Morneau blames inflation on Liberal COVID spending that 'went on for too long'

In January, former finance minister Bill Morneau criticized Prime Minister Justin Trudeau for 'probably' splurging too much during the pandemic, adding the consequence of printing hundreds of billions is a potential recession.

Morneau blames inflation on Liberal COVID spending that 'went on for too long'
The Canadian Press / Justin Tang
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Trudeau's former finance minister continues to hold Cabinet to account after criticizing their inflationary spending publicly for the second time.

Bill Morneau oversaw the delivery of many COVID programs as minister that lasted longer than necessary. He admitted the federal government's pandemic spending went on for too long and contributed to Canada's current inflationary woes. 

"I think the early efforts were appropriate and important. They were, in several cases, too large. That was not purely a Canadian issue; other countries had the same problem," Morneau told the Harvard International Review. 

They printed nearly $211 billion in COVID stimuli, including $100.7 billion through the Canada Emergency Wage Subsidy (CEWS) for 460,000 businesses employing 5.3 million Canadians, and EI benefits, like the Canada Emergency Response Benefit (CERB) that delivered $74.8 billion to 8.5 million Canadians.

"The bigger issue was they went on for too long, which meant that we put more money into the economy than we needed to."

COVID pandemic expenditures partly increased spending to $644.2 billion in 2020/21 and $508 billion in 2021/22. However, much of the spending increase remained independent of the pandemic, "representing a permanent long-term ramping up of federal expenditure."

Last August, a Fraser Institute report said total federal spending rose 27% in fiscal year 2022/23 from 2019/20.

Federal COVID spending totalled $359.7 billion, adding $8.3 billion to the interest costs of the country's national debt.

Over the next decade, the total cost of wasteful COVID spending will be $111.0 billion, including $89.9 billion in wasteful spending and $21.1 billion in ongoing debt interest costs to service the debt from the wasteful spending.

According to another Fraser Institute report, Canada lagged behind other developed nations in results achieved from egregious pandemic spending.

In 2020, Canada placed fifth of 40 industrialized countries in growing government spending as a proportion of its economy. 

Between 2019 and 2021, the country ranked third in elevating its debt-to-GDP ratio, which showcased Canada building up its debt faster than other nations surveyed.

On inflation, researchers said Canada was "mid-ranked" compared to other advanced economies.

"While governments across Canada, particularly the federal government, increased spending markedly during COVID, it's now clear we didn't get much bang for our buck," said Lakehead University economics professor and author of the report, Livio Di Matteo.

"It's important for governments in Canada to understand the effects of their pandemic responses so they don't repeat the same ineffective and costly policies in the future."

Morneau attributed the inability of the feds to address excessive demand to "the inevitable result [of] inflation."

In January, the former finance minister said the Bank of Canada's "only response" to counter pandemic spending was to raise interest rates. 

"Inflation is hugely problematic for people to deal with. And so, when you raise interest rates, inevitably, there's less investment," he said.

At the time, Morneau criticized Prime Minister Justin Trudeau for "probably" splurging too much during the pandemic, adding the consequence of printing hundreds of billions is a potential recession.

"I hope that if we have one, it will be a shallow recession, and one that we would be able to come out of," he said, stressing fiscal prudence moving forward as "doubly important."

However, the Canadian Taxpayers Federation (CTF) says Parliament has not been responsible since the pandemic while spending taxpayer dues.

"The government should [have found] savings in the bloated budget, but taxpayers shouldn't hold their breath," said Franco Terrazzano, Federal Director of the CTF. "After all, the Trudeau government hasn't met a budget target it couldn't miss."

The Parliamentary Budget Office (PBO) notes Budget 2023 did not assess program effectiveness as promised and has since been replaced by another pledge of "cross-government program effectiveness reviews."

In a letter penned to Cabinet, Treasury Board President Anita Anand gave her fellow Cabinet ministers a firm deadline of October 2 to cut current spending.

"In 2022, spending was $470 billion. In 2023, it will be $491 billion. Spending will climb to $509 billion in 2024, $523 billion in 2025, $538 billion in 2026 and $556 billion in 2027. That's not saving money. That's massively increasing spending," Terrazzano told Rebel News.

The federal debt will total $1.2 trillion by the end of this year, with interest charges on the debt costing taxpayers almost $44 billion in 2023 and reaching $50 billion in 2027.

In past interviews, Morneau has repeatedly dodged questions on if he considers Trudeau an 'effective manager' of the economy. 

Initially, he said the feds are "rightly focused" on long-term economic concerns only to pivot that "everyone can do better."

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