Pierre Poilievre: It’s time to move beyond Canada’s credit-card economy
December 8, 2020
By Pierre Poilievre
Finance Minister Chrystia Freeland delivers a fiscal update in the House of Commons on Nov. 30, 2020.PHOTO BY SEAN KILPATRICK/THE CANADIAN PRESS
Chrystia Freeland has an idea. It involves your bank account.She even has a trendy new buzzword for it: “pre-loaded stimulus.” She told BNN last week, “households do have quite a lot of money that they’ve saved because there hasn’t been that much to do in the pandemic.” We can’t have that! “And certainly, it would be great if that money could go to driving our recovery.” What an opportunity! “If people have ideas on how the government can act to help unlock that pre-loaded stimulus, I am very, very interested.” Somebody give her the keys to unlock our savings and fire them out a cannon. Imagine the stimulus!
To a government that brags about its $381 billion deficit, savings can only be a bad thing. The debt to GDP ratio will rise from 31 per cent last year to 56 per cent next year. That is below the 66 per cent ratio that led to a near-default in 1996. We are not yet off the cliff but getting close and moving there fast.
We are not yet off the cliff but getting close
And low interest rates are only a short-term salvation. Only about 15 per cent of this new debt is locked in at low rates for the long run, making it vulnerable to unexpected rises in lending rates.
The only way to service all the debt is income — income from investment in software, pipelines, factories, ports and other assets that produce wages for workers and incomes for governments. But the Bank of Canada projects that business investment will grow a minuscule 0.8 per cent over the next two years, failing to recover to 2019 levels until at least 2023. On the other hand, consumption will grow 4.7 per cent, five times faster than investment.
All told, consumption and government spending — which consume wealth and add to debt — will represent 80 per cent of economic growth in the next two years, while investment and net export growth — which produce wealth — will be less than zero.
The Bank of Canada projects that business investment will grow a minuscule 0.8 per cent over the next two years.PHOTO BY RANDY VANDERVEEN
Already, workers are paying the price, as business investment per worker is $15,000 in Canada but $26,000 in the United States. How can Canadian workers compete with their American counterparts who get $11,000 per year more invested in tools and equipment? More output, wages and jobs will head south.
No wonder we are headed for Canada’s sixth consecutive trade deficit and the Bank of Canada reports that our trade balance will worsen over the next two years, as imports outgrow exports.
This is the credit-card economy: consume more than produce; buy more than sell; borrow from the world to buy from the world; send money and jobs out to bring foreign goods in. Others get the jobs, investment and savings. We’re left with the debt.
Continuing in this way will force Canadians to pay interest to wealthy (often foreign) lenders. Worse, unexpected interest rate hikes could mean a crisis.
There is only one solution: paycheques
There is only one solution: paycheques.
Yes, it is that simple.
Not easy, but simple.
Only paycheques will allow people to pay off their colossal debts. Paycheques afford families good childcare, housing, post-secondary schooling, nutrition and recreation. Paycheques produce tax revenue, reduce government debt burden and protect our cherished safety net.
They must be real jobs, in real industries, with real products and services, which real customers buy in the real world. (That rules out politically trendy, money-losing industries propped up by endless government subsidies that cost more than they are worth — the wind and solar power schemes in Ontario come to mind).
To make it happen, government must reform the tax system to end the war on work. Right now, low-income people face marginal effective tax rates of up to 80 per cent when you count both the clawbacks and taxes. That punishes work and traps people in poverty. Simpler, lower and fairer taxes on labour will empower people to earn more.
To allow them wages in the first place, we must speed up approval for job-creating projects, large and small. “Canada ranks 34th out of 35 OECD countries in terms of the time required to obtain a permit for a new general construction project —168 days longer than the United States,” reports the Business Council of Canada. All three levels of government should commit to offer the world’s fastest permits to build factories, shopping centres, business parks, mines and more.
The federal government should approve the now-shelved $20-billion Teck Frontier Mine to allow Teck Resources to either restart the project or sell the permit to another company, writes Pierre Poilievre.PHOTO BY NORM BETTS FOR BLOOMBERG NEWS
The federal government could fast-track decisions on the $14 billion LNG gas project in the Saguenay region of Quebec, on top of another $6 billion in similar projects awaiting sign-off across Canada. Approving the now-shelved $20 billion Teck Frontier Mine would allow Teck Resources — which threw up its hands after years of federal delays — to either restart the project or sell the permit to another company.
Removing regulatory and tax penalties that block First Nations communities from building enterprises and developing resources would unleash the potential of our youngest demographic of workers.
Repealing the No-More-Pipelines Bill C-69 and West Coast energy shipping ban would empower Canada to sell its resources on the world market at full price.
The federal government could bring the provinces together to push occupational licensing bodies to quickly recognize the credentials of foreign-trained, but highly qualified, immigrant doctors, mechanics, architects and other skilled newcomers now sidelined by bureaucratic delays.
As for those savings Freeland wants to unlock: they are fine where they are. Banks lend them to small businesses, which hire workers. Savings become investment, which become wages, which become yet more savings. We need more, not less, of that.
So, let’s put down the credit card and pick up paycheques.
We have work to do.
Pierre Poilievre is the Conservative Shadow Minister for Finance.