November 22, 2023

Federal government released its fall fiscal/economic statement yesterday.

I barely understand what the purpose of this document is other than politicians now think it is useful to announce new spending more than once a year. Just to remind people politicians are doing things.

Recently, it is a document entirely focused on "spending" money by giving it away to not the government. A lot of the spending is money that the government is borrowing to give away. The public can be forgiven for thinking that this is all governments do.

The housing program announced is essentially a massive profit subsidy to developers. An additional $15B of government-subsidized debt to be distributed to private developers.

Subsidized debt? Yes, debt that is lower cost than the debt from the private markets. Delivered to developers who are profitable even if they borrow from the private markets.

The move toward subsidized debt is akin to artificially lowering the interest rates—which has been a problem for at least two decades. It causes inflation and it is an expensive way to transfer wealth from poorer working class people to investors.

Sure, there is about $1B assigned to "non-profit" developers, but the fact is that without additional supports, that is unlikely to result in much of anything.

Why is this a problem? Developers do not need more profit incentives to build homes. They are already building expensive homes (yes, even expensive rental units) for people who can afford them. We do not need more expensive homes, we need more affordable homes. And, frankly, new homes are expensive.

So, what to do?

Well, the government should be building homes. Market-rent targeted rental housing units.

There are many ways to do this, but none of them appear in the Liberal's plan. Why? Because the Liberal believe in a magic solution that has never existed. They believe that if you build expensive houses, people move from less expensive houses into more expensive houses. This, of course, would magically create new spaces in affordable housing.

Does this happen? Yes. Does it happen at a level that matters to the housing market? No. Never. Why? Because if people had enough money to move into a more expensive house, they would have because there are more expensive houses available almost always.

Where are we missing housing? A the less expensive end of the market. Why don't we have housing at the less expensive end of the market? Because those houses get purchased by "investors" (people who have money to do this) and flipped becoming more expensive houses.

We are constantly building more expensive housing and running out of less expensive housing. This is what the private housing market does.

Throwing more money at the private housing market simply increases the average price of housing.

The only solution—the one that has been known since the beginning of time—to this is to build public procured housing.

The Liberals cannot help themselves in this because of one very particular reason: over 50% of people in Canada either own a mortgage or a house/condo. Anything that affects the price of housing results in a loss of votes for the Liberals. So, there isn't a single Liberal policy program that even comes close to solving the housing affordability crisis.

It isn't a conspiracy, it is their policy program.

None of these measures affect cost of living. They are programs where the government gives money back to the people they took it from and then demands to be thanked.

We used to call that kind of policy "tax cuts", but we now call it "making life more affordable".

Some of these measures are slightly redistributive, but given the rather unprogressive nature of the tax system in Canada, it is really working people giving money back to themselves.

The changes to the competition act are a real "who cares" since almost none of the price increases are because of lack of competition. This is just a sop to people who think that this is the case and costs nothing. Most importantly, it costs competitive businesses nothing.

The bank changes will do nothing.

The one thing that is positive in this chapter is the heat pump subsidy. However, if you really want people to upgrade to heat pumps and have that benefit the economy, the program should be about building them here and having the state provide heat pumps and installation hook-ups, not just subsidizing the purchasing of them by homeowners.

The chapter should be called "hoping private capital is subsidized enough to invest in our economy".

I find it astounding that a government can, without shame, release a statement that includes a list of all of their investments in green energy a week after they were directly called out for not doing anything on green energy.

Hoping that the market will save us from climate change is silly after it is clear that 20 years of hoping has resulting in almost nothing.

The main part of this is "tax credits" for green investment. A focus that includes carbon capture and storage and clean hydrogen. Both products are not online and will not be online any time soon because one doesn't exist and there is barely any market for the other.

Even the electric vehicle supply chain, which we are generally supportive of the idea of more investment, misses the main point: Canada needs its own technology and solutions to energy storage.

Some how pension funds are part of this chapter. As if they are magical altruistic money trees held back from investing in loss-leading production. It is, again, almost like Liberals do not understand how the economy works.

Ownership trusts are also promoted. One need only read Angella MacEwan's analysis to understand why those are ridiculous. Workers are not asking for these, but start-up founders who like to seem progressive are.

There are many ways to balance budgets. There are many ways to even understand what a "balanced budget" is. You will find none that are helpful in this document.

There is no balance. The Liberals spend more than they have because they are essentially giving money away and then borrowing to give more money away. Much of it is inflationary—which is hard to say because that's what the Tories say.

However, the problem is not the amount that is being spent or the size of this or that deficit ratio with GDP, it is that the money is spent in the wrong way.

There is a general understanding that profit subsidies are the global call of capital these days. The loss of artificially low interest rates are really putting a dent in the magic money tree that investors parked themselves under. Now that interest rates have gone up, capital is shocked to learn that unsubsidized capitalist investment in actual production is hard. Governments have come to their rescue with different subsidies.

The issue is that the subsidies are inflationary and workers are bearing the brunt of the costs. Invested properly and workers and the environment could be supported in a way that creates value as opposed to just redistributes it upwards.

However, we would need a socialist-orientated government to do that.

As we have it now, it is more of the same. The worst part is that it is clear that the Liberals are unsure how to win the next election because they are unsure how (do not want to) solve the problems faced by working people.

This note is too long and too whiny to deal with the solutions. But, the government has identified the areas we need to focus our alternatives on for the next election:

• Housing
• Affordability
• Economic development
• Fiscal stability (who pays and how)

These are things we can answer. And we should.