“The pandemic is over,” U.S. President Joe Biden said in an interview with CBS’ 60 Minutes. While some public health officials have taken issue with Biden’s declaration, the Public Policy Forum’s Sean Speer says the comment is something to be proud of, as it reinforces that society has managed to get through a once-in-a-century pandemic.
“Too many people died, too many people faced financial hardship, and I think there's going to be ongoing challenges with respect to educational loss and mental health issues,” Speer said.
“But I think in a lot of ways, the President was saying something that I think a lot of people want to hear, which is that we need to ultimately move on. It doesn’t mean we should be reckless or irresponsible, but we were taking extraordinary steps… things that are extraordinary can’t become ordinary. It’s unsustainable.”
On this episode of Editor’s Edition, Speer and Yahoo Finance Canada’s Alicja Siekierska discuss Biden’s comments about moving on from the COVID-19 pandemic, as well as why China is continuing to pursue a COVID-zero policy. They also discuss the government’s plan to provide inflation relief for Canadians and what to expect out of the new session of parliament, including the challenges ahead for both Prime Minister Justin Trudeau and new opposition leader Pierre Poilievre.
ALICJA SIEKIERSKA: Welcome to "Editor's Edition." I'm Alicja Sierkierska.
On today's episode, Canada's inflation rate slowed for the second month in a row, but it is still well above the Bank of Canada's 2% target range. We'll take a look at the latest with the consumer price index. And with inflation still high, the Trudeau government is facing growing pressure to do something about it. We'll take a look at how the government has chosen to respond, and what issues will dominate the new House of Commons sitting.
Also, "the pandemic is over," says US President Joe Biden. We'll dig into the latest with COVID-19 as we head into the fall. To discuss all this, I am joined by Sean Speer. Sean is a fellow-in-residence at the Public Policy Forum, and was also a senior economic advisor to Prime Minister Stephen Harper, and he's here to help us dig through some of the policy issues shaping the post-pandemic recovery. Sean, welcome back to the show.
SEAN SPEER: Thanks for having me, Alicja.
ALICJA SIEKIERSKA: Now, the latest inflation data that came out on Tuesday, and the situation does appear to be gradually improving. Here's the latest from Statistics Canada. Inflation slowed to 7% in August, which is the second slowdown in a row, and a further sign that inflation may have hit its peak back in June, as you can see in the chart.
But while it is slowing, there are categories where prices continue to rise at a rapid pace. The cost of food at grocery stores is up nearly 11%, which is the fastest increase in 41 years. So there are some positive signs here, but inflation is clearly still far from where it needs to be. Sean, how do you think this is going to impact policymakers today?
SEAN SPEER: It's a great question. I think you were right to mention the food item for-- for a couple of reasons, Alicja. First, it will maintain pressure on policymakers to try to mitigate the effects of rising prices, particularly on staple products like food for low income households. We'll get into some of the steps the government has taken so far. But I think the fact that it continues to manifest itself in rising food prices is-- means that the political pressure is-- is not going away.
The second thing I will say is, one can't help but think, Alicja, that-- that calls on the part of unions, particularly public sector unions, for wage increases commensurate with inflation, similarly are not going to go away in light of these new inflation numbers. When households are seeing more and more of their household budget eaten away by basic costs like food, you know, it seems to me that unions will have as strong an argument as they had last month, at least from their point of view, when it comes to fighting for higher wages. So I guess all of this to say, well, you-- I think you rightly observe that things are-- look like they peaked. I don't think that means that the different voices calling for government action are going to-- are going to be silenced anytime soon.
ALICJA SIEKIERSKA: And notably, wage growth is still much lower than the pace of inflash-- inflation. I believe it was 5.4% in August. And then at the same time, we still are talking about a 7% inflation rate. It is still well above the average, and this was thanks in large part to lower gas prices, which are still up about 22% from last year. So costs are still rising.
And so we've seen, really, especially that pressure on politicians that you mentioned, ramp up in the last few months, I think. And the Trudeau government has decided to finally respond after sitting on the sidelines for quite some time. On Tuesday it pushed ahead with two pieces of legislation aimed at providing inflation relief for low income Canadians.
One is that the government will temporarily double the GST credit payments for low income Canadians for six months. And then low income renters will receive a one-time $500 top-up of the Canada Housing Benefit, if they qualify for it. So Sean, what do you make of these kind of measures that have been introduced and-- and that this is the government's response to the affordability crisis that we're facing right now?
SEAN SPEER: Yeah, there's so much to say in response to that question. Let me just make a couple of-- of quick points-- one maybe policy-oriented, and then one perhaps political. The policy-oriented point I would make, Alicja, is it seems to me there was-- the government found itself in something of an unsustainable position.
High inflation is good for-- for one entity in our society, and that is the government and government revenues. So, you know, during the pandemic, a lot of Canadian governments found themselves in deep deficits. Their public finances were painted in red. We're actually seeing pretty remarkable progress on deficit reduction at the federal level and amongst various provinces, and a lot of the work is being done by inflation pushing up government revenue.
And so it seems to me that as long as governments were going to laud the progress that they were making on deficit reduction, which is mostly a result of these inflationary pressures, there was going to be growing pressure on the other hand to return some of those new revenues back to Canadians in the form of-- of measures that would try to mitigate the impacts of inflation. In that sense, I think the package that the government's put forward represents something of a reasonable political economy compromise. The GST credit, in particular, will provide targeted support for those low income households that are facing some of the pressures that we've already talked about, including-- including food prices.
I guess the second point I would make though, the political one, is I don't think this is going to stop new conservative leader Pierre Poilievre from continuing to beat the drum on these issues as parliament gets set to return this week. And one area in particular I would draw viewers' attention is the subject of the-- the rising carbon tax. Viewers will probably know that we have a carbon tax in Canada that is going up $10 per ton each and every year.
There were calls in-- in January of this year for the government to suspend those increases because of a combination of rising inflation, the economic uncertainty of the pandemic. The government took a pass at that point. But as we approach the end of this year, I think there will be renewed calls for the government to suspend the increase-- scheduled increase in the carbon tax. Because as you said earlier, Alicja, we've seen a pretty significant increase in gas prices through these inflationary forces alone, let alone policy efforts on the part of the government to effectively artificially raise prices in the name of our broader climate goals.
So I guess that's a very long way of saying I think so far the government has taken some reasonable steps. But I think this issue will loom large in the new parliament, and in particular, the subject of carbon taxes, I think, will be a line of attack that you hear on the part of-- of Pierre Poilievre and the conservative opposition.
ALICJA SIEKIERSKA: Under the measures that have been introduced so far, you know, economists have been warning about potentially adding pressure to inflation through different kind of initiatives and policies to help with affordability for Canadians, and to deal with these rising costs. Do you think that these measures are targeted enough, that-- that they won't necessarily contribute to inflation, or that it will help the people that need it most at this time?
SEAN SPEER: It's-- it's a great question. Viewers who'll be following this issue will know that there are kind of competing views on that question. Derek Holt at Scotiabank, for instance, has made the case that-- that the introduction of these measures will actually require the Bank of Canada to have to raise interest rates even higher in order to deal with the inflation problem.
I should say I was on CBC's "The House," over the weekend with University of Calgary economist Trevor Tombe, who made the case that he thought that these measures are sufficiently targeted, particularly the GSTHSD credit, such that they should provide some relief to households without having a major impact on inflation. I guess, you know, the outcome is yet to be seen.
But I come back to my earlier point which is, given rising government revenues as-- resulting from these high sustained rates of inflation, I think the government was in something of a-- a lose-lose position. It had to return those inflationary driven dollars back to taxpayers in some way, shape, or form or, I think, face, you know, significant criticism from the opposition, but also, I think, from Canadians who-- who, you know, would rightly see something of a-- of a cognitive dissonance between heralding, you know, a deficit reduction on one hand, and watching Canadians struggle under inflation on the other hand.
ALICJA SIEKIERSKA: I think you've seen that kind of approach really explicitly said in Saskatchewan, where Premier Scott Moe is going to be-- introduced $500 checks for those in the province over the age of 18 that will be coming out in the fall because they were having a surplus because of the soaring resource prices. And that's the approach that that government decided to take, but it was very much explicitly tied to the fact that they will be running a surplus that was unexpected because of the rising cost of these resources, and just inflation, as you mentioned.
Sean, in the US, we saw Biden-- the Biden government pass what it called "The Inflation Reduction Act." But I think it's fair to say that it wasn't primarily about reducing inflation-- very much a climate bill marketed as an inflation bill. But does having this kind of-- some kind of a policy response help? You know, it-- does the government need to just appear to at least be doing something in this inflation fight that is-- that requires the Bank of Canada and different factors to-- in order to fight it? But does the government need to be-- appear to be doing something here?
SEAN SPEER: Yeah. There's something to that. You mentioned in the introduction that I previously worked in politics. You know, there's some similarities, at least in political terms, to the growing pressure the Harper government then faced back in 2009 to do something in the name of fiscal stimulus in the context of the global financial crisis. In that sense, even if one has quibbles with some of the policy choices the government has made, or the risks that these new interventions may-- may represent in terms of higher inflation, you know, as you say, politics, at the end of the day, probably necessitates some action.
If I could just make one related point though, Alicja, that you know, a lot of these policies are principally focused on the-- on the area of demand, which is where we've kind of got ourselves into some trouble, of course, particularly given the fact that we've found ourselves now for, you know, north of 24 months, in a supply constrained economy. This, of course, is a subject that we've talked a lot about over the past several weeks on this program. And I'm struck that-- that the Trudeau government's package to date is really silent on the supply side question.
Now, I recognize, of course, that any supply side intervention is probably not going to produce a lot of fruit in the short-term. But it seems to me, you know, it represents an opening for a conversation about the fact that we need to make progress when it comes to the supply of-- of any number of-- of goods and services within our economy-- health care, housing, energy, manufacturing, you know, domestic production in certain strategic areas in the aftermath of the pandemic, and I could go on and on and on.
And so this strikes me as a bit of an opening for the new conservative leader Pierre Poilievre. Viewers will probably know that he spent a good part of the leadership campaign talking about the so-called "gatekeepers" who were standing in the way of-- of construction, and building, and production in different parts of the economy. It was a good slogan. I think the question for him and his team is if he's able to effectively translate that slogan into a credible policy plan to deal with the supply crunch which, at the end of the day, is really at the heart of-- of this inflationary period that we now find ourselves.
ALICJA SIEKIERSKA: So I want to take a look ahead at what we should expect from this upcoming parliamentary session, given that things are looking a bit different in the House of Commons these days. We do have a new leader of the opposition with Pierre Poilievre, now officially the leader of the Conservative Party. And as we've discussed, there are many issues that the government is being pressured to tackle, including inflation and affordability, and health care funding that you just mentioned.
So Sean, why don't we kind of set up this upcoming session and what, perhaps, the government should focus on, and Poilievre. So let's-- let's start with the prime minister and-- and the government. What do you think needs to be the focus going into this fall-- fall session?
SEAN SPEER: I think Poilievre's selection as leader of the Conservative Party on a message of affordability, household living costs, et cetera, probably represents a signal to the government that it needs to wrap its arms around those issues. You know, one of the-- one of the good outcomes of this parliamentary agreement that the government has signed with the new Democrats is it gives them some time to-- to work through these issues. For all-- you know, all things being equal, we shouldn't have a federal election campaign until 2025.
So even though polls suggest that Poilievre has found something of a salient message, there's plenty of time for the government to preempt Poilievre and start to own these issues through, you know, various policy steps, particularly the ones I mentioned earlier around supply. There's a whole movement, Alicja, particularly in the United States, associated with Ezra Klein, the "New York Times" columnist, Janet Yellen, the Treasury Secretary, and other progressive voices, in favor of what I think Klein calls "supply side progressivism." And Chrystia Freeland, the finance minister, kind of nodded to some of these ideas when Janet Yellen was in Ottawa in the spring or summer.
So I guess that's a very long way of saying I think there's an opportunity for the government here to make some adjustments to its message and its priorities, and try to head Poilievre off on a set of policies really focused on trying to boost supply in different parts of our economy. That's, I think, certainly where the government is team-- the prime minister's team, rather-- need to be focused.
ALICJA SIEKIERSKA: And with a potential election seemingly far off and-- a few years off, usually when you see a new leader come in, they spend that first initial period kind of introducing themselves to the Canadian public. But I think, I mean Poilievre is not new to the scene, so what do you think-- what are you expecting out of the opposition leader in this upcoming session?
SEAN SPEER: I'd say two things. He's going to do what he's done for some time, which is kind of carry out almost a prosecutorial role in-- in the parliament. And, you know, viewers who are familiar with Poilievre will know that he likes to mix it up with the prime minister in parliament, you know, in many ways. His kind of personal profile, which would be higher than most national politicians, stems in large part from his kind of combative approach in parliament, and I don't think that is going to change any time soon.
What might change a bit, Alicja, is Poilievre's message and orientation. He won the leadership by effectively being who he's been for most of his career, which is a pretty down the line, conservative politician with a bit of an edge. And, you know, that resonated a lot with core conservative voters.
The challenge for Mr. Poilievre will be now to build on the-- the extraordinary base of support that he has within the Conservative Party and try to reach new and different voters who will ultimately determine if he's the next prime minister. And in that sense, Alicja, I think his speech to the Party Convention the night of the leadership, and then his speech a couple of days later to the parliamentary caucus in which he really espoused a message of social mobility, kind of rooted in his own life experience.
This is someone who was adopted from a teenage mother, and within a single generation, you know, is now the official opposition leader and poised to potentially become the prime minister of a G7 country. I think it's a powerful message, one that would resonate with a lot of people and would represent a kind of slightly different tone and focus than people are accustomed to. So I think it would be in Mr. Poilievre's interest to continue down that line, and expand beyond the kind of combative persona that I think a lot of people tend to associate with him.
ALICJA SIEKIERSKA: And in terms of issues, do you think this is going to be something dominated by this affordability crisis that-- and-- and addressing the rising costs that we've been seeing over the last year or so?
SEAN SPEER: Yeah. The short answer is "yes." And in particular, as I say, I do think one area where the conservatives will be focused like a laser is on the January 1 increases to the carbon tax. The carbon taxes are, you know, I think generally unpopular in the country, but particularly unpopular amongst conservative voters. And so there's a kind of political rationale for focusing on carbon taxes.
But I would just say, Alicja, there's-- there's also something of a policy case. Even carbon tax proponents-- some carbon tax proponents, that is-- have expressed some concerns that layering another carbon tax increase on top of-- of price increases that have been driven by market forces, risks accelerating energy-- energy price increases faster than were initially intended under this kind of scheduled series of increases under the carbon tax. I don't think the government is going to bend on this. The carbon tax really is at the kind of heart of Prime Minister Trudeau's kind of policy legacy. But I have no doubt that this will be a subject we'll hear-- we're going to hear a lot about between now and the end of the year.
ALICJA SIEKIERSKA: Yeah, especially in the coming weeks and as we get closer to that January 1 increase. Sean, I think it's fair to say that this session is going to be a bit different from what we've seen in the last two and a half years-- in part because the pandemic is just not the primary issue that's going to be guiding policy decisions. And so I wanted to take a look at the latest thinking on COVID-19 as we go into the fall, in particular, comments that US President Joe Biden made during an interview at the Detroit Auto Show this week. Let's take a look at what the President said in an interview with "60 Minutes."
- Is the pandemic over?
JOE BIDEN: The pandemic is over. We still have a problem with COVID. We're still doing a lot of work on it. It's-- but the pandemic is over.
If you notice, no one's wearing masks. Everybody seems to be in pretty good shape. And so I think it's changing, and I think this is a perfect example of it.
ALICJA SIEKIERSKA: So the pandemic is over? Sean, what do you think the impact will be of President Biden saying those words and really signaling that it's time to move on from COVID-19?
SEAN SPEER: I know that some people have reacted negatively to the president's comments. There are concerns, Alicja, that it may reduce momentum on people getting booster shots. I know that there are some public health officials who are concerned that it may cause people to undertake kind of risky behavior, particularly those who may have autoimmune deficiencies or other risks associated with COVID.
But I have to say, you know, we started this program, at least I started as a guest near the beginning of the pandemic, and I don't think anybody thought we were going to be living within-- you know, with a set of-- of ongoing public health restrictions indefinitely. And I think what the-- the President is saying is actually something we should be proud of. That, you know, that this is a-- a-- I think a collective accomplishment.
That, you know, we've gone about this clumsy. It hasn't been perfect. We've been kind of at each other's throats more than we probably ought to. We probably were too unkind to governments as they made mistakes along the way.
But we faced a once-in-a-century pandemic as-- as a society and, you know, all things being equal, we managed to get through it. You know, there were too many people died, too many people faced kind of financial hardship. I think there is going to be ongoing challenges with respect to educational loss and mental health issues.
I don't want to sound like I'm diminishing any of those challenges. But I think in a lot of ways the President was saying something that I think a lot of people want to hear, which is, you know, we need to ultimately move on. It doesn't mean we should be reckless or irresponsible, but we were taking kind of extraordinary steps.
And I think what some of the public health voices don't understand is that, you know, by definition, things that-- that are extraordinary can't become ordinary. It's-- it's just unsustainable. And-- and in that sense, I think it represents a pretty major moment that will put some pressure on the Canadian government to start to unwind some of its lasting vestiges of-- of the pandemic period.
ALICJA SIEKIERSKA: You're definitely seeing that. I think you saw it through the summer with the demands over the ArriveCAN app. And we'll see in the coming weeks whether that pressure continues to mount on the Trudeau government to get rid of the-- the final remnants of its COVID pandemic policies.
But Sean, it's interesting, because as the world moves away from COVID-19 restrictions and lockdowns, China is the one country that is still pursuing a COVID zero policy. Millions of people are back into lockdown in cities across the country, and it's dealing new blows to the Chinese economy, and of course, raising concerns for global supply chains, which we've discussed so much on this show.
A recent survey from a US-China business relations lobby group found that more than half of US companies are considering canceling or delaying investment in China due to this issue, and that 24% of companies had already moved parts of their supply chain out of China in the last year because of the COVID zero policy, and just, you know, the challenge of lockdowns that-- that continue to happen. And so, Sean, what do you see as this-- China being the lone holdout here in the world with this-- this kind of COVID approach, and what that means, not just for China, but for the rest of the world, and how it may impact everyone else?
SEAN SPEER: Yeah, it's a fascinating question. Just anecdotally, I was speaking to a book author last night about when his impending book is going to be released, and it is presently undetermined because the book is being produced in China, and it is stuck somewhere between China and-- and North America. So it's a kind of practical example of some of the challenges that you describe.
You know, what I would say in response to your observations and question, Alicja, is that, you know, when we started this whole pandemic experience, it wasn't self-evident what the kind of net effects would be in terms of the global standing of different countries, you know? There was a time when things looked like the US might come out of this looking stronger. It-- it led the way on the creation of a vaccine, which seemed to kind of validate the market economy, and kind of innovation capacities of the US. And then of course, American politics got in the way and left the country, you know, in a highly politicized context when-- when it came to vaccinations themselves, such that I think probably on that the US is coming out of this looking weaker, not stronger.
I would put China in that camp as well. That China, I think, probably has maybe-- maybe left itself looking even weaker than the United States. Just think about it-- its lack of transparency on the origins of the pandemic-- on the vac-- the-- the virus itself, pardon me, which has left even its closest allies kind of skeptical and unsure.
You know, the ongoing kind of authoritarianism and totalitarianism that we've seen with respect to some of these lockdowns has-- have left, I think, people a bit more aware of the kind of excesses of-- of the Chinese regime. And now, you know, undermining the one part of China's economy which has always been such a source of strength, which is its capacity to make things cheaply and efficiently. And as you say, I think a lot of companies around the world are-- are starting to question that.
So I guess what makes that on one hand notable, on the other hand kind of worrying, is a China that feels weaker and a bit more vulnerable may be a China that's actually more inclined to assert itself in geopolitics to try to sort of reestablish perceptions of strength. And so, you know, these are not my area of expertise, but one can't help that, you know, geopolitical discussions about a possible Chinese invasion of Taiwan, you know, need to account for this just growing sense that Chinese society feels a bit less stable, a bit less sure, and a-- a bit less confident in its role and place in-- in the world.
ALICJA SIEKIERSKA: Yeah, it's such a-- a different place than from years ago where we started. And-- and so much of this growth that we've seen shrink in China seems to be kind of self-inflicted because of the policy route that they have chosen. And so it'll be interesting to see how not just China responds to this, and whether it's sustainable for them, but how the rest of the world responds just in terms of that reliability for supply chains that we've talked about so much over the last--
SEAN SPEER: Do you mind if I--
ALICJA SIEKIERSKA: --more than a year.
SEAN SPEER: Do you mind if I just sneak in? I know we don't have a lot of time, but just-- just to emphasize this point for viewers. You know, for all of the talk about political dysfunction and polarization in the United States, it's worth noting that the Chips Act, which passed, you know, in the past several weeks to try to use government policy to develop and strengthen the semiconductor industry within the US border, and in fact outside of China, had bipartisan support-- there were Democrats and Republicans in Congress.
So I do get the sense that China's behavior through this pandemic has probably left itself in a-- in a weaker position. And the West's support of Ukraine and the progress that Ukraine seems to miraculously be making vis a vis Russia, I just think-- well, all of these factors seem to-- you know, seem to be having the net effect of restoring a degree of kind of vitality and confidence in the West which I think will leave China feeling a bit exposed and vulnerable. And the consequences of that, I think, are-- are pretty hard to predict.
ALICJA SIEKIERSKA: Yeah, I think that's definitely right. But Sean, thank you so much. That's all the time that we have for today. As always, it's been a pleasure chatting with you.
SEAN SPEER: Thanks.
ALICJA SIEKIERSKA: And as always, if you're looking for the latest business news, please check out the Yahoo Finance Canada website. And if you have any questions, please feel free to email me. I'm at Alicja@YahooFinance.com. Thanks for watching.