Roundup: Fiscal update and actuarial context

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Finance minister Bill Morneau released his fall economic update yesterday, and it showed that while the economy was doing well – fairly strong growth, very strong job creation (November’s numbers notwithstanding) and wage growth – the deficit was going to get a lot bigger unexpectedly. The reason for it, however, was largely ignored by all of the commentariat, both media and partisan, because the kneejerk response in Canada about any finance story is about the size of the deficit, end of story. The real reason – that low interest rates had forced a hefty actuarial adjustment for government pension plans – was inconvenient for them to force a narrative onto, so they just ignored it and clutched their pearls some more, crying “The deficit! The deficit!” and the Conservatives continued to cheerlead a “made-in-Canada” recession by cherry-picking some very selective economic data that was to the exclusion of the broader trends, because narrative. Here’s economist Kevin Milligan to explain some more.

https://twitter.com/kevinmilligan/status/1206632527244300288

https://twitter.com/kevinmilligan/status/1206633499391709187

https://twitter.com/kevinmilligan/status/1206634678662250496

https://twitter.com/kevinmilligan/status/1206635967479566337

https://twitter.com/kevinmilligan/status/1206637216039964672

https://twitter.com/kevinmilligan/status/1206639670798340096

I would add that while the Conservatives like to rail about how our unemployment figures compare poorly to other countries, it’s a bit of a fool’s errand because we don’t all measure unemployment the same way, and not all of our economies work the same way. Canada has had record low unemployment in recent months, to the point where economists say we are have been at what is essentially “full employment” – in a statistical sense, not to dismiss that there are regions where it’s still a problem, but essentially there’s not a lot of room for more job growth in the economy. But hey, why let reality get in the way of the narrative, right?

In terms of analysis, John Geddes delves into the notion of “endless deficits” and finds that, shockingly, it’s not a cut-and-tried issue, but the real issue is complacency. Certain bank economists think that because the shift in the deficit is on pension obligations, it could force the Bank of Canada to act sooner if there were an economic downturn. Heather Scoffield wonders what kinds of budget promises that Morneau will have to abandon given the bigger deficit figures if they don’t want to lose their debt-to-GDP anchor.

Good reads:

  • Bill Morneau says he’s open to making changes to the Fiscal Stabilization programme, and will discuss it with provincial finance ministers at their meeting.
  • New Heritage minister Stephen Guilbeault’s mandate letter includes instructions to require streaming platforms to carry – and produce – more Canadian content.
  • Lawrence MacAulay’s mandate letter calls for faster service times for veterans, as well as the creation of a “rapid response unit.”
  • Here is the tale of a Health Canada tweet that went badly awry.
  • The first day of Federal Court proceedings over the Trans Mountain expansion went ahead yesterday, with arguments that Indigenous consultation was substandard.
  • Senator Serge Joyal says that it’s clear “conversion therapy” is still happening in Canada, which is why he introduced his bill to criminalise it.
  • Some veteran Conservatives are hoping for a swift leadership contest.
  • We appear to have our first “outsider” of the race, named Bryan Brulotte, who is a veteran organizer and CEO of a consulting firm.
  • Pierre Poilievre and former senator Michael Fortier are also mulling leadership bids.
  • The NDP want regular reviews of the New NAFTA once it comes into force in order to assess its impact on Canada.
  • Jason Kenney’s own court documents showed that he was lying about the supposed damage the province’s carbon price was doing to its economy. Oops.

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6 thoughts on “Roundup: Fiscal update and actuarial context”

  2. So called deficit fighting is all well and good but every time a government takes it on vigorously those at the lower end of the financial strata seem to have to feel the pain a lot more than those at the upper end.

  3. Conservatives know that the deficit is linked to the interest rates and pension funds which were outlined above but they complain that it is the Liberals who have sent the deficit spiralling. This is the trick of not being truthful and fulsome because the tories make the mistake that because they believe that the populous is ignorant that they won’t be called out. This is what they did for months before and during the election when they fought the carbon levy. They called it a tax, as if it added a burden upon the taxpayer and inured a windfall to the Federal government. The truth which they conveniently ignored is that the levy is generally tax neutral. Thank you for your clarifications here. You also wrote a comment on the neutrality of the carbon levy. Thank you for that also. Unfortunately the officials of the government seem loathe to complete statements of fact. I cannot understand why. If they did these specious statements by tories would backfire.

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