Inflation is a slippery foe.
In politics, it is one of the few enemies that can’t be outcampaigned, outspent or outmessaged. It does not conform to the electoral calendar, and it can’t be brought to the table for another round of bargaining. Most slippery of all, no amount of ingenious policy can ever truly stop it in its tracks.
Like a force of nature, inflation promises to return and to astound us with its accelerated pace and its growing magnitude. And like a force of nature, it has the potential to be deadly for those in its path. Presently, that seems to include Prime Minister Justin Trudeau.
As Trudeau decamped for Washington, D.C. to rub shoulders with President Joe Biden and congressional leaders, the news arrived that inflation in Canada has reached its highest levels since 2003. The consumer price index has increased 4.7 per cent since one year ago, surpassing the Bank of Canada’s target range for the sixth consecutive month.
That is a big problem for Trudeau. In politics, everyone knows “it’s the economy, stupid” — but the economy means different things to different constituencies. For many, it means jobs and economic growth. For others, long-term investment and stimulus. But regardless of which camp you’re in, every Canadian can agree that no aspect of the economy is more personal than the price we all pay for goods and services.
Since the pandemic began, a vast swath of Canadians has been indifferent to deficits, or the repercussions of massive government spending. The government has behaved accordingly. But now, compounded by global trends, those chickens have come home to roost. And while recent government policy may not be to blame, you can be sure that Canadians will start to care a whole lot about that spending.
For a long time, the Trudeau Liberals have excelled at managing economic issues in a micro capacity, by choosing policies that have a personal impact in the lives of Canadians. CERB payments are a good example, but so are their latest big-ticket items like child care and affordable housing.
Unfortunately for the government, the biggest issue in the lives of Canadians today is one that must be met with a macro response — and largely through monetary, rather than fiscal, policy. Mr. Trudeau and Deputy Prime Minister Chrystia Freeland are about to learn that you cannot fix every political issue with direct payments to your voters. In fact, that “fix” may actually make things much worse.
The jury is out on the extent to which major spending programmes like CERB have exacerbated inflation. Responsible economists may disagree on that point, but the question remains: Where will Canadians turn when they need someone to blame? If history is any indicator, I’d bet that the sitting prime minister is as good a scapegoat as anyone — especially on the tail end of his government’s historic spending.
What’s more, this rising threat finds Trudeau stuck between a rock and a hard place. On the one hand, his fiscal critics decry massive government spending; on the other, his quasi-coalition partners in the NDP demand exactly that.
If the pace of inflation continues, even many Liberals will be uncomfortable with billions in increased spending, as outlined by our increasingly orange minority government. For a party that centred its last campaign on delivering several transformative — and hugely expensive — new programs, this reality constitutes a clear and present danger.
It may be that while he was in Washington, Trudeau commiserated with Biden on the issue of inflation, which threatens to define this president’s administration — much as it did that of his predecessor Jimmy Carter.
Biden has publicly taken an aggressive posture on addressing the root causes of inflation, as when he ordered clogged ports to extend hours. If Trudeau learned anything in Washington, I hope it’s that he must do the same. And for the sake of our wallets, I only hope the lesson is not too late.