The turn of the year offers reasons for both optimism and pessimism: the days are getting longer. But the temperature continues to drop. End of the year sentiments are also often a mixed bag. We asked people involved in the observance of present things what keeps them hopeful, and what doesn’t, this holiday season. Today Christopher Ragan, founding director of the School of Public Policy at McGill University.
I am not a pessimist by nature. But I am definitely pessimistic about the growth of public spending, especially at the federal level. During the pandemic, the federal government rolled out large-scale and rapid new programs that provided financial relief to millions of Canadians and businesses whose revenues had disappeared. For this reason alone, the feds deserve serious credit. Even recent reports from the Auditor General that roughly $30 billion of this spending may have been questionable shouldn’t cloud the assessment: Given the enormous uncertainty at the time, erring on overpayment during a major health emergency was a wise move. .
But Ottawa’s seemingly never-ending eagerness to spend on a wide range of great new programs without cutting back on lower-priority items is now a big problem. Universal child care and dental care can be good ideas, as can public investments designed to fuel “clean growth” (although there are strong arguments against such initiatives as well). But if the government is going to prioritize these new areas of spending, it should cut or even eliminate a good number of existing programs, “whatever it takes!” as they say, to acknowledge the reality that, as always, there are limits on how much tax Canadians can pay.
There will be many future demands on the public purse, especially to pay for the rising health care costs of an aging population. Governments must keep their fiscal houses in order. That requires making tough decisions about which programs to end so that more space is available for emerging priorities. Deep down, I am pessimistic about the ability of this government to make such decisions, or even to admit that the problem exists.
In a sense, the inability to deal with the long-term consequences of their decisions is perplexing, since in another important forward-looking policy area, the government is clearly involved. I know many readers will disagree, but in my opinion, climate change is a serious threat to our standard of living and we need better policies to address the problem, even if it is obvious that Canada alone cannot solve this global problem. . But it matters what policies we use to reduce greenhouse gas emissions. As an economist, I am forced to think that we should employ those who do the job at the lowest possible cost: there is little point in spending X billion dollars to achieve some result when it could be done otherwise for half that amount.
So it’s a good thing that carbon pricing, recognized by economists as the least-cost approach to reducing carbon emissions, is now a key pillar of Canada’s climate policy. In some provinces the policy is of a provincial design and in others the federal backstop is used. But the price of carbon now applies from coast to coast, with the price expected to gradually increase from today’s $50 per ton of CO2 equivalent to $170 per ton by 2030. This policy will drive a host of emission reductions over the next decade and beyond.
But here’s the problem. The current system is not designed to achieve all of the emissions reductions that the feds have pledged to achieve by 2050. Almost as if they don’t really trust their own price of carbon to achieve their goals, they are adding many other policies to the mix. Unfortunately, these other policies are almost always more expensive than carbon pricing, so the impact on the economy will be worse than necessary.
We are still in the early days of Canada’s overall climate policy, and much will evolve in the coming years. While many command and control policies without pricing may appear, especially if a future government decides to repeal the existing carbon price, I am generally quite optimistic about Canada’s climate policy framework.
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I wish I could be optimistic about healthcare too, but I find it impossible. Canadians have long held an inappropriately optimistic view of the quality of our system, but the pandemic has revealed deep problems we read about every day. We quickly came to the conclusion that the system really isn’t working very well and that the solutions seem to require more than just money. However, in recent weeks we have witnessed the latest theater of healthcare financing. The provinces demand more money from the feds. The feds are willing to talk about money, but naturally they want to be held accountable for how the money is spent. The provinces angrily defend their jurisdictional territory and with a straight face continue to recite their demands. We don’t get anywhere.
The lack of flexibility and creativity everywhere is staggering. This is arguably one of the most important areas of public policy in the country, and almost everyone now recognizes that serious changes are required. Yet the debate seems to be all about money, with almost nothing said about addressing the more fundamental issues. When are we going to start having serious conversations about fixing health care?
I wish I knew. Perhaps the best thing we can all do this holiday season is to work hard to avoid being a burden on the sick system: eat healthy, drive safely, and avoid walking on those icy roads and sidewalks, which need to be swept and sanded with more frequently. But that is another story.
Happy Holidays to all.