After policy clashes with two consecutive finance ministers, Prime Minister Justin Trudeau should consider that he is the source of the problem, Kevin Yin writes.Adrian Wyld/The Canadian Press
Kevin Yin is a contributing columnist for The Globe and Mail and an economics doctoral student at the University of California, Berkeley.
If all your partners complained about the same aspect of your behaviour again and again, you might start to reflect on the fact that you are the common denominator. At some point it may occur to you that you, not they, are the source of the problem.
Despite serious friction about the soundness of his policy decisions with two consecutive finance ministers, which culminated in Chrystia Freeland’s resignation on Monday, it does not seem that this possibility has occurred to Prime Minister Justin Trudeau.
Much has been made about Ms. Freeland’s poor performance with the Senate Finance Committee in defence of the government’s newly launched two-month GST holiday. But I can sympathize with her to some extent, as a textbook case of an employee having to implement the plan of an employer who ignored her. Despite the responsibility for implementation falling on the Finance Department, the proposal originated from the Prime Minister’s Office and was in fact criticized by finance officials as making little economic sense.
The GST holiday, like the home-heating-oil tax exemption before it, is poor policy and an obvious hail-Mary attempt at resuscitating Mr. Trudeau’s political chances for the next election. Our economy does not suffer from lagging demand, and the tax break does not address the real issues in the Canadian economy, such as productivity stagnation or the lagging investment.
It runs contrary to Ms. Freeland’s own declared fiscal guardrails, a now-failed promise that many would have held her responsible for had she not just resigned. The Parliamentary Budget Office estimated it could cost Ottawa as much as $2.7-billion in tax revenues, though of course some of this pain will be distributed across provincial governments.
Even small businesses who would benefit from higher demand have argued the GST break is more trouble than it’s worth. Thus Ms. Freeland was faced with the unenviable task of defending an indefensible policy she herself does not believe in.
Nor is it the first time Mr. Trudeau and the Finance Department have fought over spending. During the COVID-19 pandemic, tensions arose between the PMO and then-finance minister Bill Morneau, who was concerned about the massive expansion in the federal deficit as a result of pandemic stimulus. How large the stimulus should have been during the pandemic is perhaps an open question, but Mr. Morneau has pointed out that the Finance Department’s analysis and recommendations were largely ignored in that decision-making process.
His criticisms of the Trudeau government since leaving office will sound reasonable and familiar to readers of this paper. Mr. Morneau has argued since that Mr. Trudeau is personally unserious about productivity growth and favours politics over policy, taking far more advice from his political staff than his ministers.
Whatever their individual failings might be, Ms. Freeland and Mr. Morneau had remarkable private-sector careers, are highly educated and have scores of policy experts around them. They are at least more qualified to consider the economic needs of the nation than Mr. Trudeau himself. That both have levied the same criticism of the Prime Minister’s fiscal policies from within his own government is a good indication those policies were bad. That those criticisms have been widely echoed outside the government is another such indication.
Knowing what you don’t know is the mark of a good statesman, perhaps more than in any other job. There are simply too many subjects to master in too little time. The fact the Prime Minister does not listen to his ministers is perhaps even more concerning than the ill-timed bump in aggregate demand and the larger deficit for this reason. The latest disagreements with the Finance Department suggest Mr. Trudeau thinks he knows better – or to consider the more terrifying possibility, he simply does not care.
The Prime Minister could opt to retire with grace, by attempting in his final months to emphasize his legacy and solidify the real gains he made during his tenure. He could remind the country of his beneficial work on marijuana legalization, defend carbon pricing against the Conservative sharks circling the waters and set the stage for the long-run economic stewardship of the country, without consideration for short-term political points.
The benefit of recognizing that your election prospects are doomed is that you can actually govern the way you would like. Instead, Mr. Trudeau has chosen not to go gently into that good night, thrashing about against the advice of his most competent allies.