William Watson: What we need is an affordability crisis for government

Governments will want to throw money at the affordability crisis. What they should do instead is reduce taxes and other costs they impose on businessYou can save this article by registering for free here. Or sign-in if you have an account.Pierre Poilievre told the CBC’s Rosemary Barton over the weekend that “Affordability! Affordability! Affordability!”, the Conservatives’ new mantra, is what will unite the party behind his leadership. In her own version of an affordability crisis, Ms. Barton couldn’t afford him the benefit of the doubt, concluding her report on the interview by saying that if one more floor-crossing Conservative MP gives Mark Carney a majority government, then “it would be very difficult to make the case the leader should stay.” So it’s pretty much unanimous among CBC commentators: if Mr. Poilievre doesn’t soon start behaving the way CBC commentators believe opposition leaders should behave, he’s gone.Subscribe now to read the latest news in your city and across Canada.Subscribe now to read the latest news in your city and across Canada.Create an account or sign in to continue with your reading experience.Create an account or sign in to continue with your reading experience.Affordability is not a scam invented by Democrats, as Donald Trump claims, though if anyone should know a scam when he sees it, it’s Trump. But as political philosophies go, it’s a little vague. If you search “afford” on the internet — search being a technology we had before chatbots — you learn that “To afford means you have enough money or time. If you only have 10 dollars on you, you can’t afford to buy a $20 hat.”Get the latest headlines, breaking news and columns.By signing up you consent to receive the above newsletter from Postmedia Network Inc.A welcome email is on its way. If you don't see it, please check your junk folder.The next issue of Top Stories will soon be in your inbox.We encountered an issue signing you up. Please try againInterested in more newsletters? Browse here.I got this definition at vocabulary.com. Vocabulary.com obviously hasn’t heard of government, which since the 1930s has been in the business of buying things it can’t afford. “Hats are only $10 down and the other $10 on credit? We’ll take a dozen. No, make that a hundred. And let’s hold a photo op.”Affordability has two sides: the inflow and the outflow. If you have enough inflow, you can afford almost anything. You can rent Venice for your wedding if you like, as Jeff Bezos, current king of inflow, did in June. But if you have to ask what renting Venice costs, you probably can’t afford it, as J.P. Morgan supposedly said. We whose inflow isn’t Bezos- or Morgan-like have to pay attention to the prices of things. If prices keep rising and our inflow doesn’t, we feel affordability-squeezed.Promising to increase affordability is a political winner. How many voters favour less affordability? But how you pursue affordability counts. You can make some people’s lives more affordable by giving them more money. High prices stay high but are easier to bear with more money coming in. But where does the money come from? From other people, through higher taxes on them? That just redistributes affordability. From everybody, through monetary expansion? That helps until prices catch up, but they always do. And the faster the expansion the faster they catch up. If the Conservatives’ pivot to affordability politics means they want the Bank of Canada to be tough against inflation, that would be good. Donald Trump wants easier money, which won’t help prices any.These days people say we should reduce food prices by taxing food less. Some say we should eliminate GST and HST on food, all food, whether bought in grocery stories or ordered in restaurants. Maybe that does lower food prices — though lots of food is traded internationally where its price is determined in world markets, so maybe it doesn’t. But if it does, it lowers prices for everybody, whether they’re affordability challenged or not. And, as exceptions always do, it raises the cost of administering the tax system. Better to tax everything at a low, uniform rate and do what we already do: give low-income people a GST tax credit. Our Swiss-cheese tax system has enough holes already.Pierre Poilievre says he wants to axe the hidden taxes on food, which come from industrial carbon taxes and other taxes on inputs. That’s fine. But they probably don’t explain a lot of the food price inflation we’ve been having, certainly not on the import side, which doesn’t pay these taxes. And if you eliminate the carbon tax, you make carbon emissions more affordable. Many readers are OK with that, I know, but if Poilievre wants to fight Mark Carney in the political centre, he’ll need some sort of emissions plan. And most of the command-and-control schemes, though ultra-popular with the eco-Tech lobby, are more wasteful and expensive.How does government raise people’s inflows so they can afford higher prices? One way is to reduce reporting and regulatory costs for businesses. More information is always useful to somebody: we professors and ex-professors love it. So do advocates for this or that social cause. But gathering and compiling information costs time and money, and the costs may well be greater than the benefits. One thing that’s certain: businesses don’t swallow such costs, they pass them along to consumers. You get in the habit of swallowing costs, you don’t stay in business long.Another way to reduce business costs is to lower taxes. To get more employment, tax employing people less. To get more investment, tax investment returns less. To get more entrepreneurship, tax profits less. Easing the way for business will get you more business, more competition and lower prices.Of course, lowering taxes will cause an affordability crisis for government. It can’t go on buying things with borrowed money forever. But that’s an affordability crisis we need.Postmedia is committed to maintaining a lively but civil forum for discussion. Please keep comments relevant and respectful. Comments may take up to an hour to appear on the site. 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