Canada Budget 2021: Liberals Double-Down On Money Printing & Debt

InsightSpencerFernando

As always, ‘temporary emergency spending’ becomes permanent at the behest of politicians.

Historically, Canada has been a nation with low taxes, an entrepreneurial and ambitious frontier-spirit, and a recognition that limits on the power of the state are essential.

That history is being lost.

In its place, is a massive expansion of government spending and government power, at the expense of individual freedom, community initiative, and our financial future.

Here’s how Pierre Poilievre described it on Twitter:

“TRUDEAU BUDGET: Government debt smashes through 100% of GDP. The highest ever.”

“Today Trudeau will lock in permanently high deficits paid with printed $.

Back to the future. When his dad did this in early 80s:

-Inflation: 12%

-Unemployment: 12% (record)

-Interest rates: 18% (record)

-Suicide rate: 14.8/100k (record)

-650k more ppl in poverty”

Of course, the Liberals put a different spin on it, saying the budget is about fighting COVID, getting out of the COVID recession, and building a ‘more resilient Canada.’

Here’s some of what finance minister Chyrstia Freeland said in her speech:

“This budget addresses three fundamental challenges.

First, we need to conquer COVID. That means buying vaccines and supporting provincial and territorial healthcare systems. It means enforcing our quarantine rules at the border and within the country. It means providing Canadians and Canadian businesses with the support they need to get through these tough, third-wave lockdowns, and to come roaring back when the economy fully reopens.

Second, we must punch our way out of the COVID recession. That means ensuring lost jobs are recovered as swiftly as possible, and hard-hit businesses rebound quickly.

It means providing support where COVID has struck hardest – to women, to young people, to low-wage workers, and to small and medium-sized businesses, especially in hospitality and tourism.

The final challenge is to build a more resilient Canada: better, more fair, more prosperous, and more innovative.

That means investing in Canada’s green transition and the green jobs that go with it; in Canada’s digital transformation and Canadian innovation; and in building infrastructure for a dynamic, growing country.

And it means providing Canadians with social infrastructure – from early learning and child care, to student grants to income top-ups – so the middle class can flourish and more Canadians can join it.”

On the federal government website, they listed these ‘quick facts’ about the budget:

Budget 2021 includes $101.4 billion over three years in proposed investments as part of the Government of Canada’s growth plan that will create good jobs and support a resilient and inclusive recovery. Key measures include:

  • Establishing a Canada-wide early learning and child care system, in partnership with provincial, territorial, and Indigenous partners, which will help all families access affordable, high-quality, and flexible child care no matter where they live, and no longer shoulder the burden of high child care costs. The budget proposes new investments totalling almost $30 billion over the next five years and $8.3 billion ongoing to support this vision.

  • Extending emergency supports to bridge Canadians and Canadian businesses through to recovery, including:

    • Extending the Canada Emergency Wage Subsidy, the Canada Emergency Rent Subsidy and Lockdown Support until September 25, 2021.
    • Extending the number of weeks available for important income support for Canadians such as the Canada Recovery Benefit and the Canada Recovery Caregiving Benefit.

  • Enhancing Employment Insurance sickness benefits from 15 to 26 weeks.

  • Increasing Old Age Security for seniors age 75 and older to provide them with better financial security.

  • Supporting small and medium-sized businesses through several transformative programs, such as:

    • A new Canada Digital Adoption Program that will assist over 160,000 businesses with the cost of new technology. And it will provide them with the advice they need to get the most of new technology with the help of 28,000 young Canadians who will be trained to work with them.
    • Allowing Canadian small businesses to fully expense up to $1.5 million in capital investments in a broad range of assets, including digital technology and intellectual property. This represents an additional $2.2 billion investment in the growth of Canada’s entrepreneurs over the next five years.

  • Revitalizing Canada’s tourism sector through $1 billion to help tourism businesses recover and support festivals and cultural events that provide jobs and growth in many of our cities and communities.

  • Supporting women, Black Canadians, and other underrepresented entrepreneurs who face barriers to launching and owning businesses through $300 million to enhance initiatives like the Black Entrepreneurship Program and the Women Entrepreneurship Strategy.

  • Establishing a $15 federal minimum wage.

  • Enriching the Canada Workers Benefit, which will support about 1 million more Canadians and lift nearly 100,000 people out of poverty. This will result in additional support of $8.9 billion over six years for Canada’s low-wage workers.

  • Helping to build, repair, and support 35,000 affordable housing units for vulnerable Canadians through an investment of $2.5 billion and a reallocation of $1.3 billion in existing funding.

  • Investing $17.6 billion in a green recovery that will help Canada to reach its target to conserve 25 per cent of Canada’s lands and oceans by 2025, exceed its Paris climate targets and reduce emissions by 36 per cent below 2005 levels by 2030, and move forward on a path to reach net-zero emission by 2050.

  • Closing the gaps between Indigenous and non-Indigenous peoples, supporting healthy, safe, and prosperous Indigenous communities, and advancing meaningful reconciliation with First Nations, Inuit, and the Métis Nation through an historic investment of over $18 billion. 

Massive government intervention

The ‘quick facts’ I share above are obviously government talking points, but I share them because to critique something it’s important to first hear the argument being made.

And the argument the Liberals are making is that Canada needs massive government intervention at all levels.

However, their budget – particularly what amounts to $100 billion in stimulus over the next three years – is already off base with reality.

The fact is the ‘COVID recession’ was a government-driven phenomena, with lockdowns shutting businesses and forcing countless people out of work.

The solution long-term isn’t to keep spending more and more money, the solution is for lockdowns to be lifted.

The government has also been contradicting themselves, simultaneously claiming the economy is roaring back, while saying their massive stimulus spending is needed.

Both can’t be true.

In reality, since the ‘COVID recession’ was due to government action, the lifting of that government – not more government spending – is the proper course.

Something else you probably noticed from the Liberal government talking points is that everything on their list involves more spending, rather than ensuring Canadians keep more of our own money.

The Liberals have a clear vision for the country, but unfortunately that vision is one where the government takes more and more, while giving it ‘back’ to those who are doing what the government wants.

On childcare for example, rather than recognize that parents should be responsible for raising their children, and rather than empowering parents by simply not taking their money in the first place, the Liberals plan to use money they’ve already taxed, and then give it back and seek to get credit for ‘making childcare more affordable.’

Rather than let parents choose whether to use their own money to have a parent stay at home, the Liberals are instead perpetuating the idea – that is kind of strange when you really consider it – that our whole society should be based on parents leaving their kids with strangers during the day and focusing on work instead.

Beyond that point, the entire Liberal approach is about expanding government, and racking up immense debt.

Get the money printer going

People often ask, “how will we pay for this.”

And the answer from the Liberals is “by printing a ton of money.”

The Bank of Canada balance sheet has been expanding rapidly, and they are in effect enabling this massive government spending by keeping interest rates low.

This has consequences of course, and we are seeing those consequences in rising inflation everywhere, from food, to housing (the housing market absurdly surged during the depths of the recession last year), and makes a mockery of the government claim that inflation is only 1.1%.

We are definitively entering the era of fantasy economics, where money is thrown around so liberally that it loses value, and loses touch with any semblance of real value.

For a time, it will make people feel great, but sooner or later the consequences begin to creep in, and rising inflation and an absurd housing market are the initial warnings signs that something is seriously wrong.

You can’t print your way to prosperity, just as you can’t spend your way to wealth, yet the Liberals are determined to try both.

Conservatives struggle to respond

When it comes to how the Conservatives are responding to the Liberal debt-binge, there seem to be two main camps.

One camp includes Pierre Poilievre and many core Conservative supporters, who are clearly telegraphing that the big problem is money printing and deficit spending.

Their focus (which in my view is the correct focus), is on the reality that we simply cannot continue to spend like this, and we can’t keep printing money to try and pretend there’s no deeper problem.

On the other hand, there is the response from Erin O’Toole, which seems ideologically unmoored and confused.

Watching O’Toole’s response, I noted that he was repeatedly shifting between contradictory critiques, claiming that the government is racking up too much debt and spending too much, but then claiming the government isn’t doing enough to help businesses, saying they ‘have no plan,’ aren’t doing enough for families, and then refusing to answer what he would have cut.

It would have been easy for O’Toole to say he would have cancelled the $100 billion in stimulus, and to say he wouldn’t spend on a national childcare program, but he seems unwilling to say much of substance for fear of being accused of planning ‘cuts.’

Canada needs to cut spending

At some point, the Conservatives, or another party that supersedes them, will have to represent the millions of Canadians who actually think spending should be cut.

This past year has witnessed a historic surge in debt and deficits, and while that was initially due to a temporary crisis, the Liberals are clearly trying to lock in those massive spending levels in perpetuity.

To oppose that requires articulating a principled vision of more freedom through less government, and that requires tax reductions (actually getting rid of the carbon tax and not replacing it with a pathetic ‘petro points scheme’), and reducing spending.

By being vague and evasive on the issue, and by planning to wait an entire decade before balancing the budget, Erin O’Toole is depriving Canadians of the principled opposition we need at a time when the Liberals are driving Canada down an incredibly dangerous path.

Spencer Fernando

Photo – YouTube

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