- Member of Parliament
- Liberal
- Lac-Saint-Louis
- Quebec
- Voting Attendance: 67%
- Expenses Last Quarter: $123,581.21
- Government Page
- Feb/7/23 4:06:24 p.m.
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Madam Speaker, I will say at the outset that I will be splitting my time with the member for St. Catharines.
Canadians are hurting. That is obvious. We see it every day on the news, and we hear about it in the House. While employment is strong, and this is not an insignificant positive, inflation is at its worst in 40 years. We have always had inflation. Every year there is inflation. Two per cent is inflation, but this inflation is obviously the worst we have seen in 40 years. That is a fact that is indisputable. We also have the first war in Europe in 78 years, and we have the most volatile climate ever.
I will start my speech with a quote, if I may. It is a quote from a Canadian farmer by the name of David Coburn, who is helping put food on the tables of families across this great country. This is from a CBC article from November, just a couple of months ago. Mr. Coburn said, “This is going to drive inflation.... All of our food goes on our truck at some point in time so this is not gonna help the inflationary figures.”
What was Mr. Coburn talking about? He was talking about the price of diesel, the fuel that keeps the global economy moving. Here again, I quote from the article from the CBC website, which says:
Drivers may wince when the price of gasoline goes up, or decide not to drive if they can. But the trains, trucks, boats, and barges that keep the economy moving run on diesel — and they don't have that option.
The article, from back in November, goes on to say:
The average retail price of diesel in Canada has topped $2.40 a litre at various points this month, a previously unimaginable level that has many businesses scrambling to keep up.
There are many reasons why it is happening, but the impact boils down to one basic thing: it's driving up the price of everything, and making inflation worse.
What has been driving up the price of diesel? We know that shutdowns of refineries for maintenance have an impact on supply and the price of diesel in a market that is driven by demand and supply. For example, the Irving Oil refinery in Saint John saw a shutdown for maintenance recently in the fall, taking 300,000 barrels a day of supply off the market. Refinery shutdowns for maintenance happen all the time, but when they happen in a very tight market, then we can see very wide swings in the price of diesel and the price of gasoline because barrels that might otherwise be available to meet local needs are just not there. In this case, in November, in New Brunswick, and therefore in Canada, barrels that might otherwise be available to meet local needs were being diverted to the other side of the ocean.
Again, I quote from the article, which is quoting a gentleman by the name of Patrick De Haan, a Chicago-based analyst with a website called GasBuddy.com. He says:
Europe is trying to move away from Russian oil products like diesel fuel, and as a result of that, much of the product that could be imported into the Northeast or eastern coast of Canada, as well as the Northeastern U.S. is being pulled over there.
Europe was essentially building stockpiles for the winter ahead, and that meant that, when the Irving Refinery shut down for maintenance, the market was very tight, and the price went up drastically.
Another factor that has increased demand for oil and gas is the rebound in airplane travel. I will quote another analyst, Paul Pasco, who is with a firm called Kalibrate. He says in the article, “air travel getting back to pre-COVID levels isn't helping either.” He then said, “Diesel, kerosene or jet fuel, they're basically all the exact same part of the barrel, they're all what's known as the distillate barrels”. Therefore, we have lots of factors that are contributing, or have been contributing, to the very high price of diesel.
The opposition will have us believe that all of these huge forces at play internationally are not really what is causing prices to go up. They contend that it is the price on carbon, but all experts will say, and I will quote a professor of economics at the University of Calgary, that the overwhelming dominant reason why prices are higher now compared to a couple of months ago is there are factors other than the price on carbon.
Professor Trevor Tombe said that the federal carbon price adds 11¢ to the cost of each litre of gasoline, and added that the notion that the carbon tax is what is behind high gas prices is a misconception. He said, “While, you know, 11 cents a litre is a meaningful level overall, they don't drive the recent increases that we're seeing.... It's really about global oil prices, and that's really driven by things far beyond the government of Canada's control.”
I do not know what they are talking about on the other side. I do not know what their researchers are telling them or why they are telling them what they are telling them, but they are invoking all the wrong factors to explain what is going on in the economy, and that is quite concerning for a party that claims it wants to govern the country. If Conservatives do not understand basic economics, how could they make big decisions?
We know that the Leader of the Opposition holds Milton Friedman in very high esteem. One could say that he worships at the altar of Milton Friedman, and we know that he carries around under his arm a copy of Milton Friedman's A Monetary History of the United States. Let us see what Milton Friedman would say about this whole issue.
The University of Chicago school of economics, where Milton Friedman was the top economist for many years, held a forum a few years ago called, “What Would Milton Friedman Do About Climate Change?” Former U.S. representative Bob Inglis, a Republican from South Carolina, opened the discussion by playing a 1979 clip of Milton Friedman appearing on The Phil Donahue Show. Phil Donahue asked Milton Friedman, “Is there a case for the government to do something about pollution?” Friedman replied, “Yes, there's a case for the government to do something. There's always a case for the government to do something about it.”
He was basically saying that the market had broken down and was not operating efficiently, so something had to be done. What did he mean by saying the market was not operating efficiently? He said, referring to the cost of pollution:
those costs are real, and they're not being reflected in the costs of that electricity or the tank of gas. Emitting carbon dioxide into the atmosphere does allow you to produce electricity more cheaply, but there's a whole other set of people who are being punished or penalized. It's a poor idea of economics.
I do not know if the Leader of the Opposition read that quote by Mr. Friedman. He went on to say:
What we need is an adjustment mechanism that will enable us to adapt to what happens as it develops. Everybody in this room knows there is such a system, namely the price mechanism. If we have a problem today, in the air, with pollution, it is solely in my opinion because that system has not been allowed to work.
Then someone else—
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- Apr/26/22 3:49:43 p.m.
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Madam Speaker, housing is a very complex area. We have brought in some important measures to help with housing affordability. We have a new savings vehicle. It is a very creative combination of a TFSA and an RRSP that will benefit first-time homebuyers.
There are other aspects of the housing situation that are under the control of municipal governments. I think the member has probably seen this in his area. I have seen it in mine. There is a big debate going on in my community about densification, and some amount of densification is going to be necessary if we are going to increase the housing supply in a geographic area that is already highly developed. Obviously, we cannot influence municipal bylaws and permitting, but through the housing accelerator fund we can exert a certain amount of influence, and hopefully that will be helpful.
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- Apr/26/22 3:30:16 p.m.
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Madam Speaker, I would like to dedicate my speech today to Tania Woroby, now retired from teaching, but who taught me my first economics class ever when I was in CEGEP in Montreal. Ms. Woroby had a gift for explaining economics with crystalline clarity.
A good economics professor can play a crucial role, as I am sure the members for Joliette and Mirabel would agree.
How would Ms. Woroby have graded the official opposition's response to the budget? She would have probably awarded them low marks for their partial analysis of the state of the economy. However, like a kind and patient teacher, she would perhaps have allowed them to rewrite the mid-term.
There is a real economy and a money economy, as I learned in Ms. Woroby's class, and yes, they are connected, but the Conservatives insist on ignoring what is going on in the real economy. They focus solely on monetary policy, which seems misplaced since the government does not control monetary policy, something the Prime Minister has tried over and over again to explain in the simplest terms.
The Great Depression highlighted the potential impacts of catastrophic events in the real economy. In the Great Depression, we saw the collapse of agriculture, the hangover from industrial overproduction, the rise of trade protectionism and a general crisis of confidence, something Keynes incorporated in his analysis under the rubric “animal spirits”. All these factors combined calamitously to sink the economy against the backdrop of a shrinking money supply tied to widespread bank failures. The money supply is always the backdrop, but contrary to what the Conservatives believe, the money supply is not the main driving force behind economic activity.
As Andrew Coyne put it in a recent column, inflation is not “too much money chasing too few goods”. Rather, the price of a good or service rises when demand outstrips supply. For example, if the price of oranges goes up because of a frost in Florida that killed the crop, that is not inflation. It is a price signal that oranges are in short supply relative to demand, a gap the free market will move to fill by offering more economical substitutes.
Quantitative easing, or “unconventional monetary measures” as it has been called, did not unleash inflation in the United States between 2009 and 2015 when the Federal Reserve used it in response to the 2008 financial crisis, because the state of demand in the real economy was weak, deflationary even. What quantitative easing did was save the international financial order. Quantitative easing has been front and centre during this pandemic, but this is not what has fuelled inflation. As Ian Lee, a professor of economics at Carleton University, says, “Over the last two years people realized there's some things they don’t need as badly or as much as they thought they needed.”
What is more, those who received COVID benefits did not spend more. They essentially borrowed less and saved more. Canadian household savings rates rose during the pandemic, and much of the savings are still in personal bank accounts. Bank deposits have grown by an average of around $12,000 per household compared with prepandemic trends. Also worth mentioning is that consumers are expected to use their credit cards less in 2022 in favour of instead using cash. According to Nicole McKnight of finder.com, “Three times as many people said they would either stop using their credit card or use it less often, than those who said they would use it more.” None of this suggests a credit-driven spending spree linked to inflation.
Quantitative easing is not the same thing as creating cash. It is not printing money, as the member for Carleton likes to tell us. Quantitative easing creates chartered bank reserves that are held at the Bank of Canada. These can be turned into loans, but this does not happen automatically. It happens only if there are profitable lending opportunities, including to businesses that want to expand capacity, something that actually mitigates inflationary pressure.
As global chief economist for Manulife Investment Management Frances Donald has said, “For the past 40 or 50 years, we've tended to view the economy through a demand-side lens. What is so unique about this [period today] is that it's the greatest supply side shock since the 1970s.” In others words, to quote economist Armine Yalnizyan, “This is pandemic economics. The regular rules may not apply.”
We have been living in a trade globalized world for the past two decades, with global supply chains built around just-in-time delivery and thin inventories that, if they had been more robust, could have better absorbed COVID supply shocks. When confronted by lockdowns at major ports and factories, the global just-in-time delivery system simply snapped.
Pandemic economics is mostly about capacity constraints, and demand shifting from services like travel and restaurant meals to goods, mostly ordered online, and not about too much money chasing too few goods. We are talking about fewer semiconductors for cars and washing machines, the halt in housing construction for weeks, if not months, at a time during the lockdowns and even capacity limits in the oil and gas sector following a downsizing of its workforce in response to a precipitous drop in economic activity caused by the pandemic. Of course, there is a war in Ukraine that has created uncertainty in energy markets causing prices to rise, which has in turn raised the cost of food production, among other things.
Energy prices may be about to stabilize. According to an article in the New York Times on April 12 referring to the impact of world oil prices on U.S. inflation:
...it now appears that the world oil market overshot in response to Russia's invasion of Ukraine.... President Biden's million-barrel-a-day release from the Strategic Petroleum Reserve makes up for much of the shortfall [in Russian oil supplies]. As of this morning, [on April 12], crude oil prices were barely above their pre-Ukraine level, and the wholesale price of gasoline was down about 60 cents a gallon from its peak last month.
Then there are the impacts of climate change on agriculture. To quote from a CTV article from this past January:
A recent NASA study noted that global agriculture is facing a new climate reality and with the interconnectedness of the global food system, impacts in even one region's breadbasket will be felt worldwide.
According to Canada's Food Price Report, in 2021, Canada experienced climate change-related adverse weather effects, such as severe wildfires in British Columbia and drought conditions in the Prairies, that affected the prices of meat and bakery products.
Finally, there are the all-too-familiar labour supply constraints, including shortages of port workers and drivers, who are so vital to a functioning supply chain. Here in Canada, the pandemic depressed immigration levels in 2020 and forced hundreds of thousands of women out of the workforce. That is why we are investing in immigration and child care.
To see the impact of supply-side inflation, one needs only to dissect the components of the consumer price index. The main components of a rising CPI, in February 2022 relative to February 2021, were transportation, at 8.4%; food, at 6.5%; and shelter, at 6.6%. That is not to be confused with the cost of housing, but includes mortgage interest, property taxes, fuel and electricity. If we take energy and food out of the equation, the inflation rate in February was only 3.9%. When we looked at the inflation figures for March, we saw that the price of gasoline, year to year, went up about 40%. While mortgage interest, household operating costs, rent and furnishings are included in the basket of goods that make up the CPI, home prices are not. This is because homes are capital assets.
Bidding wars have driven home prices to unprecedented levels, due in part to people moving away from core areas, shortages of new supply and cheap mortgages, clearly. However, house-asset inflation does not squeeze disposable income the same way that a rising CPI does, though it creates intergenerational inequality and this is a problem. That is why the budget is addressing housing supply and housing affordability. Independently, of course, the Bank of Canada is addressing interest rates and the cost of mortgages.
Monetary policy, however, can dramatically suppress economic activity. It can cause great misery for a great many. We can think of the Federal Reserve's actions during the first Reagan administration, when former Fed chairman Paul Volcker wrung inflation out of the U.S. economy through an aggressive, tight money policy that created a deep recession.
The question for the official opposition is this: What should the Bank of Canada have done at the start of COVID-19? Should it have suffocated the economy during a global pandemic and created deflation worthy of the Great Depression, in the process destroying production capacity in a way that would have comprised economic growth across future generations? Also, what should the Bank of Canada do now that it is not already doing? Should the bank go even harder on raising interest rates, to the point of provoking house price deflation and a deep recession? Would that bring down the international price of oil and food, or would these remain a problem, especially for the larger number of Canadians suddenly thrown out of work? Would a more aggressive interest rate policy resolve supply chain issues? No, and that is why our budget is taking aim at the supply chain problem.
These are some of the questions that the official opposition needs to answer. They are answers that Canadians would like to hear.
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