The Cognitive Dissonance of the 2023 Fiscal Update

Not so very long ago when “Fall Economic Updates’” were added to the Parliamentary calendar, these short “Updates” on the fiscal situation heralded a new transparency around the nation’s finances. “Updates” then morphed into “mini-budgets”, providing the Government of the day an opportunity to pat itself on the back and to offer up pre-holiday goodies.

At over 100 pages, the “2023 Fall Economic Statement” rivals a full budget in length. And an old adage comes to mind: “When you’re explaining, your losing”. And so it is for the governing Liberals.

Down in the polls and with an election less than two years away, they had to try with this Update to steady their ship, change the narrative and point the way forward. Constrained by fiscal realities that is no mean task.

There is cognitive dissonance evident in this document – the challenge of keeping two contrary ideas in your head at the same time and hoping your brain doesn’t explode. Spend, but show restraint so spending doesn’t have an inflationary impact. Placate the NDP Opposition (who’s support you depend on to stay in power) by only whispering about certain things like pharmacare, but don’t go there. Respond to the “housing crisis”, even though that’s a tough one to solve immediately with Federal initiatives alone. Celebrate your steady economic stewardship, but acknowledge challenges facing Canadians. The problem is that responding to those struggles without immediate direct hand-outs will only be felt down the road. And some matters were left unsaid, e.g. that increased immigration, something this Government is committed to, puts pressure on housing.

What to do in the face of this? Say, as any therapist would tell you: “I hear you” and demonstrate a direction that shows you get it. Do what you can do now and hold out the promise that better times will come…with you at the helm.

When the Opposition Conservatives are soaring in the polls on messages related to affordability and change, the governing Liberals have adopted some moves from the Conservative play book. But the Update does not cede to the Opposition leadership on addressing the needs of Canadians. The challenge the Opposition has is that they can only “bay at the Moon”. The Government gets to do stuff and see if it plays well. We shall see.

Pity Finance Ministers. Budgets are shaped by circumstances at home and exogenous events over which they have no control. A Finance Minister only gets a rare chance to shape their own Budget with “signature initiatives” that become synonymous with their tenure. The first Budget of a new government is all about implementing election promises made. The last Budget is about something to fight the next election over. This “Update” was a ‘hold the line’ until what we believe will be that last Budget (next Spring), a Budget the Liberals will take to the people.

The full Fall Economic Statement can be found here. Principal themes include:

  1. Housing affordability – for renters, homeowners and new buyers
  2. Supporting the middle class – through, among other things, cracking down on high prices and “junk fees” charged by the perennial targets – banks, airlines, cell phone companies and grocery stores
  3. Providing consumers with more choice and more power – through “consumer driven banking” (formerly known as open banking) and changes to Competition law
  4. Living within our means – by not offering lots of new government spending and tightening its belt the way most Canadians are doing today

 For more information, please contact Barry Campbell or Gayle Nathanson.

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