There are a lot of things the Quebec government could use money to fix.
Posted at 5:00 am
It could fix our crumbling infrastructure, starting with the Pierre Laporte Bridge’s overhead power lines in Quebec, which are in danger of breaking, the program reveals detectionThursday.
It could help struggling children who are sorely lacking in support at school, the Quebec Ombudsman denounced Monday.
It could reduce court delays that impede access to justice, improve youth welfare services, invest in mental health and in home care… the list goes on.
But there’s one thing money can’t fix: inflation. It is not by issuing checks or granting tax cuts that the government is helping households suffering from the general rise in prices.
By turning them into ATMs, the government is attacking the consequences of the problem, not its cause. By stimulating demand, it exacerbates rising prices. It makes the problem worse instead of alleviating it. And it’s hurting the efforts of central banks, who are using horsepower to rein in inflation.
The US Federal Reserve went into overdrive this week. It, which normally raises interest rates by 25 points, announced a 75-point hike in the blink of an eye, an unprecedented level since 1994.
Between two evils, the Fed has chosen its side. It appears willing to use heavy artillery to prevent 1970s-style inflation from taking root, even if the economy suffers the collateral damage of its offensive.
The question now is whether there will be a recession. What are the probabilities? 35%, replies Treasury Secretary Eric Girard. 50%, according to Prime Minister François Legault.
The risks of a downturn are perhaps even greater if we are to believe the stock market, which is officially in a bear market after falling nearly 24% from its January peak. However, the stock market is a precursor index. Since 1956, America’s S&P 500 index has fallen more than 20% 11 times. A recession followed eight times. The economy only held up three times.
But politicians don’t care about the danger of a storm. The election campaign has not yet officially started and the political parties are already daring to offer tax breaks.
After making a $500 payment to 94% of Quebecers, a bill of $3.2 billion, in its March budget, the Coalition avenir Québec (CAQ) is now dangling another check to be paid after the election.
During its convention last weekend, the Quebec Liberal Party (PLQ) added by proposing a middle-class tax cut that would bring in an average of $1,250 per person. In fact, Dominique Anglade wants to cut the tax rate by 1.5% for taxpayers earning less than $92,000 a year (and increase it by 2% for those earning over $300,000).
On Monday, the CAQ made another application and also mentioned tax cuts. And on Wednesday she returned to the charge by immediately capping school tax increases to “an average of 2 or 3%” to help people struggling with the rising cost of living.
Undoubtedly, promises of tax cuts are attractive to voters. Finally, the tax burden in Quebec is very high. Harder than ever before in 20 years. Heavier than anywhere else in North America.
If we want to lighten this burden, let’s start by lowering the income tax, which is more harmful because it discourages work, rather than lowering taxes, especially on gasoline, which would run counter to the fight against global warming.
Aside from the fact that in the current context we really have the means to cut taxes?
It is true that the province’s public finances are recovering better than expected from the pandemic… thanks to inflation! In the short term, rising prices bring more revenue to the state coffers. But wait a little longer! Cost comes next when it comes to negotiating up employee salaries. Or if rising interest rates drive up debt service, every 1% increase in interest rates translates into an additional cost of $553 million per year.
Despite better-than-expected public finances, Québec still runs a deficit that could worsen in the event of a recession. Politicians should therefore carefully consider promising cuts in tax credits when our public services are already heavily mortgage-backed.
It is not because there is a clearing above our heads that we should take a boat trip and ignore the black clouds on the horizon.