The Liberals need a stronger economic story, and soon

Armed with a renewed mandate, the Liberal government needs to take care that its agenda for the 44th Parliament does not appear to become disconnected from the day-to-day economic concerns of Canadians. 

Delivering on its platform commitments, the Liberal agenda entails new investments, taxes and regulations.

Billions have been pledged on health care, child care, housing, climate change initiatives, pandemic relief benefits, and Indigenous reconciliation. 

New taxes are on the way for the financial services industry and the highest-income earners. The carbon tax is planned to increase from $30 per tonne to $170 per tonne by 2030.  

For its overriding priority of climate change, the government has pledged to cut greenhouse gas emissions to between 40 and 45 per cent below 2005 levels by 2030.  Achieving this goal will inevitably entail new, more stringent emission-reduction regulations of some kind across all economic sectors.   

This is a bold and ambitious agenda focused on addressing both urgent and longstanding national challenges. Overall the Liberal program has a solid economic justification in terms of reducing inequality, sharing opportunity, spurring innovation, and improving our national standard of living.  

But to date, the government has stressed their social and environmental benefits over their economic benefits. 

Climate change, for example, is an existential global threat. It is relatively easy to calculate the economic and fiscal cost of taking action. But it is much more challenging to calculate — not to mention communicate — the costs of not taking action. 

The same could be said about a wide swath of the Liberal agenda.

The danger for the Liberal government as it prepares for Parliament is the uncertain state of the economy.   

In recent months and throughout the election, we saw warning signs of accelerating inflation and increased concerns among Canadians about their ability to pay their bills. The latest inflation numbers for September tell the story — a new 18-year high of 4.4 per cent, driven by higher prices for gas, shelter and food.

If this continues, the Bank of Canada would be forced to jack up interest rates to bring down inflation. 

This would increase borrowing costs to everyone on everything from business and personal credit to home and business mortgages. This dynamic carries an inherent risk of a recession.

The potential risk to the government here is that its progressive agenda may seem out-of-step in a contracting economy, when the existential concerns of average Canadians may be more related to keeping their jobs, paying their bills, and keeping their homes, than with addressing worthy social and environmental priorities.    

Of course, a recession is far from a certainty. But if one occurs, the Liberals will certainly be blamed for it. And the political damage would be far worse if it looks like they were distracted by non-economic issues while the economy deteriorated.  

It would be prudent for the Liberals to start doing a better job of communicating a narrative that connects their platform with jobs and growth. 

This will be challenging, given the transformational nature of their agenda. That is why they have to get their story straight — and out — soon. 

Ken’s piece first appeared on National Newswatch on October 20, 2021. Read it here.