Conservative gimmicks are not cheap



Editor’s Note: This is the second in a series of surveys of the economic bases of each party prior to the 2021 federal elections. The first one can be read here.

In the campaign, bright and shiny objects need to parade in front of sound bite-led media. However, the Conservative Party of Canada is hanging a gimmick before voters threaten to undermine a meaningful economic recovery.

Some of these “recovery plan” offers, such as the December sales tax holiday, are ridiculous but temporary and relatively harmless. Other issues, such as bankruptcy rewriting, are serious and can undermine Canada’s ability to attract investment and increase productivity.

For their honor, the Conservatives provided their plans in great detail. From the beginning of the campaign, every voter was able to peruse it on their own.

But when weeds, consistency is avoided. Readers with an economics lens will find themselves split. And while we welcome the positives, we will be swayed by many negatives. The former includes the promotion of free trade agreements to “realign trade priorities away from countries like China,” but this also comes with many protective trade-minded warnings. The latter is a shade of Hugo Chavez in Venezuela, promising one million new homes in just three years.

Elephant in the room

A striking, comprehensive and annoying theme is not trying to confront Canada’s unsustainable finances at the federal and state levels. The August 27 policy announcement is typical: doubling employment insurance for the seriously ill from 26 to 52 weeks.

“Canada workers and their families are of better value,” reads the press release. “It’s time for the government to stand up for the health of workers and their health.” Why not give up on that abandonment for 100 weeks? This kind of generous contest is rude, contributing to the uncertainty of the administration without a clear funding mechanism.

Those looking for a light touch of limited intervention will have a hard time getting angry with the spending and lending plans of numerous pet projects on the platform, coupled with a variety of targeted tax cuts. This is embarrassing given the party’s stated commitment to a balanced budget within 10 years. Once the recovery begins, you need to manage your spending. “

Unfortunately, the Conservatives’ plans to achieve this modest goal aren’t really plans at all. (1) Complete the COVID-19 Stimulation and Support Program and (2) “Grow the Economy Again”.

If it was so easy. Even after stabilization after COVID-19, parliamentary budget officials predict an increase in the debt-to-GDP ratio. As Ben Eisen of the Fraser Institute pointed out, “things are getting worse.” A higher debt-to-GDP ratio means higher interest rate costs and revenues that can lead to better services and tax exemptions.

The Canadian Taxpayer Federation was even more straightforward, saying the Conservatives “have no reliable plans to balance their budgets or find savings … and pay very little to reduce their deficits.”

We rarely disagree with CTF statements. As economist Robert Higgs said, wanting a balanced budget without specifying spending cuts is like wanting a small building without removing any bricks. Just saying that Canada is out of the red is eerie and eerie, similar to the infamous remarks of the 2014 Prime Minister. “Commitments need to be commitments to economic growth, and the budget is balanced on its own.”

Fundamentally transform Canada

Economic priorities within the Conservatives seem to be shifting to populist rhetoric rather than noble meaning. This shift, which blames businesses and hits the heart of the free-market economy, is probably even more dangerous than Canada’s financial hardship.

In this respect, two specific policies stand out. First, the representative of forced labor on the board of directors of a company. Second, the reversal of pecking orders in bankruptcy proceedings.

This mission applies to large federally regulated businesses that interfere with the divine right of private property to allow owners to run the company for their own benefit. Workers, no matter how good, are not the owners of the company. This policy aims to push them into de facto ownership and bolden the union.

Due to the bankruptcy change, pensioners will be lined up for payments above creditors. In recent years, some people have had to cut their hair, so this ploy seeks to protect defined benefit pensions. Conservative leader Erin O’Toole wants to prevent executives from paying large bonuses while running a company that is undergoing restructuring if the pension is not properly funded. His plan did not stop the bonus, but it would politicize the legal process.

Defined benefit pensions, similar to the Canadian pension plan, are inherently volatile and often have unfunded debt. It is a fool’s business to support them. They deserve to fail and give way to defined contribution pension plans where there can be no unfunded debt.

To make matters worse, changing payment pecking orders in the event of bankruptcy disrupts sophisticated case law (the rule of law in Canada) and reduces confidence in financial markets. Creditors do not allow the law to change after the contract is signed. This pulls the floor covering from your feet. This leads to an increase in the risk premium imposed on the borrower.

Economic commentators have the luxury of not seeking elections. However, both Politico and the economist are looking at the same challenge, only looking at different results. This dispute raises an ugly head when one seeks elections within a month and the other seeks long-term economic development and vitality. There is a trade-off and there is no doubt which side the Conservatives have taken.

The views expressed in this article are those of the author and do not necessarily reflect the views of The Epoch Times.

Fergus Hodgson

Fergus Hodgson is the founder and editor-in-chief of the Latin American intelligence publication Econ Americas. He is also a roving editor for the Gold Newsletter and a researcher at the Frontier Public Policy Center.