Canada is in a fiscal mess
Posted December 20, 2024
Former Finance Minster Chrystia Freeland had to choose a response. The Prime Minister had told her that she would no longer be Minister of Finance and would be replaced by former Bank of Canada Governor Mark Carney. Would she accept the demotion, and if not how would she respond? Her resignation letter response was a bombshell with implications affecting all of the political parties.
Each of the leading players in Ottawa now has a decision to make. It is easy for some and harder for others.
The Prime Minister’s Office had been leaking hints for weeks that Carney would be joining the cabinet. He appears to have declined the opportunity. Instead, Trudeau appointed Dominic LeBlanc, who has extensive political experience but few credentials in finance.
Trudeau has to decide whether to resign or press on. His extreme self-regard makes it difficult for him to understand that he is the biggest problem weighing down the party.
The Liberal caucus is divided. They face grim prospects. Current polling has 70% of them losing their seats with Trudeau as leader. In the recent British Columbia byelection the Conservative candidate received two thirds of the vote. No wonder so many Liberal backbenchers and ministers are quitting. Some members have said publicly that Trudeau should resign. Others harbour that view without speaking out. In a no-confidence vote, that could lead to an early election where some Liberals may abstain or even vote against the party.
Bloc Quebecois leader Yves-François Blanchet would be enthusiastic about the prospects of a no-confidence vote. Present polling has the Bloc adding 11 seats to the 34 they already have. In some scenarios he would have more seats than the Liberals and be the leader of the opposition.
NDP leader Jagmeet Singh has a more difficult problem. The minority Liberal government depends on him for survival. He has been able to extract some wins—preliminary pharmacare, a start on dental—as a price for his support. The longer these are in place, the harder it will be to undo them. They will be at risk in the very likely event that the Conservatives win the election that has to happen no later than October 20,2025.
Voters will remember every time that the NDP propped up the much-despised Liberals. Singh has called on Trudeau to resign, but when asked what he will do on a non-confidence vote, he said, “All options are on the table,” as if that was a threat. On Friday he said that they will support a non-confidence motion. Present polling has the NDP getting about half as many seats as the Bloc.
Suppose that instead, Trudeau chooses to resign. Like Biden it will be too late, but the resulting leadership race could help the Liberal party present a fresh face. Contenders might include LeBlanc, Freeland, and Carney.
Carney would be free from some of the enormous baggage that Trudeau carries and Freeland has somewhat distanced herself from it. Carney especially would be able to advocate new economic policy ideas without having to defend the many poor choices made under Trudeau.
Conservative leader Pierre Poilievre has been very effective in highlighting the problems with the Liberals’ performance. They have always exceeded their spending forecasts, as was highlighted in the recent fiscal statement that Freeland declined to present.
The Liberal advocacy for the carbon tax was dishonest because it did not include the knock-on effects on municipal and provincial taxes, consumer goods, and especially groceries.
They made a mess of Canada’s immigration system by letting the numbers of international students and temporary foreign workers get out of control, adding to the housing crisis.
Poilievre is an effective attack dog and would have little difficulty defeating Trudeau, but he has been less persuasive on new ideas. A visit to the Conservative Party website discovers nothing but slams on the Trudeau government.
With a different leader the Liberals might be more competitive. Poilievre would struggle in a debate on economic policy between him and Carney.
“Axe the tax” is a great slogan. But it does not acknowledge the need to reduce carbon emissions. He says he wants to shrink the size of government. Good. But more detail would make him more credible.
Likewise, Canada has a productivity deficit. How would he approach it? In any scenario he needs to come across as a thoughtful and discerning leader.
Canada is a in fiscal mess. The best contribution that Trudeau can make is to resign as soon as possible.