Yahoo Finance Christopher Ragan: It’s strange, we have long-term focus in some policy areas but not others
The turn of the year offers grounds for both optimism and pessimism: The days are lengthening. But the temperature is still falling. End-of-year feelings are often a mix, too. We asked people involved in the observance of things present what has them hopeful — and not — this holiday season. Today Christopher Ragan, founding director of McGill University’s School of Public Policy.
I’m not by nature a pessimist. But I’m definitely pessimistic about the growth of public spending, especially at the federal level. During the pandemic, the federal government implemented new programs, quickly and at scale, that provided financial relief to millions of Canadians and businesses whose incomes had disappeared. For this reason alone, the feds deserve serious credit. Even the recent reports from the Auditor General that roughly $30 billion of this spending may have been questionable should not dampen the assessment: given the massive uncertainty at the time, erring on the side of overpayment during a major health emergency was a good call.
But Ottawa’s seemingly endless enthusiasm for spending on a wide range of large new programs without reducing spending on lower-priority items is now a big problem. Universal child care and dental care may be good ideas, and so might public investments designed to drive “clean growth” (although there are also solid arguments against such initiatives). But if the government is going to prioritize these new spending areas, it should cut back or even eliminate a good number of existing programs — “whatever it takes!” as they say, to recognize the reality that, as always, there are limits on how many taxes Canadians can pay.
There will be many future demands on the public purse, not least to pay the rising health-care costs of an aging population. Governments need to keep their fiscal houses in order. That requires making tough decisions about which programs to terminate so that more room is available for emerging priorities. At bottom, I’m pessimistic about this government’s ability to make such decisions — or even to admit the problem exists at all.
In one sense that inability to deal with the long-term, far-horizon consequences of its decisions is puzzling, for in another important, future-oriented policy area, the government is clearly all-in. I know many readers will disagree, but in my view climate change is a serious threat to our living standards and we need better policy to address the problem — even if it is obvious that Canada on its own cannot solve this global problem. But it matters which policies we use to reduce greenhouse-gas emissions. As an economist, I’m bound to think we should employ those that do the job at the lowest possible cost: it makes little sense to spend $X billion to achieve some outcome when it could be done differently for half that amount.
So it’s good that carbon pricing, which is recognized by economists as being the lowest-cost approach for reducing carbon emissions, is now a key pillar of Canada’s climate policy. In some provinces the policy is provincially designed and in others the federal “backstop” is used. But carbon pricing now applies from coast to coast, and the price is slated to rise gradually from today’s $50 per tonne of CO2-equivalent to $170 per tonne by 2030. This policy will drive a lot of emissions reductions over the next decade and beyond.
But here’s the rub. The current system is not designed to achieve all the emissions reductions the feds are committed to achieving by 2050. Almost as if they don’t really trust their own carbon price to achieve its objectives, they are adding lots of other policies to the mix. Unfortunately, these other policies are almost always more costly than the carbon price, and so the impact on the economy will be worse than necessary.
We are still in the early days of Canada’s overall climate policy, and much will evolve over the coming years. While many non-pricing, command-and-control policies may appear, especially if a future government decides to repeal the existing carbon price, overall I am quite optimistic about Canada’s climate policy framework.
I wish I could be optimistic about health care, too, but I find that impossible. Canadians have long had an inappropriately rosy view of the quality of our system, but the pandemic has revealed deep problems that we read about every day. We are quickly coming to the view that the system actually isn’t working very well, and the solutions appear to require more than just money. Yet, over the past several weeks we have witnessed the latest health-care-funding theatre. The provinces demand more money from the feds. The feds are willing to talk money, but naturally want accountability on how the money is spent. The provinces angrily defend their jurisdictional territory and with straight faces continue to recite their demands. We get nowhere.
The lack of flexibility and creativity on all sides is astounding. This is arguably one of the most important areas of public policy in the country, and just about everyone now recognizes that serious changes are required. Yet the debate appears to be only about money, and almost nothing is said about addressing the more fundamental problems. When will we start having serious conversations about fixing health care?
I wish I knew. Maybe the best we can all do during this holiday season is to work hard to avoid being a drain on the ailing system: eat healthily, drive safely, and avoid walking on those icy roads and sidewalks — which should be ploughed and sanded more often, but that’s another story.
Happy holidays to you all.
