Economic plan deserves debate, not rhetoric

The last time Stephen Harper doled out investment advice during a financial crisis, he characterized the global meltdown of 2008 as a “buying opportunity” and then went on to design his fiscal policy accordingly.

Harper, in a minority Parliament, soon had to about-face on austerity and introduce a deficit-financed stimulus budget that enabled an economic recovery.

But here he is again.

In a podcast posted this week, the former prime minister warns about rampant government spending without end or purpose, leading to dangerous inflation with all the makings of a debt crisis.

“This is bad macroeconomic policy on an enormous scale,” he says.

He goes on to say that the U.S. dollar may not last as the world’s reserve currency, and so he is increasing his holdings of precious metals as a result.

This is apocalyptic talk, but there are some grains of rational debate here.

Reasonable people can discuss how fast government spending needs to be reined in as we exit the pandemic. Reasonable people can discuss how to ensure debt levels are sustainable. And reasonable central banks have said they’re keeping a watchful eye on inflation.

But to leap from reasonable questions to concluding that the U.S. dollar is done for and that we’re heading toward a Weimar Republic of inflation and unsustainable debt is hyperbolic.

Perhaps it wouldn’t matter much if Harper were just a regular citizen who wanted to switch up his investment portfolio. But his thoughts are so often the thoughts of the federal Conservative party that we need to pay attention — especially since management of the economic recovery is shaping up to be a central election issue.

Finance critic Ed Fast calls Justin Trudeau’s deficits “reckless” and warns that this week’s inflation data for June shows “the problem is only getting worse.”

He was referring to the June consumer price index that Statistics Canada published this week. It showed inflation running at 3.1 per cent — slightly above the Bank of Canada’s targeted range of one-to-three per cent, but lower than May’s 3.6 per cent.

Conservative Leader Erin O’Toole issued a separate press release, saying Trudeau’s “risky” economic agenda will lead to “out-of-control spending, multi-generational debt and inflation.”

And then there’s Conservative MP Pierre Poilievre, the former finance critic who seems to be branching out with his own highly-produced communications package that kicked off with an attack on Trudeau’s deficits and spending, saying they will lead to “inflation and bankruptcy.” He popped a red balloon marked “prices” for added effect, presumably a suggestion that Liberal policy is fuelling a housing bubble that will soon burst messily.

He regularly and casually suggests that the Bank of Canada is corrupt, frivolously printing money at the behest of the Liberals to finance their political agenda.

But what are they saying here? Are they saying that the government spent way too much money during the pandemic, and the central bank was far too accommodative, and therefore they should turn off the taps? And otherwise, housing prices will collapse, and we will be sucked into a dangerous inflationary spiral that will erode our savings, send Canada into a debt crisis and undermine global currency markets?

For sure, there are legitimate concerns about inflation, and about how to withdraw the stimulus that is still flowing into some personal bank accounts.

Former senior finance department official Don Drummond and Alexandre Laurin at the C.D. Howe Institute, for example, just crunched some numbers about how sustainable Canada’s government debt is. They found that if the world unfolds as expected, the debt burden for federal and provincial governments is set to drift upwards. And if economic growth is even marginally lower or if interest rates are higher, that drift turns into a substantive increase.

But nowhere do they warn of an apocalypse. Instead, they make uncomfortable points for the Liberals, and they counsel fiscal policy that would boost long-term growth, and a serious debate about spending and adequate taxation.

We do actually have the makings of a serious debate.

The federal Liberals are already thinking hard about when to rein in pandemic supports. On Friday, in the face of a fourth wave, they just extended some of them but only on a temporary basis so that they can wind the spending down when the economic conditions warrant it.

Their last budget also suggests they are also thinking hard about how to boost growth and improve affordability, including in the real estate market, over the long term.

And on the inflation front, the Bank of Canada has started to extract some of the liquidity it injected into financial markets to deal with the crisis and has indicated repeatedly that it’s watching consumer prices closely — ready to nip any overheated inflation in the bud if need be.

But the stakes are high and we could really use some serious Conservative voices here. Is it worth allowing inflation to run hot if it means more jobs? How fast should pandemic supports be withdrawn and what are the consequences? How much federal debt is acceptable and what kind of sacrifices are we willing to make now or later to allow for that debt load? How much government help is necessary to boost growth?

These are enormous questions, and the answers will determine our quality of life. Apocalyptic warnings don’t add much.