44th Parl. 1st Sess.
September 29, 2022 10:00AM
- Sep/29/22 4:00:11 p.m.
- Watch
Mr. Speaker, I appreciated my colleague's speech, in which she talked about the difficult situation that seniors are experiencing because of inflation and price increases. She talked about increasing old age security to better support them.
The problem we have with that increase is that only seniors aged 75 and over will benefit. The government is leaving out people aged 65 to 75.
In the fight against inflation, if the government wants to recognize seniors, why is it creating two classes of seniors? Why is it leaving out people aged 65 to 75?
94 words
All Topics
- Hear!
- Rabble!
- add
- star_border
- share
- Sep/29/22 4:13:37 p.m.
- Watch
Mr. Speaker, I thank my colleague from Châteauguay—Lacolle for her speech, which was certainly very interesting.
She spoke at length about the measures her government is putting in place to deal with inflation, including dental insurance and rent assistance. However, when we read the bill, it is clear that it is not compatible with what exists in Quebec. Quebec has its own rent assistance program, and Quebeckers do not apply for the benefit directly. There is not a single line in Bill C-31 to tie it all together.
The same goes for dental insurance. Bill C‑31 is for children who are 11 or younger. In Quebec, unless I am mistaken, children under the age of nine are already covered. How do we tie that together? There is not a single word about it. They did not even think about it.
Does the government intend to amend the bill to take Quebec's reality into account? We opposition members can make amendments in committee, but the House of Commons law clerks would not find that acceptable since it would require royal assent. What does my colleague think?
195 words
All Topics
- Hear!
- Rabble!
- add
- star_border
- share
- Sep/29/22 4:47:22 p.m.
- Watch
Madam Speaker, the current inflationary crisis is affecting everyone and putting millions of households in hopeless situations. Families must make agonizing choices to be able to continue making rent or mortgage payments.
Many low-income people are cutting back on food and going hungry. The same is true for many middle-class households that are heavily in debt. Such a huge increase in prices, especially for food, energy and housing, creates considerable hardship, and that is not something to take lightly.
81 words
- Hear!
- Rabble!
- add
- star_border
- share
- Sep/29/22 4:48:09 p.m.
- Watch
Madam Speaker, thank you for keeping decorum in the House.
As I was saying, we cannot take these huge price increases and the hardship they cause lightly, especially when it comes to the price of food, electricity and housing. My thoughts are with the millions of seniors who were already struggling to make ends meet before prices started going up. They are now facing an impossible task, making choices or making cuts to their budgets.
The inflation crisis is one of the most worrisome issues in the world, and I acknowledge that people are trying to address it and find solutions. I am going to put on my CEGEP economics teacher cap and give an overview of inflation and the economy.
The aggregate demand and aggregate supply model is a useful tool for understanding the phenomenon of inflation. This model tells us that inflation is caused by an increase in aggregate demand, a decrease in total supply or a combination of the two. Analysts generally agree that the increase in prices we are experiencing is essentially a global phenomenon primarily attributed to a decrease in aggregate supply.
The supply chain problem led to a significant drop in supply. It is the same thing with the war in Ukraine. Crop failures due to droughts or floods are also reducing supply in the food sector. Labour shortages, which existed before the pandemic but have gotten worse since, are limiting business activity, leading to a decrease in total supply, and so on.
On the demand side, we have seen more of a change than a significant increase in demand. During the pandemic, people shifted their usual consumer choices to new sectors. Supply was unable to adapt quickly enough, so we saw new price increases and often shortages, resulting from the imbalance.
We are seeing the same type of imbalance in the real estate market, where the construction of new housing is insufficient to meet demand. Inflation in that sector is also driven by the increase in the price of building materials, which is itself explained by the current inflationary situation and the change in consumer habits during the pandemic, not to mention the impact of the war.
Even though the central bank's injection of money into the economy and the government's support to keep consumption going during lockdown were more generous than necessary, because they were not always well targeted, the effect of those interventions on the increase in global demand and on prices is generally secondary. The government's actions are not the main reason for the global inflationary crisis.
Unfortunately for us, and especially for those impacted the most by the current rate of inflation, there is no simple solution to a decrease in aggregate supply. The best solution is to support businesses as they adapt to the new reality. It is a long and complicated process, but as I said, even if the effect is not felt immediately, it is the best solution.
For example, let us look at the labour shortage. The government could provide support for the automation of some economic activities. The government could also change the tax system to entice young retirees who want to remain in the labour market, perhaps with part-time work. The government could provide support for companies that invest in resilience, for example by making decisions that cut their energy consumption. The government could also do this for households, of course.
That is the primary solution for addressing the supply side of the issue. Unfortunately, this government is doing very little about it. I am also disappointed that the official opposition, which says it is concerned about this issue, is not putting this solution forward. Both major Canadian parties seem to be short-sighted on this issue.
It is often said that the central bank is well positioned to use monetary policy to counter inflation. The Bank of Canada must ensure that the overall economy is in good shape. To that end, its main policy objective for the past 30 years has been to keep the average annual increase in prices within a range of 1% to 3%. Obviously, we are well past the upper limit now.
Although the central bank is extremely well equipped to control inflation when the economy is overheating because of an increase in aggregate demand, the situation is very different in the event of a supply crisis. That is because successively raising its key interest rate does not allow the central bank to influence supply. It simply reduces demand.
In other words, since production is insufficient to meet the demand, equilibrium prices rise, and all the Bank of Canada can do is lower demand to reduce the price increase. However, at the end of the day, there are not more goods and services on the market, only less room to manoeuvre and borrow to make consumption or investment choices.
Such a monetary policy could pose a risk. If, at the time of implementation, the economy is not in an overheated situation where overall supply is basically inelastic, the central bank's action could also slow down the economy or even plunge it into recession. Considering how much the labour market is changing, this could almost be described as a quantum leap. The signals of the economic context are difficult to pick up, and there is a real risk that the monetary policy will be too restrictive and therefore impede growth.
Again, there is not much that either monetary or fiscal policy can do to respond to a supply crisis. These policies aim to reduce demand in order to lower prices, but they do not allow for increased production in the short term.
I want to reiterate that the best government policy is to support businesses and help them adapt and become more resilient in order to push supply back up, even though that does not happen automatically.
If there is one lesson we can learn from the global supply-and-demand model, it is that we need to avoid falling into the very tempting trap of responding to a decrease in supply by giving everyone money. That kind of policy may appear to meet people's needs, but it will quickly fuel inflation. It is therefore a futile, ineffective policy, especially if it drives society as a whole into debt. It is a good solution, but not for a supply-side crisis.
Tax cuts would have exactly the same effect. It is tempting, but it is a short-sighted solution that would make the problem worse, not better. Indeed, such an expansionist policy would actually thwart the central bank's restrictive policy. That would be the worst possible situation. England is currently experiencing major difficulties that illustrate what happens when policies clash like that.
What can we do? As I said, there are no simple or easy solutions. We can help companies pivot. We also have a moral obligation to help the most vulnerable people and the hardest-hit sectors cope.
I am thinking of low-income families and single people, especially seniors who live on modest pensions that are not indexed. I am also thinking of sectors that are particularly affected by inflation, such as agriculture. We also need to reinvest in social housing to respond to the housing crisis.
For goodness' sake, though, we should not send cheques to everyone, lower taxes for everyone or, above all, abandon our climate efforts.
1239 words
All Topics
- Hear!
- Rabble!
- add
- star_border
- share
- Sep/29/22 4:57:29 p.m.
- Watch
Madam Speaker, I thank my colleague for his question.
I have a few things to say to him in response.
First, I would love to analyze and study the impact of the Liberal government's carbon tax. This tax will increase gradually, and it is set to triple by 2030, not right now when we are in the middle of an inflationary crisis. What will be the actual, concrete impact on the price of food and the cost of living? We have to study that in order to put a figure on the results. I think the impact will be much lower than indicated.
Now I would like to ask my colleague if he acknowledges that human activity contributes to climate change. If so, does he agree that Canada should honour the Paris Agreement, which requires us to reduce our greenhouse gas emissions? If the answer is yes, what would his plan be? My concern is that this government's plan will not even enable us to honour the agreement.
My colleague spoke of the national policy. In closing, I would like to remind him that the English Canadian nation is not my nation. Quebec's national policy is the carbon market, which, by the way, was created by a Liberal premier, one Jean Charest. Therefore, Quebec is not subject to this government's carbon tax. Since we have a different system and a different model, we are not affected by these changes.
243 words
All Topics
- Hear!
- Rabble!
- add
- star_border
- share
- Sep/29/22 5:00:19 p.m.
- Watch
Madam Speaker, first, I would like to thank the hon. member for Victoria for making such a concerted effort to ask her question in French. We have all had the experience in the House where we hear the interpretation while we are asking our question. To hear your question being translated, especially in your mother tongue, is quite disconcerting, so I salute her effort.
The Bloc Québécois is a progressive party. We support the idea of a more progressive tax system, meaning that the wealthy pay a higher percentage of taxes than the poor. As we know, poorer people tend to use their income to cover the cost of essential goods. For example, members of the House earn high salaries and, despite what we pay in taxes, we do not have to make such agonizing choices.
My colleague's question is well worth considering. The fact that big corporations are making excess profits as a result of the current situation is something that needs to be looked at. I have read quite a bit about this, and let us just say that analysts are quite divided on the feasibility of this. What is the right way to go about it?
We certainly need to move in that direction, but we must do so efficiently while maintaining stability in the system.
Again, bravo to my colleague for asking her question in French.
235 words
All Topics
- Hear!
- Rabble!
- add
- star_border
- share
- Sep/29/22 5:02:42 p.m.
- Watch
Madam Speaker, I thank my colleague for his question, even though it was not asked in French. Perhaps he will try next time.
The trickle-down theory, which refers to the notion of creating wealth before distributing it, was popular in the 1970s, 1980s and 1990s. I would say that it was possible to continue embracing the theory up until the 1990s. It was an ideological vision. Since the 1990s, however, this theory has been clearly debunked. Nothing ends up trickling down, so it is not a theory that can be supported.
As for the second part of my colleague's question, I will use the example of England, which is really not doing well right now. The Bank of England has adopted a restrictive policy, but the government has adopted an expansionist budgetary policy. Together, these short-sighted policies cancel each other out and result in debt.
It is wishful thinking to believe that cutting taxes will significantly stimulate the economy, especially at a time when the economy is overheated and inflation is high. When I taught in CEGEP, we taught the Laffer curve, which espoused this theory and was developed by an American economist. It never worked. It is a myth. Experience has shown that it does not work.
211 words
- Hear!
- Rabble!
- add
- star_border
- share
- Sep/29/22 5:05:06 p.m.
- Watch
Madam Speaker, I thank my colleague and friend for the question, although when he mentioned the second CEGEP, I realized he was talking about UQAM. That is a serious mistake. I would have him know that the economics department at UQAM does good work.
Keynes' work certainly contributed to the establishment and creation of the first central banks and highlighted their importance. The other thing that came out of his work is the famous equation for the quantity theory of money. It does not happen automatically and instantaneously. It depends on several other factors. Keynes particularly drew attention to the perceptions or psychology of people and economic players in the phenomenon of inflation.
For example, the U.S. dollar is the global reserve currency. If a lot of money is printed, prices will rise much more slowly than in an economy where the currency is weaker, where foreign investors have less confidence in their currency. If they deviate slightly from established practice, prices can soar because confidence is lost more quickly in those economies. The central bank plays an important role, and it is important to respect its autonomy.
189 words
All Topics
- Hear!
- Rabble!
- add
- star_border
- share
