(Ottawa) Parliamentary committees have become increasingly polarized over the last two minority Liberal governments and have provided a venue for political theater outside the House of Commons.
The Governor of the Bank of Canada, Tiff Macklem, knows something about this. He finds himself in a political minefield every time he testifies before the House Finance Committee.
Four times a year, deputies have the opportunity to question the governor on monetary policy.
At a time when inflation and interest rates are both high, MPs – particularly those in opposition – are eager to question him on politically sensitive issues.
Is the federal government spending too much? How much does carbon pricing raise prices? Would eliminating it lower interest rates?
Aware of the weight of his remarks, the governor focuses his answers on the implications of budgetary policy on inflation.
But despite Mr. Macklem’s best efforts, his words are often cut and repackaged by politicians to serve their own narratives.
This was made clear on Thursday, when the Conservatives issued a press release following Mr. Macklem’s appearance before the committee, stating that the governor had “confirmed that Trudeau’s $61 billion in new spending were “not useful” in bringing down inflation and lowering interest rates.”
Excerpts on the social network X also quickly circulated.
But what was missing was that Mr. Macklem never singled out federal spending.
He pointed out that the provinces increased their spending, and that this was largely financed by the deficit.
“It increased the government’s contribution to growth,” Mr. Macklem said, in response to a question about whether fiscal and monetary policies were moving in the same direction.
PHOTO SEAN KILPATRICK, THE CANADIAN PRESS
Four times a year, members of the House of Commons have the opportunity to question the governor on monetary policy.
Mr. Macklem noted that the central bank’s April monetary policy report projects that overall government spending will increase by 2.75% this year.
That’s up from its January forecast of 2.25 per cent, largely due to a series of provincial budgets that increase spending.
Notably, the federal budget had not yet been presented at the time of publication of these forecasts.
“So yes, it doesn’t help in trying to reduce inflation,” Macklem said of the increased rate of growth in spending at all levels of the Canadian government combined.
The Canadian Press asked the Bank of Canada if the governor’s response was accurately reflected in the Conservative press release.
“We will let the governor’s testimony speak for itself,” Paul Badertscher, the central bank’s communications director, said in an email.
The Conservatives did not answer a question about whether they believed provincial government spending contributed to inflation.
Instead, they reiterated their interpretation of Mr. Macklem’s comments.
“Mr. Macklem said government spending is ‘not helpful’ to efforts to lower inflation and interest rates,” said spokesman Sebastian Skamski.
Because the federal Liberals increased overall spending in this year’s budget, “it’s clear” that Mr. Macklem was referring to “Justin Trudeau’s spending,” Mr. Skamski argued.
Several criticisms of the central bank
After four years as governor during what was arguably the most tumultuous economic period in decades, Mr. Macklem knows well how quickly the Bank of Canada can find itself caught in a political storm.
The central bank has come under fire from politicians of all stripes, union leaders and commentators.
Conservative Leader Pierre Poilievre even promised to fire Mr. Macklem over the Bank of Canada’s policy response to the pandemic. He hasn’t repeated this promise in a while.
PHOTO BLAIR GABLE, REUTERS
Conservative Leader Pierre Poilievre
Even if Conservative MPs are now relying on Mr. Macklem’s credibility to try to demonstrate that Liberal decisions fuel inflation, government MPs are seeking his validation.
Liberals often ask the governor questions to try to get him to defend their government’s financial record and policies.
Stephen Gordon, an economics professor at Laval University, said this is far from the first time politicians have tried to use the Bank of Canada to score political points.
He added that the central bank’s long-standing tradition is not to engage in politics or pass judgment on government policy.
“She always takes fiscal policy as a matter of course. It’s not supposed to express an opinion on whether it’s good, bad or not,” he explained.
Mr Gordon said it was unfortunate that MPs were more focused on political scoring than on asking substantive questions of the governor.
“Parliamentary committee meetings are really a missed opportunity for politicians to really understand what is happening with monetary policy. The focus on misleading media clips or quotes makes it more difficult for the bank,” he argued.
“The bank would really like people to understand how things happen. »