A Three-Pronged Affordability Crisis

Are you worried about affordability? 

I am.

Are you worried that the federal government’s policies are going to make it worse?

I am.

As prices rise, each dollar in the household budget gets stretched, making it more difficult to make ends meet.

One might think that the federal government is also worried about how price increases impact Canadians and that they'd be taking concrete steps to give households financial breathing room.

They aren’t.

This affordability crisis has largely been caused by poor decisions on three main policy fronts - monetary policy, fiscal policy, and energy policy.

Monetary policy is based on the idea that money is just a commodity, like oil or copper or gold.

If you increase the amount of any commodity available for consumption, the value of each individual unit of that commodity decreases. 

In the case of money, increases in the money supply decrease the purchasing power of each dollar - in other words, too many dollars chasing too few goods, driving prices up.

Over the past few years, central banks have pumped billions of dollars of liquidity into the system, which has played a role in increasing costs across the country.

However, the price increases we are experiencing are caused by more than just monetary policy.

Take fiscal policy - the impact of government spending on the economy. 

There is a concept called “fiscal dominance,” which is what happens when a central bank (like the Bank of Canada) is forced to shape its policy in response to massive government spending, rather than simply focusing on monetary policy.

In last week’s federal budget, Finance Minister Chrystia Freeland announced $70 billion in new spending. 

This spending is another way to pump more money into a system that already has too much.

This increases the pressure on the Bank of Canada, forcing them to raise rates at a faster rate, and putting systemic pressure on our entire financial system.

Which brings us to energy policy, the third prong driving our current affordability crisis.

Energy is the industry that powers every other industry, meaning that affordable energy solutions should be at the forefront of every discussion around affordability.

The federal government, instead of embracing reliable, affordable energy, has brought in policy after policy directly aimed at shutting down our energy industry entirely!

The big news this week was a report from Parliamentary Budget Officer, Yves Giroux, that pointed out that most households will be worse off as the federal government's carbon tax continues to rise.

“When both fiscal and economic impacts of the federal fuel charge are considered, we estimate that most households will see a net loss,” Giroux said in a statement following the release of the report.

“Based on our analysis, most households will pay more in fuel charges and GST - as well as receiving slightly lower incomes - than they will receive in Climate Action Incentive payments.”

Of course, that was always obviously how the tax would work, to anyone who took even a moment to think about it.

But, it’s nice to have it in black and white from an independent Parliamentary officer.

Even federal Environment Minister and climate extremist Stephen Guilbeault was finally forced to agree, stating that “if you do the average, yeah, it's true, it's going to cost more money to people.”

In other words, what we’ve been saying the entire time - that most Canadians will pay more than they receive - is true, and what the federal government has been saying the whole time - that most Canadians will receive more than they pay - is false.

It's nice of them to finally admit it!

If you appreciate all the work we've put into getting the word out on this issue, and you’d like to help us keep speaking the truth, help us cut through the political spin, and help us get the message out about how policies will really affect Canadians, please consider making a donation to fund our research, advocacy, communications, events, and activism:

We need every Canadian to understand that the challenges we’re facing haven’t just appeared out of thin air - they’re being actively caused by a federal government that is implementing bad policies that drive up costs.

That's why you can also help us by spreading the word, sharing our content, and helping us get more Canadians thinking about these important issues.

Regards,

Josh Andrus
Executive Director
Project Confederation