A poorly timed inflation celebration

Opinion

Hey there, time traveller!
This article was published 24/02/2024 (571 days ago), so information in it may no longer be current.

It’s kind of like acting as if you hit a home run after hitting a long foul ball. You end up looking kind of silly.

This past Tuesday, Statistics Canada reported that Manitoba’s consumer inflation rate is the lowest rate among Canadian provinces. It revealed that our inflation rate had dropped from 1.7 per cent in December to just 0.8 per cent in January. We are well below the national average of 2.9 per cent.

The same report pointed to the Kinew government’s decision to temporarily suspend the provincial tax on gasoline as a big reason for the big drop in our inflation rate.

Sensing an opportunity to score political points, Premier Wab Kinew and his team of spinners quickly scheduled a press conference for later that day. During that briefing, the premier bragged that “Our government is taking real action to make Manitoba more affordable,” and “We took action right away to give people relief at the pump and now we see that relief helping to lower costs across the province.”

Not so fast, Mr. Premier.

The price Manitobans pay at the pumps has gone down because of the tax break, but prices were already going down before the cut came into effect. The price of oil has dropped 25 per cent over the past year, meaning that Manitobans would have seen lower gas prices — and a lower inflation rate because of that price drop — even if the government had not cut the gas tax.

Beyond that, lower gas prices haven’t made life more affordable for Manitobans.

Prices for many products, groceries in particular, were already high and haven’t gone down. A lower inflation rate merely means that high prices haven’t gone even higher than they already are.

In December, Kinew promised to take steps to lower grocery prices if they didn’t go down because of the gas tax cut. At the time, many in the media (myself included) said it was unlikely that the tax cut would result in lower food costs because the cost of fuel plays a very small role in prices charged at the grocery store.

We were right. Groceries are just as expensive now as they were before the tax cut, and the premier is conspicuously silent on what steps he plans to take to lower those prices.

Just before the gas tax cut was implemented, many also argued that it was both bad environmental policy and bad fiscal policy. Lowering the cost of gasoline would result in higher traffic, which would result in higher greenhouse gas emissions, thereby worsening the impact of climate change. Don’t be surprised to see a report showing how much.

From the fiscal perspective, many pointed out that the tax cut’s estimated cost — $164 million — was an expense that a government mired in a huge deficit could not afford. We suggested that, instead of cutting the gas tax and losing all that revenue, the money could be better spent on education, social programs and our troubled health-care system.

With the second-highest child poverty rate in the country and a sharp increase in both homelessness and families using food banks, that $164 million could have been used to lessen the suffering of many Manitobans.

Alternatively, if the government had allocated the $164 million toward funding education, it may not have been necessary for school divisions across the province — including the Brandon School Division — to raise property taxes.

Finally, I warned that the gas tax holiday was scheduled to end during the Canada Day weekend and that the government would be pressured to not reinstate the tax. In fact, that pressure has already begun.

On Wednesday, the Canadian Taxpayers Federation released the results of a poll, which found that 77 per cent of Manitobans want to extend the tax break beyond June 30. Based on those results, the CTF wants the government to continue the tax holiday until the end of the year.

The pressure to extend the tax break will likely increase as June 30 approaches, but our cash-strapped government can’t afford to lose another $164 million or more in revenue — not when there are so many areas that desperately need more funding.

That brings us back to Kinew’s press conference. As excited as he was to take credit for causing a drop in the consumer inflation rate, it is just as likely that Manitoba’s rate will go right back up when the tax break expires at the end of June. That’s what has happened in Alberta after its gas tax holiday expired, causing that province to have the highest inflation rate in the country.

In politics, it is always a mistake to over-promise and under-deliver. It’s an even bigger mistake to take a victory lap before the race is over.

Kinew’s decision to celebrate the latest inflation news broke both rules. The tax cut hasn’t reduced the cost of food, products and services like he said it would. Instead, it has increased greenhouse gas emissions and cost the provincial treasury millions of dollars that could have been used to fund education, health care and reduce the harmful impacts of poverty.

That’s not the kind of thing you celebrate. It confirms the reality that, in both politics and life, blowing your own horn too loudly can sometimes blow up in your face.