I recently recited the Mourner’s Kaddish on my father’s yahrzeit, the anniversary of his passing, and it reminded me how much I miss both my parents. They instilled in me a sense of comfort and security, a knowledge that someone was always there for you. They taught by example, by the painful recollection of their courage during adversity, by their determination no matter what the obstacles. At some point, especially as we get older and suffer loss, we all ponder the meaning of life and try and determine how to lead it better. As I get older it feels like life is about driving along on a nice sunny day knowing one day we will drive over a cliff but don’t quite know when, or how steep it will be. 

I have been watching a wonderful show, Ted Lasso on Apple TV+, that deals with how to cope with change, hardship, and loss by maintaining a positive attitude and a team spirit. Ted’s motto, of which he constantly reminds the soccer team he coaches, is to believe in yourself, to do your best, and not give up even when you fail. He relates how he has often been judged and underestimated in life. It always bothered him growing up, until one day while driving his little boy to school he saw a painting on a wall quoting Walt Whitman. It said, “Be curious, not judgemental.” All of a sudden it hit him: “All of them fellas that used to belittle me, not a single one of them were curious. They thought they had everything figured out. So they judged everything and everyone.” He tells this story to an overconfident snob, who to his great surprise loses a bet over a game of darts he is certain he can win. He is judgemental, not curious.

Ted, after winning, says perhaps if his opponent was more curious he would have asked, “Have you played a lot of darts?”, and Ted would have answered, “Every Sunday at a sports bar with my father from age 10 until I was 16 when he passed away.”

Judging ourselves and others is what we all do to various degrees. Are we smart enough, rich enough, attractive enough, good enough? Social media promotes an idealized self that is hard to realize. We have to believe in ourselves more and remember the words of Theodore Roosevelt spoken in a 1910 speech at the Sorbonne in Paris. He railed against cynics who looked down on men trying to make the world a better place: 

“It is not the critic who counts, not the man who points out how the strong man stumbles, or where the doer of deeds could’ve done them better. The credit belongs to the man who is actually in the arena, whose face is marred by dust and sweat and blood; who strives valiantly; who errs, who comes short again and again because there is no effort without error in shortcoming; but who does actually strive to do the deeds; who knows great enthusiasm, the great devotions; who spends himself in a worthy cause; who at the best knows in the end the triumph of high achievement, and who at the worst, if he fails, at least fails while daring greatly, so that his place will never be with those cold and timid souls who neither know victory nor defeat.”

We strive to understand the meaning of life and how to better live it. Douglas Adams wrote The Hitchhikers Guide to the Galaxy and provided the “Answer to the Ultimate Question of Life, and Everything”. An enormous supercomputer, Deep Thought, determined that the meaning of life was the number 42. Many people over the years have ascribed special symbolism to the importance of this number even though it was likely meant as a joke. I like the fact that 42 was Jackie Robinson’s uniform number and that since 2014 no baseball player has ever worn it other than on April 15, Jackie Robinson Day, when every player, manager, and umpire wears it. They commemorate the day he made his major league debut and honour him breaking through the racial barrier and his enormous contribution to the game.  

There is another special symbolism to the number 42. The supercomputer Deep Thought speaks in computer language, and the number 42 in ASCII, a basic programming language, is an asterisk. Perhaps the asterisk is meant to say that 42 means life is what you make of it!

My daughter once asked Siri “What is the meaning of life?” It took a day of reflection before Siri answered “The meaning of life is: chocolate.” Perhaps this is also a meaningful answer. Is the symmetry not surprising that many chocolate bars weigh 42 grams? Sometimes the challenges of life need to be coated in chocolate to soften the hardship and bitterness that we may feel. I don’t know if I will ever understand life’s meaning. I will, however, continue to eat chocolate and keep trying. 

And as we try to understand the meaning of life and deal with its challenges, it is important to remain curious, not judgemental. When facing a life challenge, eat a piece of chocolate to remind you that the meaning of life is what you make it. If you believe in yourself, you can work it out. It may not always be perfect, but most times it will be more than good enough. If you somehow fail, be curious as to why, believe you can do better, then pick yourself up and try again. 

If this week’s speech from the throne was a chance for the Trudeau government to reaffirm its priorities, the upcoming fall economic statement will serve as a test for some of the core economic and fiscal assumptions from April’s budget that underlay those priorities.

First, expect some changes to the bottom line for the current fiscal year 2021-2022. Higher oil prices will help on the revenue side. Less uptake on emergency programs for individuals and businesses will likely help on the spending side. Budget 2021 had projected 9.3 percent nominal GDP growth in 2021 and 6 percent in 2022. Scotiabank is now forecasting 12.4 percent nominal GDP growth for 2021 and 6.6 percent for 2022.

In addition, the government announced considerable pre-election spending that was not in April’s budget (what is commonly referred as “off-cycle spending”).  These upside and downside developments since April will doubtless cumulatively affect Ottawa’s bottom line. The only question is by how much and in which direction.

Second, a 4.7 percent rise in inflation on a year-over-year basis in October (the largest gain since February 2003), up from 4.4 percent in September, wasn’t in the cards last spring. In its April monetary report, the Bank of Canada forecasted a 2.2 percent rise for Q4. This isn’t unique to Canada. In the U.S., inflation is running at 6 percent year-over-year. There is a robust debate over what is causing inflation and how long it will be with us. Supply chain bottlenecks are often blamed, but it is far to say that central bankers are in a bit of a bind. They will want to see the labour market improve significantly in the near term before raising rates.  

The question is this: will fiscal and monetary policy work against each other? Much of the $140 billion stimulus committed in the last budget is still coming through and another $78 billion in incremental spending was promised in the last election. This is on top of significant liquidity sitting in Canadian chequing accounts. The bottom line is a short-term focus on boosting demand (more short-term government spending combined with record savings) will risk adding more persistent inflationary pressures.  

Where does this leaves us? 

Fiscal complacency is risky: Although money is still relatively cheap (10-year bond yields are below 2 percent, but considerably up from the low of 0.43 percent in August 2020) and markets aren’t overly concerned with the federal government’s fiscal position right now, there is a real risk of fiscal complacency. Economic and fiscal outlooks always look better down the road until they don’t. Nobody expected inflation to rise as quickly as it did. Inflation matters because it raises the costs of borrowing. Once you get over the 2.5 to 3 percent range it is another ballgame. If the pandemic has taught us anything, it’s that the next crisis is always looming. Few could have predicted the tragedy unfolding in British Columbia. Now is not the time to let our guards down.

Beware of increasing structural deficits: Looking at the non-related COVID-19 commitments made in the Liberal Party platform, it is hard not to conclude we are slowly but surely building a bigger structural deficit over time. One can always hope large deficits can be sustained either by higher GDP growth relative to debt financing (r<g) and/or by raising taxes, but it is a bit like rolling the dice and hoping for the best. Post-COVID-19, the Liberal platform commits to adding, on average, $15.6 billion in new spending every year for the next five years.

To be fair, some of the spending (R&D and infrastructure for example) will help on the growth side over time and $28 billion planned in new revenues will offset some of the new expenditures. But big picture, this means that program expenses relative to GDP would rise above 15 percent on a sustained basis for the foreseeable future, a ratio not seen since the 2008 financial crisis and the 1994-1995 budget. This also assumes no further spending increases in subsequent budgets, which is very unlikely. 

The post-pandemic challenge will not be about boosting demand: Instead, it will mostly be about (re)-building the supply side of the economy — namely labour markets, the energy transition and innovation. The post-pandemic world will be one constrained mainly by supply. Just look to labour shortages and aging demographics. The retirement rate is about to explode, and the labour market is going through a tricky transition. Fast-rising sectors won’t generate adequate growth if skilled workers are hard to find. The energy transition won’t happen if we don’t significantly leverage science and technology and make huge innovation bets. Policy makers ought to use every tool in the toolbox to help build our long-term productive capacity.  

We’re now in a different phase of the recovery, with various short-term risks but also big long-term questions. Fiscal policy needs to be calibrated accordingly and should be used wisely.