Task:

1. You are a senior economist working for the Government of Canada and have been asked to brief the minister ofyour choice on the state of Canadian institutions. Currently, the inflation rate is at a 30-year high, and debt-servicing is climbing. Not too long ago, protests have taken place in various cities across Canada disrupting trade between Canada and the U.S., disrupting activities in neighbourhoods of the affected cities, among other actions. Initially, as an anti-COVID mandate protest, it evolved into a protest of various grievances, which range from anti-far-left/anti-Trudeau protests, to government involvement in daily lives complaints, to conspiracy theory propaganda. Some  view  the  protests  as  an  accumulation  of grievances  over  the  evolution  of Canadian institutions and their role in an individual’s socio-economic well-being. Note the invocation of the Emergencies Act. Others, view it as a small minority trying to impose their agenda on a much quieter majority. Nevertheless, the erosion of trust in institutions poses a problem for the manner in which  Canada’s  democratic  government  operates.  Confidence  in  Canada’s  institutions  as inclusive,  rather  than  extractive  institutions  means  that  division  among  classes  will  widen. Resistance against different branches of government (legislative, executive and judicial) can pose significant problems for economic growth.

2. Keeping in mind the following three course topics:

•   (i) the correlation between economic growth and inclusive institutions,

•   (ii) the relationship between government spending and inflation; and

•   (iii) defacto and dejure power/institution,

develop a briefing note on the evolution of trust in, if any, Canadian (socio-economic) institutions, and how this evolution has or may contribute to increased class division and any effect on              economic growth, including inflation. Given that this subject is comprehensive, limit the focus to  two or maximum three issues or examples (such as the effect of inflation on government’s             spending plans, ability of social media platforms to limit users, inconsistent application of rules     for COVID vaccines, economic winners vs losers of vaccine mandates, etc.). Of course, if you       disagree that there is no loss of confidence because this simply a loud, but small minority of          individuals, then you can argue that position in the briefing note. Use the three articles posted        below as sources of the two or three ideas or examples. You are free to include your own or           counter-examples, depending on your position. Historical references and qualitative or                   quantitative data are always welcome in your briefing note. Standard economic arguments must be used.

3. Your briefing note is “For Information Only”; however, ensure that it has a well-developed “Key Considerations”  section. Your briefing note  should be  specific to the mandate  of the department that you choose.

4. Articles of Interest:

Article #1 :https://www.theglobeandmail.com/investing/personal-finance/taxes/article-tax-

spend-time-to-cut-your-spending-so-ottawa-doesnt-have-to/

Tax & Spend: Time to cut your spending, so Ottawa doesn’t have to

AUTHOR: PATRICK BRETHOUR, TAX AND FISCAL POLICY REPORTER

PUBLISHED JUNE 20, 2022

At the start of the pandemic, the federal Liberals often proclaimed that Ottawa was taking on debt so that Canadians wouldn’t have to.

Hundreds of billions of dollars in added federal debt and an unprecedented rise in household savings were testament to the Liberals’ dedication to living up to that mantra.

Two years on, however, the rise of inflation has turned that mantra upside down. Now, you’ll have to cut your household budget – because Ottawa won’t cut its spending.

A new research note published today from the Bank of Nova Scotia spells out the economic logic behind that statement, as well as handily demolishing the well-worn line that supply-chain           constraints, not fiscal stimulus, is the root cause of inflation in Canada and most other advanced  economies.

Governments should not leave all the heavy lifting up to central banks, and should instead              coordinate fiscal policy with monetary policy, wrote Jean-François Perreault, senior vice-president and chief economist at Scotiabank, and René Lalonde, director of modelling and forecasting.

As a starting point, the Scotiabank economists point out the obvious: Massive fiscal stimulus by   governments across the globe avoided a catastrophic economic collapse in early 2020 but also      subsequently boosted demand. There were kinks in global supply chains, to be sure, but the effect of those bottlenecks were magnified by fiscal stimulus.

Obvious as that point is, it’s not one that the federal Liberals are embracing. Finance Minister Chrystia Freeland still pointed to global factors as the root cause of inflation in her Thursday speech to the Empire Club of Canada. Questioned by reporters on the need to trim the federal budget, her response was: Been there, done that, in April.

But Mr. Perreault argues that more action is needed. Without a reduction in federal spending, the government will continue to compete with the private sector for relatively scarce goods and        services, intensifying inflationary pressures.

The result is that the Bank of Canada will be forced to increase interest rates more than it would have otherwise, increasing the financial pressure on private-sector businesses and households. In essence, Ottawa is offloading its fiscal pain.

“There’s a tradeoff there,” Mr. Perreault said in an interview.

Rather than taking that path, Ottawa could pull back on its own spending, he said. That would not   necessarily mean aiming for a balanced budget and would not entail cutting transfers to individuals. Instead, the federal government should focus on reducing its own purchases of goods and services.

One of the most obvious examples: slowing down the pace of filling any vacancies in the civil service.

Draconian measures wouldn’t be needed to ease that burden. Consumption spending by all levels of government is forecast to rise by 4.8 per cent through to 2024, Scotiabank’s report says. If that         spending rose by 2.5 per cent instead, the resulting fiscal room would be the equivalent of a 75-       point hike in interest rates.

In that scenario, the Bank of Canada would only need to raise its benchmark rate to 2.25 per cent     (from the current 1.5 per cent) to dampen inflationary pressures, rather than the expected 3 per cent. In turn, that would cushion the financial pain for consumers with variable-rate debt and reduce the  risk of a recession.

Or to put it another way, Ottawa would be paring back its spending – so you don’t have to.

Taxing questions

Responding to last week’s Tax and Spend on the indexation of federal benefitslagging inflation, one online reader questioned the need to worry about delays in increasing Old Age Security and Canada Pension Plan payments, writing that relatively well off Canadians receive those benefits.

That’s true, particularly in the case of the CPP. Those payments are not clawed back for higher-      income workers, although they are subject to income tax. OAS benefits, however, are slightly more targeted. Clawbacks start once an individual’s income exceeds $79,054, with the full benefit            disappearing once an individual’s income reaches $128,149. (That maximum can be a bit higher for those who have deferred OAS benefits.)

Clearly, someone with nearly $80,000 could not be categorized as low income. What’s more, the clawback is not applied on a household basis, so a couple could have a joint income of nearly     $160,000 before OAS payments began to diminish.

That makes it all the more curious why the Liberals chose to increase OAS payments by 10 per cent for seniors 75 and older, starting in July. The putative reason was to help out those struggling          financially. If that were truly the case, there is a much more efficient way of doing so: the                Guaranteed Income Supplement. The GIS is tightly targeted to low income seniors. Its clawback     has a much lower ceiling, with payments fully clawed back once an individual’s income reaches      $19,656 (excluding OAS payments).

The Liberals, if they had so chosen, could have taken the $1.66-billion cost of increasing OAS and given a much bigger boost in income to the poorest of seniors.

Line Item

A tax on nothing: When is nothing something? Tax time, is when. A recent Tax Court of Canada   decision, highlighted inTax Interpretations, illustrates that point. Back in October, 2007, the         federal Conservative government announced that it would reduce the GST to 5 per cent from 6 per

cent. The wording of that announcement indicated that the lower rate would apply “to any supply … made on or after January 1, 2008.”

A condo builder attempted to claim that the lower rate of 5 per cent should apply to yet-to-be-built units. But the judge found that the units had been supplied when buyers acquired the right to           acquire a condo unit. That was true even though buyers did not have rights to a specific unit, and    the project had not received site plan approval or a building permit. The fact that the project did not exist did not prevent it from being real enough to be taxed.

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Article  #2: https://nationalpost.com/opinion/rex-murphy-freedom-convoy-protests-have-exposed- the-deep-divisions-in-our-nation

Rex Murphy: Freedom Convoy protests have exposed the deep divisions in our nation                  The protected class versus the working class, East versus West, urban versus rural — the protest is a marker of all these unfortunate divides

Author of the article: Rex Murphy

Publishing date: Feb 08, 2022

It is getting very rich, this protest. Rich and raw. Very much so; as each day passes and the protest deepens and extends to areas beyond its initial phase, the country is witness to a depth of division not seen in decades. The prime minister is nowhere to be seen, nowhere to be heard.

Rich and raw — I’ll expand on these adjectives, but must note first and condemn the sublimely arrogant, despicable actions of the wretched GoFundMe autocrats. What mind of a cabbage told you that you had the right to refuse to pass on $9 million donated in good faith to a democratic cause?

What is it about these internet gods with their fat billions and their laptops of gold, that they think they should be the judges of that which is right, and that which is not? Who shall speak on Twitter and who shall not? Who shall be allowed to assemble in the temple of Facebook and who shall be stricken from its pages?

Who knew that GoFundMe operates as the woke court of cancellation culture? As an utterly self- nominated moral clearing house? “These monies we shall pass on to those for whom they were donated. But those we shall stay and send wherever the wind shall list — for those who drive trucks and do manual labour belong not under the wing of GoFundMe Inc.” The intrusion of the tech

monarchs into the politics of our democracies is grim and dangerous.

Back to rich and raw.

The intrusion of the tech monarchs into the politics of our democracies is grim and dangerous

Rich in the sense that issue after issue is mingling with this ever-swelling protest, greatly broadening from the original impulses that brought it about. It started around mandates and triple vaccines as

they affected a single industry, but it is now so much more. It is among other things, a contest over civil rights; the guttering of the Charter; about Canadian politics as seen from the metropolises of central Canada versus the view from the always less regarded concerns and sensibilities of rural and

Western Canada.

Also, as it has evolved, it has given form to the deep divisions of class and economic standing made starkly manifest under the COVID lockdown regimes — a brutal rebuttal of that silly mantra that “diversity is our strength.” Not when diversity takes the form of one set of Canadians having it rather better than another set. And certainly not when one set, those at the lower end of economic security, mount a protest and receive contemptible denunciation from the prime minister and some of the higher elements of the Canadian press.

Who has most carried the hard weight of the COVID regime imposed by their governments and the protected  class?  Everyone  knows  the  answer  to  that  question:  those  in precarious  economic positions, the independent, the unpensioned, blue-collar workers. Family and small business people, service employees, the staff of hotels and restaurants. The old and the very old, most cruelly those ill and in care, who were not only the most exposed and least protected, but who were cut off during their most difficult days from family contact. Anxiety was deepest, the burden greatest — as seems always the case in this world — for those least equipped to bear it.

Those most shielded by secure or government employment, those inoculated by high income from emergent and record inflation, have from the altitude of their security and comfort affected a dismissive,  scornful  and mean  attitude. Very much  a  “who  are these people?” Very much  a paternalistic, very much a  scolding-from-their-very-superior- understandings tone towards this “mob” of “racists,” “yahoos,” “nutters,” “traitors,” “misogynists,” and other golden terms of deepest courtesy and understanding towards our worker-citizens.

The current protest is the marker of that unfortunate divide. A sign, too, of a new divide in our governance, where politics has swollen into a kind of moral marker, or an identity tag, where what should be simply a disagreement or an argument over this issue or that, has taken on the character of a shibboleth. Sign on here, you are good. Sign on there, you’re a wastrel and a pirate.

This has not been helped by a ruthlessly absent leadership. The country is in real division at this time, East versus West, rural versus urban, our celebrated harmony and instinct for compromise severely impaired. None of our political leaders has taken on the banner of “binding up our wounds” which would seem to be, even in the time of COVID, a priority medicinal requirement.

Apart from hurling nasty invective at the protesters, Prime Minister Justin Trudeau could be in Madagascar for all the presence he has shown during the past 10 days. The NDP’s Jagmeet Singh, with his invocation of “bloodlines” and wrath directed at the protest, has been all too present. The poor Conservatives … well, what’s to say?

And of course our even poorer Parliament, either empty and unattended, or open for Zoom debate, which is not much of a distinction from empty and unattended.

Internet-adulterated democracy, in a minority government, during a crisis, is a sad business.

National Post 

Articles #3

https://globalnews.ca/news/8601524/bc-dad-parenting-time-vaccination-status/

‘Next to nothing’: B.C. dad’s custody of kids dramatically reduced because he’s unvaccinated

By John Hua  Global News

Posted February 7, 2022 7:30 pm

A B.C. dad is speaking out about how he says his COVID- 19 vaccination status has reduced his parenting time with his two children. He tells Global News time with his children now must not be indoors, which includes travelling in a vehicle. John Hua reports.

The silver lining of going through an acrimonious separation was the quality time James said he could still spend with his two children.

“I’m basically there for them and when they’re not there I try to find stuff to keep myself busy,” he told Global News.

James, which is not his real name due to privacy issues and an ongoing court case, originally had three days and four nights of parenting time a week – about 63 hours.

Now, James said a B.C. Supreme Court judge has approved an application to suspend that time over concerns that he is not vaccinated against COVID- 19.

“This very clearly is a statement that any unvaccinated parent is effectively putting their child in danger…and that child is best served by being removed from that parent,” James said.

Access to court documents is not publically available for family law proceedings, but James did provide an unsigned draft copy of the Feb. 1, 2022 order to Global News.

In the order, James’ parenting time is limited to two hours on Thursday and Sunday of each week. The time with his children must not be indoors which includes travel in a vehicle. The father cannot allow his children to spend time with anyone else indoors unless their proof of vaccination is provided. A mask must also be worn at all times when the children are in James’ care.

The order states, “The suspension of parenting time will be removed upon the Claimant providing proof of double vaccination for COVID.”

“As soon as I get double-vaccinated, everything goes back to normal. This is not a suggestion that I’m not a great parent,” James explained.

Family  lawyer  Scott  Taylor  said  the  BC  Supreme  Court  decision  could  have  far-reaching consequences for unvaccinated parents across Canada. While James is representing himself in court, Taylor has provided him with unbundled legal services including legal research and document