Op-Eds

In 1990, then-prime minister Brian Mulroney infamously quipped that a first ministers’ meeting about the Meech Lake Accord was “the day I’m going to roll all the dice.” The 2021 federal budget rolls Canada’s dice again, by burdening a generation with more debt. One hopes the result is more positive than what befell the accord and the Mulroney government. Some of us were hoping the budget would introduce a fiscal anchor to return us to the pre-pandemic net debt-to-GDP ratio of around 30 per cent. And it’s there — in 2055. In the intervening 34 years, Canadians will shoulder a higher debt burden — around 50 per cent until 2025-26. A graph depicts it declining ever so slowly after that. The projection presumably assumes no further...
The housing market is hot, and has been for several years, especially in Canada’s largest cities. Many policy attempts and proposals have been made to slow it down, with the focus almost always on trying to reduce demand. The most recent proposal along these lines is a capital gains tax on principal residences. The argument for taxing capital gains on the sale of owner-occupied principal residences is twofold. First, the argument goes, the tax will decrease demand for houses and condos, putting a stopper on illogical price appreciations. Second, governments are starved for tax revenues, and taxing these gains would help fill that gap. In practice, however, neither of these is likely to play out as expected. In some ways, taxing...
The global economic lockdown implemented to contain the COVID-19 virus has caused the most severe economic downturn in Canada since the Great Depression of the 1930s. But while production plummeted, the overall income of Canadians hardly budged because of the federal government’s aggressive debt-financed policy response. Including both planned stimulus spending and the effects of the recession on revenues and expenditures, the lockdown-related increase in government debt amounts to about $550 billion. As I point out in a recent C.D. Howe Institute paper, most of the current discussion around the additional debt focuses on its sustainability — whether it can be rolled over indefinitely without requiring tax increases or spending...
Suddenly, inflation is in the news. In Canada and abroad, spending is surging and COVID-impaired production is struggling to keep up. Key commodities – oil, lumber and metals – are expensive. It is front-of-mind in financial markets as well. The yield on the federal government’s 30-year bonds, which was below 0.9 per cent last August, topped 2.0 per cent last week – well above its pre-pandemic level. Do these headlines and fears represent overreactions to rogue statistics and possible minor tactical shifts by central banks? Or is something more fundamental happening? Will politicians who won’t stop spending more than they tax end up forcing central banks to print money to cover the difference? Current indicators and worries could...
Vaccines are giving everyone hope that the COVID-19 global pandemic may soon allow us to return to our normal lives. That hope has been tempered by frustrations about vaccine rollout and fear of mutating variants and so almost all parts of the country remain in some kind of lockdown. But what strategy should we follow on lockdowns to get us through to what we hope is full inoculation? What we need is a tool that considers both health and the economy, not the false dichotomy that we must choose one over the other. Research we have conducted for a C.D. Howe Institute paper using an epidemiological-economic model provides important insights to help guide us until a vaccine is widely available. The results we present below show...