The Conservative Attack on the Government over Inflation

An event that should surprise no one, inflation has spiked as the world economy recovers from the worst of the impacts of the COVID-19 pandemic. As they become normalized people are doing some of the things they did before the pandemic shut everything down. That release of pent up demand and the continuing impacts of the pandemic on global supply chains has caused inflation to jump.

Every economist or economics organization that does not have any skin in the political game has stated that the inflation will be transitory and we should believe them. As I stated this was predicted months ago and the one factor that contributes to run-away-inflation, wage growth, does not exist. Indeed, wage growth pretty much stopped after the pandemic hit the world and it is still dead. If that remains the case until this current bout of inflation decrease (look for that to happen early in the new year) then inflation will not be a problem. In fact, I would suspect that deflationary pressures will be the problem we need to worry about, pressures that will be made worse by the current efforts of some politicians and their cheerleaders in the media in talking up inflation.

The most interesting thing about the Conservative attack on the government over inflation is their statements that it is caused by overspending of the government. Some may just dismiss this as their usual attack on government spending. After all, Conservatives only believe governments should spend money on buying votes and to provide tax cuts to big business and the wealthy. Any other kind of spending is opposed as a matter of political faith.

The problem for Conservatives is the economic consensus was drifting away from this point of view before the pandemic hit us and then it virtually disappeared afterwards. I am still amazed that after the government announced the 2020 budget deficit was almost $350 billion and that the government debt had topped the $1 trillion mark the reaction of Canadians was a collective shrug. I am no deficit hawk but even I experienced some sticker shock at seeing those numbers. However, a broad cross-section of Canadians did not see a problem and in fact appreciated the spending of the government in supporting them during the pandemic.

That is bad news for the Conservatives. They are still married to austerity and to have Canadians generally ignore and maybe even agree to government spending is an existential threat to their long-term electoral fortunes. The two Conservative governments that have followed the austerity route, in Ontario and Alberta, are both in trouble, although part of that is also their handling of the pandemic. However, it should be noted that the popularity of both of these governments was dropping before the Spring of 2020 because of their very unpopular fiscal policies.

I have stated in this space before that the Conservative Consensus on government spending and finances has been breaking down for some time and I stated the pandemic seems to have accelerated that breakdown. I am certain that some in conservative circles are seeing the same thing and they are looking for something to at least decrease the rate of that breakdown if not completely reverse it. 

That is the reason why Conservatives are blaming inflation on government spending. They do not really care that Canadians maybe spending more for goods and services. They care about the central economic plank of their ideology being eroded away and their increasingly desperate efforts to at least slow it down. Personally, I do not believe they will succeed. The momentum away from the Conservative Consensus had reached a point of no return before the Spring of 2020 and it is probably unstoppable by now. 

Some Thoughts

I have observed a few things over the last few weeks which I will briefly write about.

The whole Kyle Rittenhouse situation demonstrates that the acceleration of the decline of American society, which began in 2000, has not slowed up despite the results of the last US federal election. I have stated in this space before that it took many decades for the decline of the Roman Empire to reach a point of no return but the US has done it in about two. There is no coming back. The decline will continue until some external pressure, such as the rise of China, climate change hitting critical mass, automation hitting critical mass or a combination of all three leads to the inevitable fall. I do not know what that fall will look like but I believe I will live long enough to find out.

The COP26 talks pissed off both the climate change deniers and the climate change extremists, which probably means that they got it right. I know that the extremists would like to see revolutionary change but that kind of change always leads to a backlash, which always leads to a loss of momentum towards the goal they want to achieve. And that is what we should be trying to achieve. Maintain and increase the momentum towards change without generating a serious backlash. As well, I have noticed some deniers have changed tack and stated that we need to focus on adapting to climate change instead of trying to prevent it. This is a convenient but self defeating argument. It is true that we do need to adapt to climate change because we were too slow to prevent it. However, that does not mean we can just focus on that while continuing to spew GHGs into the atmosphere. The simple fact is the climate will change faster than we will be able to adapt if that happens. We need to do both.

Inflation has reared it ugly head again but it is not nearly as bad as some would have us believe. It was always going to increase because it was always going to be part of the bounce back of economic activity once the worst of the economic impacts of COVID-19 were behind us. Many experts, who do not have any skin in a political game, have stated it will be transitory until a new equilibrium is attained in the economy. That will not stop some politicians to hype it up for political gain.

COVID-19 is here to stay. We will not eliminate it from the world. The only way that is going to happen is for it to mutate itself out of existence. That is possible but it is also possible that it could mutate itself into some much worse than what we have seen in the last couple of years. We are going to have to live with it. Many of the changes in our lifestyle that we have implemented in that last two years will be permanent and I believe that the COVID vaccine will become like the flu shot, a regular occurrence. The health care systems of the industrialized world are going to have to make the necessary adjustments to being able to handle this new reality without being paralyzed. The idea that all other medicine has to stop to deal with COVID outbreaks is preposterous. The only positive in this is COVID will probably become less deadly to most of us because most of us are fully vaccinated and we will take the boosters when they are available and when medical experts indicate we should. The same cannot be said for anti-vaxxers but I just cannot muster up any concern about that. If they want to take that risk then sobeit, they can live with the consequences.