Should we trust a political leader who does not understand basic economic notions? This question is becoming more and more relevant as the leader of the Liberal Party of Canada, Justin Trudeau, keeps making absurd statements about the economy.
One of his key promises is that he won't raise taxes on the middle class. Who exactly is the Liberal leader talking about? Last week, he gave us several strange and contradictory definitions of who he believes the middle class is composed of.
He started by saying that they are "people who work for their income, not people who live off their assets and their savings." As several commentators noted, this absurd definition would include millionaire bank CEOs who work for their income, but not retired Canadians. All economists agree on a definition of the middle class based on total household income and not based on the source of income.
He came back with another definition a couple of days later, as absurd as the first one: they are "people who live paycheque to paycheque." Does that mean that Canadians who manage to put some money aside are not part of the middle class?
Mr. Trudeau seems to have a pretty blurred view of the life of ordinary middle class Canadians. He already has a track record when it comes to saying weird things about the middle class. In October 2012, when he was running for the leadership of his party, he stated that the existence of a middle class was what brought about economic growth. Really?
"The great economic success stories of the recent past are really stories of middle class growth. (...) China, India, South Korea and Brazil, to name a few, are growing rapidly because they have added hundreds of millions of people to the global middle class."
Justin Trudeau confuses cause and effect in terms of economic development. It is not because their middle classes have grown that China and India have become economic successes. It is rather because these countries have abandoned their socialist and interventionist policies and have liberalized their economies that they have experienced strong economic growth. It was then and only then, that millions of their citizens left the condition of extreme poverty they were in and were able to reach a standard of living which is that of the middle class.
Again, earlier this year, we were treated to another one of Mr. Trudeau's absurd statements about the economy. In a video, he explained that since households and provincial governments in Canada are heavily indebted, while the federal government has considerably lowered its debt level since the 1990s, Ottawa is the only entity that "has room" to rack up more debt. It should therefore "step up" and spend more to stimulate the economy.
Can we imagine a more absurd economic policy? This is like the guy with a lot of consumer debt who checks the invoices of his three credit cards and thinks: I have reached my limit on these two, but I still have some credit left on this other one. The best way to get richer is to max this one out too. Let's go shopping! Mr. Trudeau seems to forget that it's the same taxpayer who will have to pay back the debts of both levels of government as well as his own.
He also seems not to understand that government spending does not create wealth and that to stimulate the economy sustainably, we must do the opposite. That is, curtail public spending and put in place the best possible conditions to allow the private sector to become more productive. We can do this by cutting taxes, reducing the burden of regulation and promoting free-trade.
The Liberal leader uttered another economic absurdity when he reacted to our government's budget a couple of weeks ago. According to him, there is no need to worry about the deficit. We should rather aim at stimulating the economy and "the budget will balance itself."
For Mr. Trudeau, the more a government spends, the more it stimulates the economy, the more its revenues will grow, and the less we need to worry about the deficit. One has to wonder why the deficit and debt exploded in the 1970s, when Justin Trudeau's father implemented this type of irresponsible economic policy. Perhaps he wasn't spending enough?
There's not much harm in it as long as Mr. Trudeau cannot act on his absurd beliefs. But if the Liberal Party of Canada ever comes to power again, these ideas could become a threat to Canadians' economic security. Can we afford to take such a risk?
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