The Liberals could do more to tackle inflation — but that’s now a question for the fall

On Tuesday, as this spring’s question-long inflation debate continued into another day, interim Conservative leader Candice Bergen and Finance Minister Chrystia Freeland squabbled over who is in charge. their number “lost contact”.

Swing one new survey That shows a quarter of Canadians are already eating less due to the cost of food, Bergen asked if the Liberal government was willing to agree to the Conservative Party’s proposals to reduce some of the increased costs that are incurred. Canadians are facing or not.

In response, Freeland pointed to ways the spring budget increased support for Canadians: an expansion of the Canadian Worker Benefit, an increase in Old Age Security, and a one-time $500 increase in Canada Housing Benefit.

Bergen dismissed measures such as “several careful checks” that “could be sent by mail.”

Interim leader of the Conservative party Candice Bergen heatedly debated with Finance Minister Chrystia Freeland on inflation this week. (Sean Kilpatrick / Canadian Press)

“The Liberals are so out of touch that they don’t understand the price of gas, they don’t understand the high price of food, and they don’t understand the long queues,” Bergen said. “They have no understanding of what Canadians are dealing with and they don’t care.”

Bergen overplayed. Freeland makes sure everyone notices.

Speaker, it is irrelevant that someone living on government property propose that a check for $2,300 for a family of three working for minimum wage is ‘welcome’.” , Freeland said, referring to workers’ interests.

It is a rare opportunity for Liberals to play offensive in a spring they have faced – and largely resisted – relentless calls to do anything else to deal directly with inflation and rising costs of living.

With just two weeks left before the House of Commons will adjourn for the summer, it is highly unlikely that the Liberals will respond to those calls before the fall.

But if inflation continues to heat up when the House returns, the Liberals may be forced to do something more. That could be like another check, “piddly” or otherwise.

Politicizing the price at the pump

The Liberals have argued – not unreasonably – that recent inflation is a global phenomenon, largely due to the pandemic and Russia’s attack on Ukraine. In the face of cost-of-living concerns, they pointed to long-term actions such as expanding access to cheaper child care and new plans for subsidized daycare.

Of course The Bank of Canada is also taking steps to reduce inflationlargely through higher interest rates.

But knowing that COVID-19 and Vladimir Putin are responsible may not make it much easier for voters to accept higher gas prices – and it is on that tangible issue that the Conservative Party has focused its efforts.

A motion the Conservatives put before the House of Commons on Tuesday calls for the government to suspend the imposition of the GST on gas and diesel sales and to suspend the carbon tax. Several provinces – including Alberta and Ontario – have already cut their gas taxes.

The political purpose of those tax cuts is clear. Their practical utility is debatable. Houses with higher incomes tend to consume more fuel, so cutting taxes on gas is likely to disproportionately benefit those already in a better position. to cope with rising costs.

Calls to suspend or cancel the carbon tax tend to avoid the fact that virtually all tax revenue is returned to households. Households with lower and middle incomes tend to receive more carbon tax rebates than direct costs. (A report by the Congressional Budget Officer in March covering larger economic costs gave a slightly different pictureeven though that analysis was challenges).

And limiting actions to reduce greenhouse gas emissions to tackle inflation will only trade off one problem for another.

No one was surprised, The conservative movement was defeated on Tuesday nightwith Liberals, New Democrats and Bloc Québécois MPs voting against.

The case for depositing checks – at least for some

Welcoming the same survey Bergen cited on Tuesday, NDP Leader Jagmeet Singh reminded Freeland that the New Democrats had proposed imposing an “excess profit tax” on oil and gas companies and Use that money to double the GST discount and increase the Canadian Child Benefit by $500. .

This is where the Liberals can find something they can work on – if they decide that more work needs to be done.

“If I were to think about relief… I would focus on families that are having a hard time in their lives, it’s not going to be a price solution, it’s going to be an income solution, potentially an income solution. some targeted income transfers.. Kevin Milligan, an economist at the University of British Columbia, said (Milligan was seconded to the Federal Privy Council Office from June 2020 to April 2021. )

A sign at a gas station displays the price of a liter of regular gasoline after it hit a new high of $2.28 in Vancouver on Saturday, May 14, 2022. (Darryl Dyck / Canadian Press)

Liberals will note that both the Canada Child Benefit (CCB) and the GST rebate have been indexed for inflation.

But unlike the broad-based tax cuts, a doubling of the GST rebate would “be much more targeted and have a much stronger impact on those hardest hit because they spend more money.” spend more of their income to buy things and thus the impact of inflation is greater on them”. David Macdonald, an economist at the Canadian Center for Policy Alternatives.

Milligan said that a broad and large-scale strengthening of income support could backfire if it were to spur inflation, but the GST and CCB rebates are targeted narrowly enough to avoid the kind of economic hit bigger than that.

In one Tuesday night tweetsHours before the Conservatives were officially defeated, Freeland listed various ways that current federal policy could help “mildify” the impact of inflation.

There can be a debate to see if further action on inflation is really needed. Governments are not obligated to change jobs every time an opposition party asks. Doing something just to be able to say you did something is not always the wisest way.

But waiting to act also comes with risks. Because if the Liberals push for a CCB or GST discount this fall, the first question from opposition parties – and perhaps some voters – will be why they didn’t do it sooner.

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