Is Justin Trudeau responsible for inflation? It depends which curator you ask

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Just as we start to think that Tory financial critic Pierre Poilievre has scored a point in blaming inflation on Justin Trudeau, his leader arrives and shakes up the apple cart.

“This is a global phenomenon,” Erin O’Toole told reporters Thursday in response to questions about high inflation in the developed world.

So maybe after all, it’s not just local ‘justinflation’, as Poilievre repeatedly insisted, and it’s a bit more complex than liberals pouring money into their hands. people and irresponsibly driving up prices in all areas.

But the intermittent reopening of the global economy is certainly very confusing, making it hard to read the ins and outs of higher prices – especially now that a dangerous new variant of COVID-19 has caused panic in the global economy. once again.

News of the variant burst into financial markets, hitting stocks, currencies, oil and the airline industry on Friday – adding more stress to global trade and struggling to find supply chains their way to recovery.

None of this is good for people who are rightly worried about high inflation in Canada, which is hitting 4.7% these days and is expected to stagnate there for a few months.

And there is a growing list of such people. The Canadian Survey of Economic Conditions released on Friday showed that rising costs of labor, capital, energy and raw materials were the top concern of 42.5 percent of businesses, in particularly for the manufacturing sector.

Moreover, and rightly so, concerns about inflation have spilled over into the House of Commons. With high prices and unstable supply chains reducing our ability to restore the economy to its full potential, a dynamic and nuanced discussion of how to fight inflation is worth engaging.

But at this point, the discussion in the House of Commons has the Conservatives and Liberals confusing today’s inflation issues with long-standing affordability and deficit issues. And that’s a problem because misdiagnosing the causes of inflation will lead us to a misplaced remedy that could make matters worse, especially when we’re still reeling from the puzzling implications of yet another world-twisting variant.

When Tory MP Laila Goodridge complained during Question Period Thursday that diapers, formula and everyday items were getting too expensive, the Liberals responded by stressing plans to cut the cost of child care in half by next year.

Indeed, in this week’s Throne Speech, the Liberals – through Governor General Mary Simon – acknowledged that inflation is a problem. But in the middle of the paragraph, they changed the topic of affordability of child care and housing, promising to keep their election promises to cut the costs of both. Finance Minister Chrystia Freeland made the same change when answering questions this week.

Asked about inflation, she spoke of the need for “structural changes” such as funding for child care and housing policy that will address affordability challenges and boost long-term growth potential. .

The point is that cutting child care costs over the next year will certainly put more money in people’s pockets and potentially free up more parents to join the workforce, if new child care spaces are available. also created. Everything is fine. But the immediate effect is to give parents more pocket money, which could actually exacerbate inflation. And the expected macroeconomic effects – a boost in growth and productivity, an increase in the capacity of the Canadian economy – will be slow to materialize.

When it comes to housing, Canada has struggled with unruly real estate markets for years. Of course, expensive homes became even more expensive during the pandemic fueled by homebuyers and investors who had cash on hand thanks to generous government COVID-19 benefits, low interest rates and soaring stock markets. .

In response, the Liberals promised incentives for more home construction and option-to-buy rental programs. But increasing supply, while necessary, is a slow and long-term process.

The policy may well be sound and solve accessibility problems, but it will do little to quell inflation caused by bottlenecks in the global supply chain and high energy prices.

As for the Conservatives, they cite the large deficits and the quantitative easing of the Bank of Canada as the causes of inflation in Canada. While they don’t suggest that the hundreds of billions of COVID-19 benefits that are responsible for the bulk of the deficits were all wrong, Poilievre points to stubborn underlying structural parts of the deficit and the Liberals’ budget plans to spend. 100 billion dollars on recovery as the main culprits.

But are they really suggesting that the federal government should dramatically cut spending now to curb price hikes? Or that the Bank of Canada should raise interest rates and withdraw its stimulus from bond markets? These types of measures would likely cause a lot of hardship to Canadian consumers and borrowers, causing them to cut back on their purchases and possibly lower prices.

But it is a painful solution at a time when the recovery is not yet underway, or even assured in the face of a new fear of COVID-19.

Inflation is a serious issue that requires serious debate.

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