Examining Inflation’s Impact, Pandemic Spending, and the Feasibility of Poilievre’s Economic Proposals

Introduction

In Part 7 of our fact-checking series, we examine Pierre Poilievre’s claims about inflation and monetary policy. He criticized what he called “inflationary policies” for eroding savings and disproportionately affecting low-income Canadians. Poilievre pledged to end deficit spending and “money printing” as part of his plan to stabilize the economy. But while inflation has undoubtedly impacted Canadians, it’s worth asking: what would a Conservative plan during the pandemic have looked like, and would it have shielded vulnerable Canadians any better?

1. Criticism of Inflationary Policies

What Poilievre Claims

• Inflation has been driven by excessive government spending and monetary policy (often referred to as “money printing”) by the Bank of Canada.
• Low-income Canadians suffer the most as inflation disproportionately affects necessities like food, housing, and fuel.

Analysis

• Inflation Trends:
  • Inflation surged globally during 2021-2022 due to pandemic recovery, supply chain disruptions, and the war in Ukraine. In Canada, inflation peaked at 8.1% in mid-2022 before declining to around 3.5% in late 2023, following interest rate hikes by the Bank of Canada.
• Global Context:
  • “It’s easy to point fingers at the government or the central bank,” Peterson noted during the interview, “but the reality is far more complicated. Inflation isn’t just about printing money or government spending—it’s a global phenomenon tied to energy prices, supply chains, and economic shocks.”
• Who Suffers the Most:
  • Poirlievre is correct that inflation disproportionately affects low-income households. Essentials like food and rent, which make up a larger share of their spending, have seen the sharpest price increases.
  • “Inflation isn’t just an economic issue; it’s a moral one,” Peterson said. “When the cost of living skyrockets, it disproportionately punishes those who are already struggling. It’s a silent thief that erodes savings and destroys trust in institutions.”

2. What Would Conservatives Have Done Differently?

Pandemic Spending: A Necessary Evil?

During the pandemic, governments worldwide introduced fiscal policies to avoid economic collapse. In Canada, programs like CERB and wage subsidies kept businesses afloat and families fed.

• Short-Term Impact:
  • Without pandemic aid, millions of Canadians—especially low-income earners—would have faced unemployment, eviction, or worse. While inflation eroded savings over time, immediate inaction would have disproportionately harmed the same demographic Poilievre claims to champion.
• Long-Term Recovery:
  • While pandemic spending contributed to demand-driven inflation, Peterson pointed out that “fiscal discipline is a virtue, but it has to be implemented with care. Slash-and-burn approaches to budgeting can do more harm than good if they undermine critical services or erode public trust.”
• A False Dichotomy:
  • Balancing the budget doesn’t inherently solve inflation. Without emergency measures, economic activity would have plummeted, deepening Canada’s recession. Stabilizing the economy requires balancing immediate relief with longer-term structural solutions—a nuance often missing in Poilievre’s rhetoric.

3. Pledge to End Deficit Spending and “Money Printing”

What Poilievre Proposes

• End deficit spending by balancing the federal budget.
• Stop “money printing” by ensuring the Bank of Canada does not engage in further QE.

Analysis

• Deficit Spending:
  • Canada’s federal deficit peaked at $327 billion in 2020-2021 due to pandemic spending. It has since decreased, with the 2023-2024 budget projecting a deficit of $40.1 billion. Balancing the budget would require either significant spending cuts or revenue increases. Without specifics, it’s unclear which programs or services Poilievre would target for reductions.
• Ending QE:
  • The Bank of Canada ended QE in 2022, shifting to quantitative tightening (QT) by selling off bonds. This aligns with Poilievre’s call to end “money printing,” but the policy is already in place.
  • “Central banks have become these untouchable institutions,” Peterson observed. “Who holds them accountable when their policies lead to economic instability?”
• Economic Stabilization:
  • Reducing deficits could ease inflationary pressures over the long term. However, abrupt spending cuts during economic uncertainty risk triggering a recession, which would disproportionately harm vulnerable populations.

What’s Better in This Case?

When considering inflation’s long-term impact on low-income Canadians, Poilievre’s critiques highlight valid frustrations. However, the immediate harm of inaction during the pandemic would likely have been far worse. Programs like CERB prevented widespread poverty and homelessness, even if they contributed to inflationary pressures.

Peterson framed it aptly: “Fiscal restraint is important, but not at the expense of stability. What’s needed is a balance—relief during crises, paired with long-term reforms that ensure we don’t end up in the same situation again.”

Key Takeaways

• Inflation’s Causes: While government spending played a role, inflation was primarily driven by global factors like supply chain disruptions and energy price spikes.
• Disproportionate Impact: Poilievre is correct that inflation disproportionately affects the poor, as essentials like food and housing have seen the highest price increases.
• Pandemic Policies: Emergency spending during the pandemic provided critical short-term relief, but it also contributed to inflation. The alternative—austerity—would likely have caused more immediate harm.
• Policy Feasibility: Ending deficit spending and “money printing” aligns with existing trends (e.g., reduced QE). However, balancing the budget would require significant spending cuts, potentially impacting essential services.

Read the final part here.

 

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