is the the mandate as expressed by the Bank of Canada itself on its website.

The Bank of Canada is the nation’s central bank. Its mandate, as defined in the Bank of Canada Act, is “to promote the economic and financial welfare of Canada.” The Bank’s vision is to be a leading central bank—dynamic, engaged and trusted—committed to a better Canada.

The Bank has four core functions:

  • Monetary policy: The Bank’s monetary policy framework aims to keep inflation low, stable and predictable.
  • Financial system: The Bank promotes safe, sound and efficient financial systems within Canada and internationally.
  • Currency: The Bank designs, issues and distributes Canada’s bank notes.
  • Funds management: The Bank acts as fiscal agent for the Government of Canada, managing its public debt programs and foreign exchange reserves.

The Bank of Canada’s mandate is expiring at the end of this year and the new mandate could change.  Some are saying the Bank should continue to print money at an unprecedented rate and Canadians will learn to live with high inflation.  Considering this drives up the cost of everything from our homes and vehicles, to the food we eat there could hardly be a more important issue.  That’s why PM Trudeau’s response to this question in Vancouver this week is so stunning.  When asked if he would consider a higher tolerance for inflation going forward here’s what he said.

 

Reporter Question about the renewal of the Bank of Canada mandate due at the end of 2021:

-Do you have thoughts about that mandate?  Would you consider a slightly higher tolerance for inflation?

Prime Minister Justin Trudeau: “When I think about the biggest, most important economic policy this government, if re-elected, would move forward, you’ll forgive me if I don’t think about monetary policy.” 

Of course this spurred an immediate reaction from the opposition Conservatives.  That oppostion is perhaps best summed up in this address from Pierre Poilievre.

The question is, will Canadians punish Prime Minister Trudeau for either lacking basic economic knowledge, or not caring about it?  Kim Campbell failed to win her own seat, but she did not seem to connect well with Canadians at all even before that election campaign.  Justin Trudeau has so far been immune to gaffes.  Even though he’s had more than 5 years in government, millions of Canadians stand by him loyally.  Will this time be any different?

After 15 years as a TV reporter with Global and CBC and as news director of RDTV in Red Deer, Duane set out on his own 2008 as a visual storyteller. During this period, he became fascinated with a burgeoning online world and how it could better serve local communities. This fascination led to Todayville, launched in 2016.

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Business

Canadians should expect even more spending in federal fall economic statement

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From the Fraser Institute

By Jake Fuss and Grady Munro

The Trudeau government will soon release its fall economic statement. Though technically intended to be an update on the fiscal plan in this year’s budget, in recent years the fall economic statement has more closely resembled a “mini-budget” that unveils new (and often significant) spending commitments and initiatives.

Let’s look at the data.

The chart below includes projections of annual federal program spending from a series of federal budgets and updates, beginning with the 2022 budget and ending with the latest 2024 budget. Program spending equals total spending minus debt interest costs, and represents discretionary spending by the federal government.

Clearly, there’s a trend that with every consecutive budget and fiscal update the Trudeau government revises spending estimates upwards. Take the last two fiscal years, 2023/24 and 2024/25, for example. Budget 2022 projected annual program spending of $436.5 billion for the 2023/24 fiscal year. Yet the fall economic statement released just months later revised that spending estimate up to $449.8 billion, and later releases showed even higher spending.

The issue is even more stark when examining spending projections for the current fiscal year. Budget 2022 projected annual spending of $441.6 billion in 2024/25. Since then, every subsequent fiscal release has revised that estimate higher and higher, to the point that Budget 2024 estimates program spending of $483.6 billion for this year—representing a $42.0 billion increase from the projections only two years ago.

Meanwhile, as spending estimates are revised upwards, plans to reduce the federal deficit are consistently pushed off into later years.

For example, the 2022 fall economic statement projected a deficit of $25.4 billion for the 2024/25 fiscal year, and declining deficits in the years to come, before reaching an eventual surplus of $4.5 billion in 2027/28. However, subsequent budgets and fiscal updates again revised those estimates. The latest budget projects a deficit of $39.8 billion in 2024/25 that will decline to a $26.8 billion deficit by 2027/28. In other words, though budgets and fiscal updates have consistently projected declining deficits between 2024/25 and 2027/28, each subsequent document has produced larger deficits throughout the fiscal outlook and pushed the timeline for balanced budgets further into the future.

These data illustrate the Trudeau government’s lack of accountability to its own fiscal plans. Though the unpredictable nature of forecasting means the government is unlikely to exactly meet future projections, it’s still reasonable to expect it will roughly follow its own fiscal plans. However, time and time again Canadians have been sold a certain plan, only to have it change dramatically mere months later due to the government’s unwillingness to restrain spending. We shouldn’t expect the upcoming fall economic statement to be any different.

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International

Trump appoints Elon Musk, Vivek Ramaswamy to lead new Department of Government Efficiency

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From LifeSiteNews

By Emily Mangiaracina

The president-elect has set a deadline of July 4, 2026, to ‘drive out the massive waste and fraud’ in the U.S. government.

President-elect Donald Trump announced that Elon Musk will lead a new Department of Government Efficiency (DOGE) with businessman and former Republican presidential candidate Vivek Ramaswamy.

“Together, these two wonderful Americans will pave the way for my Administration to dismantle Government Bureaucracy, slash excess regulations, cut wasteful expenditures, and restructure Federal agencies — Essential to the ‘Save America’ Movement,” Trump announced Tuesday on Truth Social.

Trump explained that the agency will “provide advice and guidance from outside of government and will partner with the White House and Office of Management & Budget to drive large scale structural reform, and create an entrepreneurial approach to government never seen before.”

The president assigned the duo a deadline of July 4, 2026, to “drive out the massive waste and fraud” that plagues our government budget, which has reached a mammoth size: $6.5 trillion per year.

Mogul and X owner Musk, who has been outspoken about the big problem of government waste, noted Tuesday that if the government is not made efficient, the country will go “bankrupt.”

He reposted a clip from a recent talk he gave in which he explained that not only is our defense budget “pretty gigantic” — a trillion dollars —but the interest the U.S. now owes on its debt is higher than this.

“This is not sustainable. That’s why we need the Department of Government Efficiency,” Musk said.

The U.S. debt has doubled since 2015 to reach $35.46 trillion, according to statistics shared by investor Mario Nawfal.

Musk has also shared to X reports that the Government Accountability Office “estimates the federal government wastes $247B in taxpayer money each year,” and that the Department of the Treasury reported $24.5B in “unreconciled transactions” — which means unknown items — in the past.

Ramaswamy has similarly called for a “massive downsizing” of government bureaucracy after his appointment to DOGE.

Musk responded on X, “This is the only way.”

Ramaswamy has made clear, as has Musk, that cutting regulations is a key part of their mission at DOGE. Ramaswamy maintains that “eliminating bureaucratic regulations isn’t a mere policy preference” but “a legal *mandate* from the U.S. Supreme Court.” He cited on X the Supreme Court decision that, for example, “agencies cannot decide major questions of economic or political significance without ‘clear congressional authorization.’”

Musk shared Tuesday that all DOGE actions “will be posted online for maximum transparency,” adding, “Anytime the public thinks we are cutting something important or not cutting something wasteful, just let us know!”

Commentators have observed that Musk has already demonstrated a knack for organizational efficiency through his streamlining of the social media platform Twitter, which Musk rebranded as X.

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