The election campaign is only three days old, but we can already see a very worrying trend: short-term politicians are winning out over what needs to be done for the long term. The bad lawsuit being brought against the Generations Fund is the best example of this.
Posted at 6:00 a.m.
The Generations Fund is one of the rare examples in Quebec of a long-term policy instrument. In short, you take certain government revenues – water royalties and certain taxes – and invest them in order to make a large payment on the debt. The principle being that investments in the markets are more profitable than the payment of interest on loans.
It is an instrument that is all the more important since in a few years, a major demographic shock awaits Quebec. The aging of the population combined with the labor shortage, the consequences of which we are only just beginning to experience, will make it increasingly difficult to offer and pay for all the services that the State assumes today. Especially when we know that on average, citizens consume 95% of health care in the last two years of their life.
The Generations Fund is an instrument, it is not a panacea. But it remains one of the few examples of policy whose results will be felt in the long term rather than in the next government term.
The fact remains that since 2006 – for 16 years, therefore – it has been a means adopted and perpetuated in turn by the Liberal, PQ and CAQ governments. But it looks like it won’t survive the pressing short-term imperatives of this election campaign.
For supporters of the Generations Fund, keeping a reserve for more difficult days is just healthy prudence. But on the left as on the right, we now seem to believe that this is no longer useful, among other things because the growth of the Quebec economy has reduced the debt-GDP ratio. Or that there would be more urgent needs.
At Québec solidaire, for example, we admit that we have a deficit towards our seniors, but we find it difficult to accept that we can remedy this with an instrument that we willingly describe as right-wing when it is not neoliberal. And spending right away to fight climate change is a defensible priority.
But the fact remains that, this year, our politicians seem to have given themselves the word to spend immediately, even when that translates, for the CAQ, into a 40% reduction in contributions to the Generations Fund.
This is also what the Liberal Party would do by not affecting contributions to the Generations Fund, but by postponing the return to zero deficit for seven years, which would increase the debt by something like $15 billion. But it comes down to the same thing: it’s the long-term debt that will pay for short-term tax cuts.
It is true that in politics, a nice well-stocked kitty always has the same effect as a big bowl of candy on children: you can’t resist the temptation to put your hands in it.
Even if, 10 days ago, the Legault government told a teachers’ union that it had no intention of changing its policy regarding the Generations Fund. The least we can say is that an election campaign is always full of surprises and imposes all sorts of rapid reversals.
The short term is also winning out over the long term when it comes to the very assessment of the issue of labor shortages. If we listen to Premier François Legault, there are practically only upsides to the labor shortage: wages are rising, unemployment is practically at a historic low, economic growth is better than in Ontario.
In short, everything would be fine if it weren’t for inflation, which still has the advantage of allowing the government to do what it likes best, especially during an election campaign, which is to send a check to citizens.
But the Legault government has little to say about the longer-term consequences of the labor shortage, either businesses that have to reduce their opening hours or services that can no longer be provided within a reasonable time. This risks prolonging any economic slowdown, such as the recession that many predict for next year.
In short, it is as if Quebec were swimming in money, conveniently forgetting that it is mainly thanks to inflation that the government’s finances have improved.
Except that all these tax cuts and these checks sent directly to citizens are much more likely, as most economists claim, to feed the inflationary beast instead of appeasing it.