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The renewal of the Bank of Canada’s mandate agreement with the federal government grants the central bank a five-year licence to, largely, continue doing what it has already been doing.
Still, the pact, and the unusual process that led to it, add some new wrinkles to Canadian monetary policy that could take years to iron out. What is normally a dull, technical process has transformed into a political event – and that could have some hard-to-predict ramifications.
After years of research and consultations by the central bank, and months of back and forth with the Finance department, the two unveiled a deal on Monday that left the bank’s core mandate unchanged. It will continue to use monetary policy – chiefly, interest rates – to pursue an inflation target of 2 per cent, the midpoint of a 1-per-cent-to-3-per-cent range of tolerance.
At the same time, Finance Minister Chrystia Freeland and Bank of Canada governor Tiff Macklem took a modest but meaningful step to incorporate another priority – “maximum sustainable employment” – into the bank’s job description, while emphasizing that “the primary objective of monetary policy is to maintain low, stable inflation over time.”
Usually, these five-year mandate reviews are a snoozefest – conducted quietly, behind closed doors, and ending with a joint statement that more or less rubber-stamps the status quo. The inflation target hasn’t changed in three decades.
This renewal was different. The bank made its own preparations much more thorough and public, and openly discussed options for altering its mandate. The coincidence of a once-in-a-generation inflation surge hitting at the moment the government was tasked with approving a new mandate turned the discussion into an increasingly hot political topic in the weeks leading up to the final agreement.
Monday’s announcement was not merely the usual release of a joint statement and some accompanying documents, but rather a joint media conference with the Finance Minister and governor – a rare event that spoke to the high profile that this renewal had reached. The end result – with its substantial focus on inclusive employment goals – has unmistakable echoes of the current government’s own priorities.
It’s well short of the “dual mandate” the Federal Reserve has long held, under which the U.S. central bank is formally tasked with pursuing both 2-per-cent inflation and “maximum employment,” with the two goals carrying essentially equal weight. It’s clear in the wording of this new agreement that when push comes to shove, the inflation target remains the Bank of Canada’s No. 1 priority.
That said, it does put the bank’s marching orders on a similar path, if not as far along it. There now is a second, clearly annunciated priority, placed above all others, save inflation.
One of the big attractions of inflation targeting, which was adopted not just by Canada but by many other major economies in the 1990s, has been that it has given central banks a single, clear and (it turned out) achievable goal for monetary policy. It worked – in a way that previous monetary-policy mandates, which targeted any of a number of sometimes-competing economic objectives, had failed.
On the other hand, critics have argued that the inflation focus has given central banks too narrow a view, that their singular pursuit has too often been to the detriment of other objectives that are, arguably, more important than price stability – for instance, whether there are enough jobs for everyone who wants one.
But over the years, the Bank of Canada found that the pursuit of the inflation target actually gave it enough flexibility to achieve other virtuous outcomes by keeping its eyes on the inflation prize. In practice, the inflation target isn’t just about maintaining low and stable prices to foster predictability and confidence among businesses and consumers (as the bank often says). Rather, the bank uses inflation as a proxy for gauging when the economy is approaching its full capacity – which includes the notion of full employment.
So, effectively, the Bank of Canada already pursues maximum sustainable employment when it applies interest rates – it just uses the associated rise in inflationary pressures, via wage inflation, as its handy tool to know when the economy is getting there. The new language in the five-year mandate will do little, if anything, to alter that approach.
Over the longer run, though, the entrenchment of employment commitments could complicate the bank’s inflation pursuit. Inflation and employment are, typically, opposing forces; the lower the unemployment rate sinks, the more inflation rises, because wages tend to increase more as the supply of available labour shrinks. Raising rates to fight rising inflation risks slowing the economy before you’ve squeezed maximum employment out of it. Under this new mandate, that may be a consideration that future central bankers feel obliged to give more weight.
But what may be of bigger concern is the degree to which politics wormed its way into this mandate renewal. One of the enduring strengths of Canadian monetary policy has been its well-protected independence from political interference. This process – while a once-in-a-half-decade event – has shown a new willingness for political leaders, both in the government and in opposition, to breach that wall.
Will a future government, five or 10 years from now, decide to reverse these changes and remove the employment pledges from the document? Will another government push to add its own priorities to the bank’s job – say, carbon reduction, or export expansion, or domestic industrial policy?
“It raises the risk that it becomes a political document,” said former Bank of Canada governor Stephen Poloz, who oversaw the early stages of the mandate review before he retired from the post in mid-2020.
“I think the attention being given to [the mandate renewal] is healthy. … It’s too important for people to not care about it,” he said in an interview on Monday. “But … it runs the risk that it becomes more political than I would like.”
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‘OPB Politics Now:’ The problem with Interstate 5 – OPB News
Interstate 5 is a key part of the transportation system that moves both people and goods up and down the West Coast.
But the highway has problems, especially as it winds through Portland into Washington state.
On this week’s show, OPB political reporter Sam Stites and host Tiffany Camhi examine the politics of transportation and two new developments: A setback for state planners hoping to expand I-5 through the Rose Quarter and a positive, and cash-rich, bit of news for local, state and federal leaders working to replace the interstate bridge that connects Oregon and Washington.
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GOLDBERG: How an enduring myth about voter turnout distorts our politics – Toronto Sun
I have long opposed making voting mandatory, an idea that pops up every few years. I still don’t like the idea. But it’s become more attractive, at least as a thought experiment.
The arguments against compelling people to vote – as Australia and a handful of other countries do – run from the constitutional (it’s coerced speech) to the cultural (this is America, dagnabbit) to the practical and the partisan.
Historically, the practical case is that it’s the wrong solution chasing a nonexistent problem. Proponents of mandatory voting think that low voter turnout is a sign of civic decay and democratic entropy. This view, no doubt accurate or at least plausible for some people, misses the fact that for many other Americans not voting is a sign of general satisfaction. We had record-breaking turnout in 2020. Raise your hand if think that was proof that America’s civic and democratic commitments are stronger than ever.
More importantly, if voting is virtuous, its virtue – like all virtue – derives from it being voluntary. Compelled virtue is an oxymoron.
Partisanship enters the equation because both parties subscribe to an enduring myth: that increased voter turnout automatically favors the Democrats. Thus, if everyone were forced to vote – many opponents and proponents believe – some imagined reserve army of leftwing voters would swamp the polls. This belief plays a significant role among those who want to make voting easier and those who want to make it harder.
The problem: It’s not true. Yes, of course, turning out more of your own voters is how you win elections, but if everybody voted it’s unlikely that one party would always benefit more than the other. As Daron Shaw and John R. Petrocik demonstrate in their book “The Turnout Myth,” “there is no systematic or consistent partisan bias to turnout.” The recent Virginia governor’s race saw huge turnout, and the Republicans routed the Democrats.
Partisan Democrats have all sorts of high-minded and sincere reasons for making casting ballots easier for Black voters in particular and disadvantaged communities in general. But on a practical level, the fact that they think these voters will disproportionately vote Democratic drives many of their policy preferences. Partisan Republicans discount the high-minded arguments and focus on the Democratic advantage they see in such efforts. Meanwhile, Democrats assume any concern with fraud or voter integrity is a ruse for disenfranchising voters.
Republicans tend also to suffer from a weird cognitive dissonance. They fear that if everyone voted, the GOP would lose; they’ve also convinced themselves that Democrats only win by “importing” voters (i.e., immigrants) and through fraud.
Each party believes – without evidence – that they have the people on their side and that if elections were run “right,” they’d be the majority party. For Democrats this means curtailing “big money” in elections and, lately, federalizing election rules to combat voter suppression. For Republicans, it means catering to Donald Trump’s conspiracy theories and rantings.
More broadly, both parties ignore the closeness of their victories and act as if they have mandates to behave like they have super-majorities supporting them. They then devote their energies to pandering both rhetorically and in terms of policy to the slender slice of the electorate that is their base.
The incentives for pandering to the hyper-partisans are all too familiar: the pernicious effect of our primary system, self-sorting polarization, an ideologically skewed media ecosystem, and the ease of raising small donations from partisan super-fans.
And that’s what appeals to me about mandatory voting. If everybody voted – even just once – it just might dispel the myth that either party speaks for some untapped silent majority. The incentive to drive up the base turnout would evaporate. Low voter turnout – which benefits incumbents and their special interest allies – would not skew election results. Candidates, elected officials and big donors alike would ignore electoral majorities at their peril.
I still oppose this solution, but at least the case for mandatory voting is no longer a solution in pursuit of a problem. Even as a thought experiment, it helps illuminate the real problems we face.
Politics Briefing: Fate of 24 Sussex subject to consultations between PM, National Capital Commission – The Globe and Mail
Prime Minister Justin Trudeau says conversations are continuing with the National Capital Commission about the fate of 24 Sussex Drive, the official residence of the prime minister.
The commission, a federal Crown corporation whose responsibilities include managing official residences, has raised concerns about the state of the property initially built in 1868, and refurbished as an official residence for the prime minister in 1950. There is a history of the residence here.
“We are in consultations. We are assessing our options. And when we will arrive at a decision, we will share it with you,” Mr. Trudeau told a news conference on Friday.
Mr. Trudeau said the government is engaging with the capital commission and other experts to ensure there is a safe and stable environment for “prime ministers current and future” as well as the interests of Canadians.
Mr. Trudeau and his family have been living in Rideau Cottage on the grounds of Rideau Hall instead of 24 Sussex Drive since he led the Liberals to power in 2015.
“We know that 24 Sussex has been neglected by many generations of politicians and prime ministers over the years,” Mr. Trudeau said.
“Unfortunately, it is in a terrible condition.”
The Prime Minister said the property is an important, historic building but there are concerns about safety.
Asked if he would take a decision during this mandate, and whether he was concerned about criticism of renovating the prime minister’s residence and how much it might cost, Mr. Trudeau said he has no intention in living in 24 Sussex Drive regardless of how long he is Prime Minister.
This week, the CEO of the capital commission said, according to The Ottawa Citizen, that he has been stressing the need for repairs at Canada’s official residences, including 24 Sussex Drive, with federal officials.
The residence was listed as being in “critical” condition in a commission report last year, and requiring $36.6-million in work. The Citizen story is here.
This is the daily Politics Briefing newsletter, written by Ian Bailey. It is available exclusively to our digital subscribers. If you’re reading this on the web, subscribers can sign up for the Politics newsletter and more than 20 others on our newsletter sign-up page. Have any feedback? Let us know what you think.
CANADIAN LOAN FOR UKRAINE – Canada will lend Ukraine up to $120-million as Kyiv readies for possible war with Russia, Prime Minister Justin Trudeau announced Friday. Story here.
TRUDEAU VOWS ACTION ON PEOPLE SMUGGLING – Canada is doing all it can stop people smuggling across the U.S. border after a family of four froze to death in a “mind-blowing’ tragedy, Prime Minister Justin Trudeau said on Friday. Story here.
CHAMPAGNE TO EXPLAIN MINE ACQUISITION – François-Philippe Champagne, the federal Minister of Innovation, Science and Industry, will go before a federal committee as early as next week and answer questions about why Justin Trudeau’s Liberal government is allowing the acquisition of Canadian lithium firm Neo Lithium Corp. by a state-owned Chinese mining company without conducting a formal security review.
EXPLANATION FOR CONFUSED STATEMENT – Turmoil and confusion over whether truckers would remain exempt from the vaccine mandate last week stemmed from bureaucrats misinterpreting policy in more than one federal agency – including the one that co-ordinates Canada’s response to the COVID-19 pandemic. Story here.
HAITI MEETING ON FRIDAY – The U.S. State Department says it is looking forward to a productive meeting today when Central American leaders gather online with Foreign Affairs Minister Mélanie Joly to talk about the future of Haiti. Story here. Meanwhile, Canada’s ambassador to Haiti is calling for a politically “inclusive accord” to address a deepening constitutional crisis following the July 7 assassination of President Jovenel Moise. Story here.
SASKATCHEWAN TO REDEPLOY GOVERNMENT WORKERS – The Saskatchewan Health Authority says it is looking at redeploying government employees from other departments to help the health-care system. Story here.
FUNDING FOR FIRST NATIONS OMICRON RESPONSE – Indigenous Services Canada says it will provide $125-million in public-health funding for First Nations to bolster their responses to the Omicron variant. Story here.
THIS AND THAT
The House of Commons has adjourned until Jan. 31 at 11 a.m. ET.
CANADA’S FINANCE MINISTERS TALK – Deputy Prime Minister Chrystia Freeland, also the Finance Minister, is hosting a virtual meeting on Friday with provincial and territorial finance ministers.
THE DECIBEL – . In Friday’s edition of The Globe and Mail podcast, Future of Work reporter Vanmala Subramaniam tells us why the trend of hot-desking is gaining traction now. This is the idea that there are no assigned seats in an office. Instead, an employee books their spot through an app before coming in. Ms. Subramaniam also talks about what workers told her about their experience with hot-desking and how hot-desking will transform post-pandemic office life. The Decibel is here.
PRIME MINISTER’S DAY
Private meetings. The Prime Minister made a virtual announcement along with Housing Minister Ahmed Hussen, and then held a media availability. The Prime Minister delivered remarks at the opening of a foreign ministers’ meeting on Haiti, hosted by Foreign Affairs Minister Mélanie Joly. And he participated in a virtual celebration of the 100th anniversary of the birth of Lincoln Alexander, Canada’s first black MP.
No schedules provided for party leaders.
John Ibbitson (The Globe and Mail) on how the new-era Senate won’t face its real test until we get our next Conservative government: “The real test of the Senate will come when there’s a change in government, when it’s not necessarily a government with whom the appointees agree, ” said Kathy Brock, a political scientist at Queen’s University who has long taken an interest in the Senate. Until we learn how the Red Chamber performs under those conditions, we won’t really know whether it works at all. In 2014, in the midst of the Senate expenses scandal, Mr. Trudeau expelled all Liberal senators from caucus. After he became Prime Minister, he appointed only independent senators, albeit ones who mostly shared a progressive outlook.”
Gary Mason (The Globe and Mail) on Alberta Premier Jason Kenney as the Boris Johnson of Canadian politics: “So while some will say Mr. Madu’s intentions weren’t malicious or corrupt, it doesn’t matter. He violated a sacred tenet of government. He may have found other means, or avenues, to have this issue addressed that didn’t involve him picking up the phone and calling the city’s top cop. There is, however, another disturbing aspect to this whole affair: The question of what Mr. Kenney knew, and when he knew it. As mentioned, the incident and phone call happened 10 months ago. According to veteran Alberta columnist Don Braid, it was widely known among members of cabinet and discussed in “jocular” terms. It seems inconceivable that if members of cabinet knew about this, Mr. Kenney didn’t also.”
Elizabeth Renzetti (The Globe and Mail) on why real men take paternity leave: “You may have seen a recent picture of NDP Leader Jagmeet Singh in a classic new-parent pose, holding his infant daughter while also trying to sneak a peek at his laptop. Unfortunately, this nice moment of paternal devotion has been upstaged by a rocking chair. The $1,895 rocking chair was a gift to Mr. Singh’s wife, and he landed in hot water when he tagged the chair-maker in an Instagram post. He’s now said the couple is repaying the cost of the chair, and the NDP is working with the ethics commissioner on a disclosure. The photo has caused quite a flap. If you travel down the devil’s highway that is Twitter, you’ll see a certain amount of fury directed at Mr. Singh and his fancy rocker. I understand the anger: It was a dumb and possibly unethical move. But really I’m just sad, because this was an opportunity for a progressive politician to take a stand on something that is hugely important, which is the need for new dads to loudly and proudly take advantage of paid parental leave.”
Tanya Talaga (The Globe and Mail) on how a fire has killed Indigenous children again – because poverty burns through the generations: “Let this sobering truth sink in: First Nations children under the age of 10 are 86 times more likely to die in a fire than non-Indigenous children, according to the Ontario Chief Coroner’s Table on Understanding Fire Deaths in First Nations, which released a damning report last year after studying 56 fire deaths in 29 fires across 20 First Nations over the course of 10 years. How many times must we read about government reports, parliamentary committee hearings or new programs that are needed to fund basic fire safety and infrastructure in First Nations communities? How many times must the Assembly of First Nations and territorial political organizations yell from the rooftops about the need to adequately fund fire safety?”
Konrad Yakabuski (The Globe and Mail) on how taming inflation will be much trickier than stimulating the economy: “If you’ve been in the market for a new refrigerator in recent weeks, you’re likely still suffering from sticker shock. Fridge prices were up almost 14 per cent in December, as Canada’s overall inflation rate hit a 30-year high of 4.8 per cent. Everything is suddenly costing more, from that fridge and the groceries you put in it (up 5.7 per cent) to a new car (7.2 per cent more) and the gas (33 per cent) it likely runs on. From home insurance (9.3 per cent) to shelter costs (5.4 per cent), Canadians are forking out more and more of their income just to cover the basics. Some very smart folks insist this nasty spike in prices is a nice problem to have.”
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