Pierre Poilievre's Peck of Pickles

Post 80 | Will absolutism constrain budgets and pipelines?

[After you’re done reading today’s article, come back and click on this brief analysis of Carney’s new Cabinet published yesterday afternoon]

---

Politicians consistently poll at or near the lowest trust level of any profession, with this 2023 survey across 31 countries showing them at rock bottom.

Few will shed a tear for this unflattering view of our elected representatives as they spend inordinate time scrambling to gain and maintain power, interspersed by some governing. The downtrodden used car salesman has traditionally shared space in the polling basement, but these days even he doesn’t want the comparison.

“Hey, I know your face from somewhere. Are you a politician?”

“Hell no! I’m a used car salesman.”

It is against this backdrop of earned distrust that politicians find themselves staking out positions and policies to appease a divergent and demanding electorate, while clinging to their handful of principles. We live in a shades-of-grey world, yet demand unswerving black and white certainty from our politicians and are unforgiving when they flip-flop or modify a position.

As a result, some never move beyond platitudes and bromides to avoid being pinned down, while others choose unswerving and immutable positions. Pierre Poilievre and the Conservatives tend to the latter, but in the process are also taking a few absolutist stances I worry could haunt them (and us) later – two in particular.

---

---

Oh, how I look forward to some fiscal sanity in Canada including a balanced budget one day, along with a viable debt repayment plan. In that regard, the Conservative’s Fix the Budget slogan is welcome and demands constant repetition - though it can mean very different things depending who’s in charge.

After ten years of the Liberals partying on Canada’s unlimited credit card, we can no longer ignore our collective, fiscal hangover. Trudeau worsened it since prorogue by further saddling Canada with tens of billions in commitments on his way out the door (read about it here) that will further weigh on us like an anchor.

Our federal debt is approaching $1.3 trillion and costing nearly $48 billion annually in debt servicing charges, with both trending upwards.

Canadians have also awoken to our precarious dependency on the US, and a nascent consensus has arisen around the need to invest in our country. The primary urgencies are to develop pipelines, open mines, grow our military including many physical assets (ships, jets, armaments), develop our Arctic infrastructure, and build ports and military installments. Guess what they all need.

Money.

We can pretend that de-regulation and careful fiscal management will scrape enough loonies from under the couch cushions to pay for it all, but I don’t see how. We are watching the US spectacle of DOGE pretending to find enough to offset their $1 trillion in annual debt charges or put a dent in entitlement programs consuming 60% of their budget - but it will only scratch the surface. And while I am a major proponent of Canadian de-regulation and wrote of it recently, I contend the benefits are more about freeing up markets than finding tens of billions to directly repurpose into bolstering our nation with capital asset development.

And it will all take time - time we can’t afford.

Can De-Regulation Fix Canada?

Two of de-regulation’s prime benefits will be to unfetter the private sector to build and grow without the shackles of 76,000 federal regulations currently weighing it down. But also, to re-attract corporate and foreign investment into some of our pipeline, refinery, infrastructure and mining projects - to engage Public-Private Partnerships (PPP) with shared costs and revenues. It will be very challenging to solely develop everything we need without external money.

This will also be an opportunity to expand the sources of foreign investment in Canada as we diversify away from concentrated American dependency.

Indeed there is plenty of fat to be cut in government (a recent Fraser Institute study proposed eight program cuts to free up $10.7B annually) but finding, negotiating and liberating it will be a yeoman’s task that offers only a start and will take time. I have yet to see the math showing how much we’ll realistically save from bureaucracy, consultants, corporate welfare and foreign aid reductions to pay for everything we need. And good luck chopping now-entrenched daycare, pharmacare, dentalcare or indigenous payment promises that hang like a millstone around our neck.

So while I love Poilievre’s Save a Dollar to Spend a Dollar budgeting approach for the operational and programmatic side of things, will it be fast and large enough to grow out our critical infrastructure and capital assets requiring multiple tens of billions - even with a freer private sector?

We will need more money.

And this is where Mark Carney briefly enters the story.

Several weeks ago he floated a plan to balance operational budgets within three years while continuing to run surpluses of capital budgets - the latter to ostensibly feed major projects.

The Conservatives immediately punched him in the nose, pointing out Justin Trudeau made similar promises in 2015 to run "a modest short-term deficit" of less than $10 billion for each of three years to double spending on infrastructure and jump-start economic growth, then balance the budget. And they accused Carney of “sneaky accounting”.

Well - now it gets a bit nuanced because they are entirely correct on the first change, but only partly on the latter.

Trudeau’s three modest deficits added a whopping $600+ billion (~100% increase) of debt to our balance sheet, as the Liberals ran budget deficits and missed projected budgets every one of their ten years in office. To call it a terrible fiscal record is doing the Liberals a kindness, and now this same Party is proposing to further institutionalize the money shuffle. I understand why Conservatives are pounding the table.

But - as with businesses, government budgets already delineate between operational and capital expenditures with the former using accrual accounting where some expenses can be deferred to future periods rather than paying it all in the fiscal year; and the latter allowing for capital assets to be spread out over a longer depreciated time period.

So, there is nothing untoward about the accounting methodology that Carney proposes. However, it all comes down to the execution - including which expenses drop into which bucket, how much is accrued, the depreciation schedule and myriad accounting sleights of hand to make a miserable year look peachy, as costs are fobbed off to the future.

And that is where the sneaky part is very true, as this Liberal government has played a bunch of games on us for years – including the shell game (let’s shuffle money between buckets to make it look better), kick the can down the road (let’s commit us to tens of billions but smooth it out over a long period to look good in the short term while saddling Canada with perpetual commitments) and the recent capital gains tax (let’s pull forward a bunch of revenue to this year through coercion even though it’s not yet legislated). The Liberals are neither the first government nor will they be the last to perfume the budgetary pig, but they are masters of the craft.

In contrast, Poilievre put a stake in the ground with his proposed Dollar-for-Dollar legislation and governing intent. I applaud the principle while worrying he’s painting himself into too tight a corner by seeming to reject the notion of ever running capital deficits to get Canada’s infrastructure built. Maybe there is wiggle room in the position he’s taking, but I’m not seeing enough for what may lie ahead.

I agree completely on not trusting Liberal judgement or accounting after ten years of hearing them conflate spending with investing, and their spurious explanations of “investing in people” to justify operational (not capital) social programs like universal daycare, pharmacare and dentalcare. And their talk of “investing in” the green economy, to drive their net zero zealotry with nothing to show for it except more debt and a frigid economy.

Most of their spending has just been spending, no matter how they tart it up.

It is a well founded worry that Carney will continue using the “investing in” schtick as a way to spend billions of operational and ideologically driven taxpayer money, while tucking it neatly into the capital budget for kicking down a road with no end.

In which bucket will our $48 billion of interest charges land? Is that an operational item to be included in a balanced budget?

How much is a “small” deficit to Mark Carney – he of the global financial perspective?

And with Carney’s fixation on net zero and his bonkers position that Canada must spend $80 billion each year until 2050 to reach net zero, what bucket will that land in? You know he’ll call it an investment in Canada and push it to the balance sheet…for just a few years. Sound familiar?

So, I share Poilievre’s concerns in these regards if Liberals are at the wheel. Even though the accounting principle is acceptable, the execution is what matters and we have a demonstrated ten years of terrible fiscal management on which to judge the Liberals, with a new financial wizard now at the helm.

But I also worry about the Conservative’s rigid position that we must save a dollar to spend any new dollar. Will it tie Canada’s hands too tightly, and should they allow themselves some room to operate? Despite everything, Canada still has a very strong balance sheet compared to most developed nations and we could leverage it for intelligent investments that have long term benefit to the country.

But the devil is in the details - and who do you trust to make the right call on details?

---

Moving on to pipelines.

A few weeks ago Mark Carney was called out on a conflicting message about using federal powers to push through projects seen as national emergencies for the country – particularly pipelines. The resulting hue and cry was partly due to a different position he talked up in BC versus Quebec, on which Poilievre quickly called him out saying, “Sneaky Carney said in BC in English that he will use emergency federal powers to force provinces to accept big projects. In French, he says he will not force projects on unwilling provinces. Sneaky. Sneaky.”

Carney’s team then clarified what he apparently meant to say, spinning it as innocent “muddled messaging” and assuring projects would only be done with full consultation of provinces and indigenous.

If this smackdown was just about conflictual pandering, we could dismiss it as politicking. But given Poilievre’s response, is the implication the Conservatives would not consider using emergency powers under any circumstances?

Indeed, they have been clear in their plan to rescind Bill C-69 (Impact Assessment Act) which is a major impediment to fossil fuels and mining projects, and to remove the emissions caps on the oil & gas industry. Both will be sea changes and entirely necessary. But even after that, the battle to get anything done is fraught. We face an obstinate Quebec still opposed to “dirty oil” traversing their province; and despite David Eby’s talk of greenlighting energy projects in BC, his NDP are not exactly energy friendly and further hobbled by the two-person Green Party who hold the balance of power. Even more seriously, few Canadians are willing to talk openly about indigenous grievances that virtually every project will face, with a history of shuttered or mortally delayed projects in Canada after consultations revealed unreconcilable intransigence.

Add to this the lack of previously mentioned corporate and foreign investment and we’re facing some big challenges to getting projects moving.

Taken from a February Bloomberg article quoting Enbridge CEO Greg Ebel regarding what needs to change in Canadian policy before any new pipeline investment would be considered from a corporate player like Enbridge.

“For us to be willing to seriously consider reinvesting in a project like that, whether it’s east or west or just west, we need to see real change on numerous fronts,” said Ebel.

He said he’d want to see legislative changes at both the federal and provincial level identifying an energy project as in the national interest and so legally required, as well as the removal of policies like an emissions cap, carbon tax and new environmental assessment rules.

Then in a March Globe & Mail article.

Greg Ebel said Tuesday that Canada’s current regulatory environment makes it impossible to build a pipeline like its Northern Gateway project, which was abandoned almost 10 years ago after Ottawa revoked its permits.

“The ability to actually get anything done would take significant legislative changes,” Mr. Ebel told reporters following the company’s investor day event. The only way that might happen, he said, would be for the government to deem the projects in the national interest or to declare an energy emergency.

“If this is the significant crisis that I know many Canadians feel that it is, then you would think you’d want your lawmakers actually making laws to address that.”

Indeed.

Let’s assume these comments are indicative of how corporations feel about investing in our over-regulated climate. Unless they have legislative certainty from government, their appetite to invest is non-existent. Once burned twice shy….

To that end, if we face intractable opposition from any group standing in the way of our collective prosperity, security and wellbeing, I don’t want any legislative, legal or constitutional tools taken off the table.

Carney has already done that.

Has Poilievre too?

---

The Conservatives have big work ahead of them in the coming weeks - to set out their costed policies, battle the surging Liberals and continue reminding an amnestic electorate about why we’re in our current pickle, while carefully navigating their position on the Trumpian chaos without letting it dominate.

I respect principles, clarity and consistency and appreciate those coming from the Conservatives. But I hope they don’t give way to absolutism on too many issues and restrict flexibility to govern once we smartly vote them into office.

Stay tuned and stay pragmatic.