Hugh Mackenzie
Huntsville Doppler
Do we care?
When it comes to federal politics, this has been quite a week and I cannot help but wonder how many Canadians really give a damn.
First, we had the government’s economic statement. It was devastating. Much of it necessary, but, devastating nevertheless.
None of us were ready for a pandemic. But the Trudeau Government was less than prepared, not even for a widely anticipated slowdown in the economy, let alone a pandemic. As Andrew Coyne said in the Globe and Mail, they should have been paying off debt and preparing for an economic turndown for the past five years.
But they didn’t. Instead, as more than one critic has said, they were spending money like kids in a candy store and, in some ways, they still are. When first elected, they projected a deficit of $10 billion. By September of last year, they had managed to turn that into a deficit of $28 billion, almost tripled.
And now, with the pandemic spending, putting it all together, we face a deficit of $343.2 billion and a national debt of more than one trillion dollars! Here is what that looks like: $1,000,000,000,000.
And don’t kid yourself, it is not pretend money. One way or another, it will have to be paid back. At this point, it represents a debt of about $26.6 thousand for every man, woman and child in Canada. That is without any new spending or pandemic surprises.
When the economy is seriously threatened, as it is in a recession, a war or a pandemic, it is necessary for the government to spend money, especially to help those who are adversely affected. Few people will argue with that. It would be helpful if they were prepared for it, but in any event, they have to do it.
But even during a pandemic, it is hard to determine, with a government who has a demonstrated penchant for spending money, how much of it is really necessary and how much is thrown in under the guise of crisis spending for political reasons.
Robert Benzie, a Toronto Star journalist and often, in my view, a Liberal apologist, said it best. “There is nothing Justin Trudeau likes more than handing a cheque to millions of voters…but at some point, someone has to pay the piper.” He has that right.
The more challenging the crisis, the more governments tend to grab power and the more potential there is for the mismanagement of public funds and therefore comes the real need for effective accountability and oversight by Parliament.
When that is supressed, as it has been by the Trudeau Government, then you know that the table is set for things that should not happen.
There are a number of examples where the Trudeau Government, under the COVID-19 umbrella, have given away money—gifts really—where there was not a serious need but certainly a political or personal advantage. I have outlined some of these in previous columns. But the granddaddy of them all is the ever growing WE Charity scandal.
There are of course the issues of ethics and conflict of interest; the sole sourcing without competition of a $900-million contract, including a $19-million fee to an organization that paid out more than $300,000 to the prime minister’s mother, wife and brother as well as employing children of the minister of finance, neither of whom thought it necessary to distance themselves from the matter. It certainly doesn’t sound like an arms-length relationship to me.
But let others take that on. Frankly, I am more concerned about the $900 million of taxpayers’ money, added to our debt, that went to WE Charity for a “volunteer” student jobs program. Why was it necessary?
There was already in place an initiative called the Canada Summer Jobs Program which provides grants for student summer jobs. In addition, there is a COVID-19 program to assist students with costs related to college and university fees. Further, there appears to be no shortage of summer jobs for students who really want one. Just talk to organizations who have a role in helping these young people find employment. In many cases, there are more jobs available than there are people to fill them.
So, what is really going on here? What is it we don’t know and, assuming everything is on the up and up, why was it important for the government to give more money to WE Charity and yet another student program than they have given to Canada’s farming community who have suffered significantly from the COVID-19 pandemic?
Two comments have caught my attention this week. The first was from Prime Minister Trudeau who said, in defense of the projected $343.2 billion deficit, “We [the government] took on debt so Canadians don’t have to.”
He really doesn’t get it and there’s the rub. The government does not have a dime of its own. When they spend money, they spend Canadians’ money, and when they incur debt, they incur it on the shoulders of Canadians who must pay it back.
The second one came from someone who commented on Doppler about my article last week. He said this: “Thanks for demonstrating once again the truth about Conservatives. You care more about money than you do about people who struggle to survive.”
Actually, as I see it, Conservatives care as much about people who struggle to survive as anyone else. The difference is that they believe there is a need to have the money to pay for it. Without that as a priority, without controlled and strategic spending, the well will eventually run dry.
That is not a theory. That is an inevitable fact. Then the very people who need help from government will not get it. The cupboard will be bare. We need to think seriously about that.
It really is something we ought to give a damn about.
Hugh Mackenzie
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Seems like the electorate doesn’t mind corruption in government, providing that it’s their party of choice that is being corrupt.
Sorry, total Cdn. debt likely hitting 400% of GDP now… not 300%.
It’s total debt that matters most, not net debt or just Fed debt. Add up all gov debt in Canada, and you find Canada is one of the worst performers since 2015, and now after heavy COVID shut down and gov spending impacts, it has shot up to over 120% of GPD. Total debt, including business and consumer is now probably well over 300% of GDP ( it was about 360% before COVID), one of the worst in the OECD.
Don’t be fooled, this unsustainable trend is going to end badly for Canada (and many other very indebted countries) at some point in the not too distant future.
I am not getting any handouts. I am paying my bills as they come in, on time, including my income and property taxes. As a retiree who scrimped and saved to have a small nest egg to live on, it irks me that I will be on the hook for years to help pay back all of this assistance being placed so freely into the hands of others.
A recently retired acquaintance who took a voluntary exit package from his employer was “lucky” enough that his severance and subsequent EI ran just long enough that he actually qualified for CERB. According to the published criteria, he does indeed seem to qualify. They even specifically reviewed his case and told him so.
This is despite the pandemic having had nothing to do with him being out of work, nor did he have any intention of going back to work. I wonder how many other people qualified for and collected some of these handouts without needing them, handouts which I will now be required to help pay back.
Financial assistance, in some form, was obviously necessary. But any such handouts should have been in the form loans, not gifts. People should be responsible for their choices, and for their lack of preparedness. The movie kmrecipients of the handouts should be the ones – the only ones – who will have to pay them back down the road.
Bill Beatty (July 13, 2020 at 9:53 am) said that
“Surely Mr. Kitching you refer to Bill Morneau and Trudeau Jr. and there [sic] wealthy buddies at SNC when you reference paying their share. ”
My quick response is that Liberals and Conservatives and “their wealthy buddies” are all “small c” conservatives, in that these LibCons have designed and maintain a system that ensures the rest of us pay to support their overprivileged lifestyle.
As for Mr Beatty’s drive by comment:
“PS…Conservatives have always cared and they have Ethics…3 strikes and you’re out !”
The pandemic has revealed who pays the price for the comfort of the rich, we’re expected to work for them, and to die of covid19 for them, because our health and safety isn’t worth any money to them…that’s not caring and it is unethical and immoral…there will be a reckoning.
As Andrew MacDonald has outlined, high level finance is a complicated subject. I do not pretend to understand it, but we are fortunate to have some very smart career civil servants in the Federal Department of Finance that do understand the subject, and their job is to advise our elected representatives.
Gross Debt is what Canada owes to self and others. Net Debt is what we owe to others. Our gross debt includes over $400 billion in CPP funds that we owe to ourselves. In 2019, Canada’s net debt (owed to others) was $768 billion Cdn and was 34% of our $2,200 billion Cdn in GDP. That Net Debt to GDP ratio was substantially lower than all other G7 countries.
Google “Government of Canada – Debt Management Strategy for 2020-2021”
You will find a chart by the Federal Department of Finance that shows Canada’s net debt to GDP was the lowest in the G7 before Covid-19 relief spending. It shows that every country is doing similar Covid-19 relief spending. And It shows that Canada’s net debt to GDP ratio will remain substantially lower than all other G7 countries AFTER planned Covid-19 relief spending.
23 of the wealthiest people in America have just come forward with their wallets open to assist the government any way they can; most specifically in combatting the pandemic. Mr. Trump is far from deserving of such largesse, considering the fashion in which he has bollixed not only the covid-19 crisis; but the BLM protests, the economy, the early reopenings, and the climate crisis (cancelling the Clean Air- and the Clean Water Act.
Where are all our putative saviours? And exactly how has Trudeau suppressed effective Parliamentary oversight? Yes, he attempted to bypass Parliament early in the pandemic. That was unforgivable and summarily withdrawn. Unless he somehow sneaked The War Measures Act by me, I believe that Mr. Scheer and the toothless Tories are still free to question anything, and in fact, to defeat anything with a handful of non-Tory votes.
Most weeks, we have an op-ed trying to resurrect the Tory Phoenix out of the ashes. Then we can count on the Beatties and Davises to salute, and Grit apologists to split the comments.
I’ve always wanted a “He said – She said” format in the Editorial Section; with She being a Liberal. But that will never happen. So we just wait for next week, when Ms. May pulls another interesting topic out of her sleeve.
Plus ca change; plus ca reste de meme.
Trudeau and WE. Really stupid move, totally avoidable. I am wondering if Gerry Butts is still an advisor to PM. I think he resigned and then was re-hired after the Raybould-Philpott scandal.
Having advisors to help a leader avoid the obvious ethical and optic potholes would be essential.
Harper had Nigel!
Just emailed Scott Aitcheson about revenue generation and taxes. I know it is a thorny issue at the best of times. But a good discussion, with a look back to our history in disparate times could go a long way to preparing ourselves, if only a bit. Thanks for listening.
Surely Mr. Kitching you refer to Bill Morneau and Trudeau Jr. and there wealthy buddies at SNC when you reference paying their share . PS…Conservatives have always cared and they have Ethics…3 strikes and you’re out !
Dead on Hugh.The apologists are out again defending the indefensible .
Seems you just can’t hide the truth about your conservatism, this time explaining how you expect the rest of us to pay for your privileged lifestyle, well, we’ve paid enough for you, it’s time that you and your rich buddies pay your fair share in hard times.
Another week and another Hugh gem.
Fractional reserve banking is a hugely complicated and very misunderstood topic. In the commercial sense, it is easy enough to understand, a person walks into a bank and deposits their hard-earned paycheque and the bank then uses those deposits to make loans to businesses, or home-owners and the bank is required to keep a reserve so that if you come in and ask for your money the bank has it. And just in case you were afraid that the bank wouldn’t have it the government guarantees the money through the CDIC (or at least the first $100k per account and there are some other rules that make it complicated but let’s call it $100k and for most people that is great as they don’t have $100k in their savings account).
Now, this is a very simple illustration as modern banks prefer creating as Lord Turner, formerly the UK’s chief financial regulator, said “Banks do not, as too many textbooks still suggest, take deposits of existing money from savers and lend it out to borrowers: they create credit and money ex nihilo – extending a loan to the borrower and simultaneously crediting the borrower’s money account”
And so you ask why does that matter? Hugh was talking about those dastardly Liberls and their propensity to just give money out!!! The reason I went into the fractional reserve banking is two-fold: 1) People then think this is the way that central banks work and 2) the role the government plays in our society: by guaranteeing things, in this case, your money when you deposit it in a bank.
Central banks and commercial banks work in a similar way, each bank has deposits with the BOC and there are reserve levels that are set by the government. The money supply. And so the theory goes that as you increase bank balance sheets either by printing money or more specifically by reducing reserve requirements ie let the banks lend more and thereby helping the economy and generating GDP. And all major political parties have made us believe that this is how government debt and that the corresponding “balance sheet” works like your home budget.
This helps people generally get their heads around a very vague and opaque concept of taxes, gov’t spending, etc. But it isn’t really reflective of the situation. The major reason is, I can’t call up RBC or TD and adjust my interest rate or print CDN $s. If I run up $10k on my Visa, I have to pay it and I have to pay it at the interest rate that I signed up for.
So this is why I take umbrage with Hugh’s comments, “And don’t kid yourself, it is not pretend money. One way or another, it will have to be paid back. At this point, it represents a debt of about $26.6 thousand for every man, woman and child in Canada. That is without any new spending or pandemic surprises.” It actual is pretend money and since the gold standard has been removed from fractional reserve banking and the fact that Canada is a sovereign nation (ie our debt is actually priced in CDN $s) unlike other countries that you may have heard in the news recently defaulting on their debt like Chile – whose govt debt is denominated in wait for it US$ and there is no Swap line between the US and Chile. So Chile can’t simply print money and pay the debt or as they like to say “roll the debt”, because Chile can’t print US$s and there is no FX swap line for the government of Chile to print more pesos and then exchange them with the Federal Reserve to get their hands on US$s.
Because our debt is in CDN $s, the government can print money and the government, through the Bank Of Canada, sets the interest rate. The government has control over levers that you and I don’t. This wasn’t the case when the CAD was backed by gold held at the mint. The number of $s in supply was pegged to the amount of gold, thus creating restraint and a limit until the government procured or mined more gold and stamped it with a maple leaf. Since the world abandoned Bretton Woods and finally left “the gold-standard” we have been in a world of Modern Monetary Theory or MMT for short. Whether we knew it or not.
I know mind-blown, eh?
MMT posits the following tenets:
1) Can pay for goods, services, and financial assets without a need to collect money in the form of taxes or debt issuance in advance of such purchases;
2) Cannot be forced to default on debt denominated in its own currency;
3) Is only limited in its money creation and purchases by inflation, which accelerates once the real resources (labour, capital and natural resources) of the economy are utilized at full employment;
4) Can control demand-pull inflation by taxation which remove excess money from circulation (although the political will to do so may not always exist);
5) Does not compete with the private sector for scarce savings by issuing bonds.
The first 4 of which are totally compatible with “mainstream” economic policy, it is the 5th that is brought into question. And this is where we go back to fractional reserve banking. The issue is that simply because RBC or TD or BMO has money to spend doesn’t mean they will. The issue for them which is totally reasonable, how do we know the value of collateral or how do we discount the cash flows a business has in this or any other crisis in order to make new bank loans?
In a crisis how do we know what the future holds? Is there going to be tourism in Muskoka in 2021 like “always”? I certainly don’t know and I work for a local tourism-based company in Huntsville. So how is TD going to know? Why would they lend money when their shareholders and employees would have to bear the cost of the loss? They wouldn’t and don’t.
This is why monetary policy has been a leading reason for growing income inequality not only in Canada, but also across the world and most visibly in the US. That money doesn’t make it into the economy it sits on the balance sheets of the big banks and they put a nice big fat loan loss reserve into place, take the hit to income all at once, and then slowly let it out as the defaults start coming in.
Those defaults are the problem. Those are you and me not being able to pay for our mortgage, our car payment, our Visa bill. Those “accounts” are representative of people’s lives, food on the table, shelter overhead, a new bike for your son or daughter. Do some people live beyond their means? yes, does everyone who has been affected by this? Absolutely, not. Don’t ask Hugh for help because as he says, “even during a pandemic, it is hard to determine, with a government who has a demonstrated penchant for spending money, how much of it is really necessary and how much is thrown in under the guise of crisis spending for political reasons.”
“political reasons” is the phrase I really have a hard time with. The government represents the people, money is flowing to people, directly through CEBA or indirectly to businesses through CEWs and that is saving jobs, putting food on the table, allowing people to make mortgage payments or paying down debt. It has a real effect on the individual’s balance sheet and as I explained above, you and I have to make our payments.
The government as long as debt is written off at par or face value then there is no issue. We have no external debtor to pay, no other country we have to pay back. Our FX rate will go up and down along the way making travelling abroad and imports more costly, but then we could you know not import everything from abroad and actually manufacture things in this country. Create small businesses through small $ value loans through banks preferably or the BDC all else fails and actually create a manufacturing base again.
We have some of the amplest natural resources in the world, our farmers that can grow more food than we need and we have the world’s largest supply of fresh water, so of all the countries in the world we are set. And this is why I brought up CDIC at the beginning of this now admittingly very long rebuttal. We as a people through the government have decided to guarantee things: deposits with banks, health care, education, just to name a few. So why is guaranteeing income in these trying times such a difficult concept for Hugh to accept?
The government is trying to help and Hugh winks at that at the beginning of his article but only for a moment and then jumps into an uninformed opinion on government debt. Uninformed opinions usually don’t stop Hugh so I guess what else should I expect. The problem is our community has a median income of $32k as of the 2016 census. Median, meaning there is an equal number above and an equal number below $32k. For those individuals that is a little more than $2,500 per month pre-tax. Our community is served very well by the money the government is spending and is greatly reducing the growing municipal burden. The money represents for many a full pay-cheque so they can you know, live.
As I hope Hugh would know more and more services and costs have been shifted onto our local municipality whose main source of income is dependent on a community that can pay its bills, including property taxes.
So while all of these sources of revenue dry up the costs to our community mostly remain unreduced and the fundraising events that many community groups do to help fill the void can’t occur or have received less money through donations as we are all trying to watch each penny and save where we can.
Unfortunately, what often gets cut is that donation to the food bank or buying some bingo cards. Money that ends up right back in our community. Those CEBA cheques or CEWs payments to companies, they are school supplies, rent, groceries and either help others do the same or pay property taxes so the Town can pay for road maintenance and other essential services.
This isn’t in Hugh’s discussion. He takes the negative view, shows the debt figure and doesn’t explain the complexity of the situation. There he is though with the conservative shill questions about the WE charity and a canceled program. Canceling the program isn’t enough, Hugh? The money being spent is his door into the topic but the goal is not saving money or doing anything positive it is about tearing down for political gains. To anger the “hard-working and decent” folk of Muskoka.
The politics of criticizing payments to individuals aren’t good and so that isn’t what Hugh goes after and do you know why it isn’t good politics? because it really helps people! People are able to pay for the things they need in a very challenging time.
Go through Hugh’s articles for discussion of an alternative policy choice to fiscal spending? I’m tapping my foot over here like Sonic the Hedgehog (I know dated reference, I loved the game as a kid to be fair). Instead he justs trots out the old deficit myth and the political attacks.
I agree that the government should be held accountable for waste and inefficiencies and I also agree that giving $900million to WE Charity was not a good idea and it has been stopped. The political points hadn’t been won though, the game of politics has to be played and that is what this article is. Let’s not let the truth about government debt get in the way of a good Op-Ed by the local conservative to rile up the base. This is about playing politics and the only people who lose in the game of politics are the people.
Please Doppler if nothing else please change the title of this Op-Ed section (“Listen Up!” or what?) or get another Op-ed writer from the other side. All we get is “old man shouting at cloud” and it really does our community a disservice.
For full disclosure, a very close long time friend of mine currently sits on the board of WE charity. Please note above that I am not in support of money going to the charity as it was proposed by the Liberal government.
Its time to generate some revenue. It is time to look at taxation and the divide of the very wealthy, loop holes in the off shore tax havens as well as investigations and prosecutions of those in violation of tax law.
In Ontario, we could have been generating revenue from the tolls of Hwy 407, for example.
? other ideas to increase revenues?
What an insult to the Civil Service that they could not give away another Billion when they are in the process of giving away a couple of hundred Billon already.
The gift of $20 Million to WE in fees was nothing but a political pay-off for supporting the Trudeau family. And $900,000,000 to buy the youth vote?
This year’s deficit of $342 billion @ 3% interest is next year’s ( and forever ) annual budget cost of over $10 Billion / year. And Trudeau was running a $20 Billion deficit before this happened. But ” What’s a Billion or 10 ” ?
Hugh, I really don’t even know where to start with a rebuttal to most of the points in your editorial! We are agreed on one thing; I too am aghast at yet another gaff our Prime Minister has had revealed to taxpayers. I seriously question some of Justin Trudeau’s choices…what was he thinking? Having said that, under unforeseen and extreme circumstances, our PM and Finance Minister Bill Morneau have done as good a job as could be done. Who could do better? Andrew Scheer; Peter McKay; Erin O’Toole? We will never know will we? Truly, we taxpayers, are on the hook for massive debt but based on current interest rates (let’s talk fiscal numbers) we will be able to substantially reduce that debt much faster if we can, hopefully soon (?) get our economic feet under us once again. As always, I enjoy your point of view even when I don’t agree with it!
An excellent article Hugh, I don”t believe the Liberals or their loyal supporters give a damn. One issue that bothered me is what legal right do teachers have to use school class lists to recruit students for the WE Charity? Would this not seem to be a conflict of interest as well a breach of privacy issues? What criteria is used for the selection of teachers for this program? I hope there will be a much deeper investigation of the relationship between the Liberal Party and the WE Charity after they so quickly cancelled this contract.
Hey Huge! So exactly what would any other government have done regardless of paying down the deficit when the pandemic hit? Not put money into the system and let things crash and burn? Maybe if your a wealthy conservative! Sure were in the hole but tell me how it could have been any better under the conservatives?
Ps. I am no fan of the liberals but were talking about everyday people in a terrible situation!