Restraint must begin to be seen as necessary for preserving Canada’s prosperity.
Can we continue to increase spending every year without limit?
Can we finance deficits with endless printed money and assume that there will be no consequence?
Common-sense would dictate that the answer to those questions is ‘no.’
Yet, our leaders seem to think the answer is ‘yes,’ if we are to judge by their actions.
And so, the inevitable result of this massive surge of spending and printed money (effectively pushing more money into the system despite no comparable increase in the quantity of goods) is that inflation is surging.
According to Stats Canada, inflation was up 3.6% in May, the largest increase in a decade.
Last month, inflation was up 3.4%, which also happened to be the highest increase in a decade:
Here’s what Stats Canada said in their report:
“The Consumer Price Index (CPI) rose 3.6% on a year-over-year basis in May, up from a 3.4% gain in April. This was the largest yearly increase since May 2011. Excluding gasoline, the CPI rose 2.5% year over year.
Although base-year effects continue to impact the 12-month price movement for some specific consumer goods, such as gasoline, furniture and beef products, the increase in year-over-year price growth in May was led by rising prices for shelter and passenger vehicles. Unlike March and April 2021, when most of the year-over-year gains in the CPI were characterized by the large upward base-year effects caused by price declines falling out of the 12-month movement, base-year effects affected the 12-month price movement for only a few key goods and services in May 2021. While prices began to recover in May 2020 from the initial pandemic-related declines, they remained below pre-pandemic levels. In May 2021, these lower prices were the basis for the year-over-year comparison, contributing to the 3.6% year-over-year increase in the CPI.
The monthly CPI rose 0.5% in May 2021, the same growth rate as in April. On a seasonally adjusted monthly basis, the CPI rose 0.4% in May.”
This section is very notable:
“Unlike March and April 2021, when most of the year-over-year gains in the CPI were characterized by the large upward base-year effects caused by price declines falling out of the 12-month movement, base-year effects affected the 12-month price movement for only a few key goods and services in May 2021.”
Previously, many of Canada’s leaders had tried to dismiss and downplay inflation concerns, claiming that inflation only ‘looked high’ because the year-over-year comparison was based on such a weak period of time due to the initial lockdowns.
But now, they are slowly starting to admit that inflation is not just ‘looking high,’ but is indeed high.
Also, we need to remember that the government was already pumping tons of money into the system last year, so it’s not as if there was some massive deflation that is skewing the numbers.
Even worse than it appears
As absurd as it may seem, even Stats Canada’s admission that inflation is the highest in a decade is downplaying the situation.
Their own report points out that shelter prices and durable goods prices are rising more than they have in quite a long time:
“Prices rose in every major component on a year-over-year basis. Shelter prices rose 4.2% year over year in May, the largest yearly increase since September 2008. Prices for durable goods rose 4.4% year over year, the fastest pace since 1989, against the backdrop of rising consumer confidence and low interest rates.”
Additionally, the ‘homeowner’s replacement cost index is up dramatically:
“Year over year, the homeowners’ replacement cost index rose 11.3%, the largest yearly increase since 1987. Prices have risen year over year for 16 consecutive months, as prices for new homes continue to be influenced by shifting consumer preferences and higher construction costs.”
Everything is more expensive
Talk to anyone, or simply consider what you’re seeing with your own eyes, and we know that everything is getting more expensive.
And those price increases often feel even higher than what the government is claiming.
After all, their method of calculating inflation (based on a shifting ‘basket of goods’), lends itself to manipulation, as they can select cheaper goods to replace more expensive ones in order to downplay the true state of price increases.
Our society and education system seems quite unwilling to promote a basic understanding of economic reality, making it easier for the government to try and fool Canadians.
Many people feel that ‘having more money’ automatically makes them more wealthy, which the government takes advantage of.
Thus, we hear about GDP growth even when it’s based on a higher population and inflation, which means no real actual wealth has been generated on a per capita basis.
Indeed, if everyone makes 2% more in a year, but prices go up 4%, we are all getting poorer.
Unfortunately, few in politics (with the exception of Pierre Poilievre and a few possible others), are willing to bring attention to this.
Canada needs real spending cuts
Currently, a combination of the Bank of Canada enabling larger and larger deficits, the power of special interest groups who can always find a reason to ask for more taxpayers money, and politicians obsessed with seeming ‘generous’ has led Canada to an embrace of gargantuan deficits.
Thus, the government is a key driver of the dangerous inflation we are seeing.
The Liberals and NDP have both gone all-in on big spending, while the Conservatives are in a strange middle ground, warning about deficits and inflation on the one hand, while their leader Erin O’Toole promises not to cut spending at all, and not balance the budget for an entire decade.
That leaves Canada with zero major parties calling for actual spending cuts.
It’s a dangerous position for our country to be in, especially when we consider that in previous moments of overspending and rising debt – particularly in the 1990’s – the Liberals, Reform, and PC Party all at various times acknowledged the need for restraint and spending reductions.
Spending cuts weren’t seen simply as ‘mean or harsh,’ back then, they were seen as necessary to protect Canada’s future prosperity.
Today, our leaders lack much of that same courage, instead either trying to have it both ways on deficits (like the Conservatives), or going all out and embracing the ‘Modern Monetary Theory’ idea that deficits don’t matter so long as a you can print money – an idea that always ends in disaster.
What we should be hearing – at the very least from the Conservatives – are calls for real spending cuts and spending freezes, along the lines of 5% cuts to much of the federal budget.
That could be achieved in part by cutting public sector wages, and/or cutting jobs in the bureaucracy.
Considering that average public sector pay outstrips the private sector, cuts of that magnitude would still leave public sector workers quite well-off in most cases.
And considering how the public sector has bloated under the Trudeau government, cutting government jobs would bring things back into more balance.
In addition to wage and job cuts, Department-level spending freezes across government would also reduce the level of money-printing by the Bank of Canada, as the Bank has taken it upon themselves to irresponsibly finance rising deficits.
Shifting the Overton Window
The left has managed to successfully shift the ‘Overton Window’, or range of acceptable debate on government spending to such an extent that even the Conservatives are afraid to call for actual spending cuts.
Consider how much power Erin O’Toole gives to the left when he says he won’t cut anything and won’t balance the budget for a decade. In effect, he is committing to ‘locking-in’ Trudeau’s huge spending increases, which amounts almost to tacit approval of Trudeau’s spending agenda.
To shift things back to a more reality-based discussion, the Conservatives will need start actually pushing a fiscally conservative agenda, calling for real spending cuts and a real reduction in the size of government.
Conservatives also need to make a passionate case for the importance of entrepreneurship and the private sector, extolling the creativity and skill of individual Canadians, rather than relying upon government force.
Otherwise, other parties on the right will step up and start making those calls, and the CPC will lose further votes for refusing to push back against the statist agenda of the Liberals & NDP.