In this budget week in Quebec, let us try to identify a series of observations which should, we hope, achieve consensus across a broad political spectrum.
1) The inflationary crisis that has been hitting Canada for some time now has several causes: shock in supply chains brought about by the pandemic and geopolitical conflicts, rising transport costs, but also excess profits in certain sectors, such as food and energy, where the national market is divided into oligopolies.
None of these causes really involve individuals from the middle class or more precarious economic backgrounds. But it is they who pay the consequences, doubly. On the one hand, by the rise in consumer prices. On the other hand, because the solution used to remedy the inflationary crisis is the increase in interest rates – which increases the mortgage payments of those who have choked to buy, and also indirectly the rents, since Landlords are always tempted to pass the bill on to their tenants as best they can.
In short, ordinary people do not cause economic problems, but it is from them that we ask for “sacrifices” to resolve them. This is one of the pillars of common sense in our dominant economic logic.
2) In Quebec, we said that the best way to “compensate” for the dominant economic logic that individuals pay the double consequence of inflation was to distribute one-off checks to the population and to grant tax cuts. These tax breaks did not follow a particularly progressive model: even taxpayers earning $100,000 and more were able to benefit in part. The result is that the government has damaged its ability to raise revenue for the long term. There were no political benefits from the tax cuts; the Coalition Avenir Québec is no less unloved. But there would be a huge political cost to any increase. The strategic blunder is undeniable.
3) The health and education systems, the two largest provincial responsibilities, have been battered over the decades by cutbacks, austerity and managerial reshuffles. We have gradually become stuck in a dead end so deep that, from now on, the attractiveness of the sector for an increasingly scarce workforce has become a structural problem. Given the historic public sector strike this fall, the Quebec government was forced to reinvest in these sectors to an unanticipated level.
However, since salary increases largely offset inflation, it is not guaranteed that the level of satisfaction of education and health employees will increase significantly enough to resolve staff retention problems. And the question of the impact of multiple managerial reforms on public services is far from having been completely resolved by the latest negotiations with the public sector.
Clearly, even if the 2024-2025 budget deficit is so large, neither elected officials, nor managers, nor employees, nor public sector unions are able to look the population in the eye and promise, without shadow of a doubt, an improvement in the concrete experience of Quebec patients and students. What is at stake here is a bond of trust: we don’t know if spending more would lead to better things.
4) Having spent unanticipated sums on education, the government seeks to “tighten its belt” and normalize expectations of austerity — sorry, “demand” and “responsibility” — in areas where public spending is in fact not expenses, but rather essential investments.
To the extent that individual cars cost the State ridiculous sums, particularly in terms of maintenance and expansion of the road network, investing in public transport means saving money. But the Coalition Avenir Québec is not calculating things here.
An ambitious plan to combat poverty can certainly be “expensive”. But calculate the funds that the government invests in police forces and prison institutions, essentially to monitor and punish an overwhelming majority of poor people. Calculate the enormous cost of poverty on public health, and therefore on the health and social services network.
Calculate what homelessness costs the State, when there is a shortage of affordable housing and we refuse to make a massive cut in social housing – and the construction of non-market housing, more broadly. Consider the intergenerational consequences of the lack of mental health services on each individual’s ability to contribute to society, and therefore also to the economy, to their full potential.
When we speak, the day after the tabling of the last provincial budget, of “structural deficit”, is the term considered from this angle?
Let’s summarize. 1) The policies put in place to get the economy back on track are stifling part of the population. 2) The government has damaged its ability to collect revenue under the pretext of giving people a breath or two of fresh air. 3) Expenditures have increased significantly in certain sectors, but we are not sure that we will see big concrete results. 4) Thus, we create a political context that complicates public investments in other sectors that are nevertheless critical not only for improving people’s lives, but also for the Quebec economy.
I therefore fear, in this week of the provincial budget, that Quebec society has reached nothing less than a form of crossroads in its relationship to social democracy.