Like The Hub?
Join our community.
Join

Robert Asselin: Does the fall economic statement pass the test? 

Commentary

In the current economic landscape, Chrystia Freeland’s fall economic statement needed to pass two basic tests: 1) reassuring financial markets that the Canadian government understands the need for fiscal prudence; and 2) making Canada more competitive in the wake of a reinvigorated American industrial strategy. 

In both cases, we are dangerously close to a passing grade. 

Fiscal prudence

To her credit, Freeland used a series of speeches and interviews over the past few weeks to signal an awareness of fiscal prudence. Unfortunately, there is a considerable gap between her words and the reality reflected in the economic update. Of the $30 billion additional fiscal space for 2002-2023, the government will spend almost half (45 percent) of it. 

Even more telling is the ratio of federal spending to GDP that is now well entrenched above 16 percent over the next five years—an unceremonious achievement that Canada reached during the global financial crisis of 2008-2009 and in the early 1990s, a painful episode which led to severe reductions in spending by former Finance Minister Paul Martin. Further, what was reflected in this fall economic statement does not account for future expenses in health, defence, wage increases in the public sector, and other big-ticket items that are expected to rise. 

In terms of economic forecasts, the statement is overly optimistic. It predicts neither a recession nor sustained higher interest rates over the next few years. In fact, the projection of real GDP growth over the next five years is on average more generous than what we have had over the past twenty years. To be fair to the government, these forecasts were made by external private-sector economists, many of whom incidentally told us that inflation would be transitory.

In his press conference following the Federal Reserve’s interest rate announcement earlier this week, Governor Jerome Powell was unequivocal: to bring high inflation under control, the terminal rate will almost certainly have to rise above 5 percent. This is one percentage point higher than what was believed to be necessary just a few weeks ago. In the U.S. as in Canada, there are fewer and fewer supporters of the soft-landing scenario: it is increasingly clear that bringing such persistent inflation back to a range of 1 to 3 percent will have severe ripple effects. To the experts and economists who think that we must tolerate higher inflation to avoid a recession, they need to explain how the weakening of Canadians’ purchasing power in relation to the earned income is a desirable long-term economic objective.

As Freeland noted in her speech, Canada cannot avoid the coming economic slowdown any more than we could have avoided the global pandemic. The risks remain enormous, and the government’s fiscal firepower is not what it was three years ago. Over the next few years, it is unlikely economic growth will be higher than the interest rate it pays (r>g) to refinance its rollover debt. This will have a significant impact on the costs of debt financing. 

Industrial strategy

The second test is whether the fall economic statement set out measures to boost Canadian economic competitiveness. With the Inflation Reduction Act and the CHIPS and Science Act (valued at a combined $460 billion), no one doubts the ambition of U.S. industrial strategy. Freeland has astutely recognized the impact all of this will have on Canada’s long-term competitiveness. To her credit, the statement lays the groundwork for Canada’s response by introducing two new tax credits targeted at clean technologies and hydrogen. She also hinted that additional measures would come in the next year’s budget. 

But based on the government’s last few budgets, the modus operandi is a scattered approach with new funds, structures, and agencies that spread out billions here and there. Contrary to President Biden’s Build Back Better plan, it is hard to see a credible and well-crafted made-in-Canada industrial strategy that targets specific sectors of strength, with clear and coordinated instruments to improve our competitiveness.

What struck me the most was the lack of urgency reflected in the fall economic statement. In these volatile and uncertain times with threats to the future prosperity of all Canadians, it would have been good to see the government showing more awareness of its obvious blind spots

Raphaëlle Roy: Maine: Québec Inc.’s playground

Commentary

I’m lucky that I get to experience my favorite journey like clockwork, year after year, for well over thirty years. The drive begins in Montreal, snakes through green Vermont and over the mighty New Hampshire mountains before crossing into Vacation Land, the magnificent state of Maine. Over the five-and-a-half hour drive, my body slowly relaxes, exhales breath by breath the stress accumulated since my last visit, and my head becomes lighter, my smile more genuine, my eyes brighter. When we arrive on the shores of the Atlantic ocean, I hear the roaring waves, I smell the briny air, and my heart skips. Finally, I’m home.

One could say I’ve been possessed by the Maine spirit since my childhood. My parents would take their four children camping for two weeks every summer on Hermit Island, a tiny islet where nature was left undisturbed, where all you’d find that signals human presence is a single general store to stock the campsite visitor. For the privilege of camping for two weeks in this remote paradise, we had to send a letter application year after year, explaining why our family should be selected to be welcomed on the camping ground. That’s right; we had to apply to be eligible for camping. Our motives had to be pure, we had to promise to honour nature, the peace, and the quiet. We had to be deserving of it. 

I don’t know how Hermit Island is run now, over thirty years later, but I know that this obsession with Maine that will make rationale-thinking adults prone in submission, begging to be allowed to enjoy a few days or weeks on the shores of Maine, with its freezing water and its finicky weather, is alive and well. Renting a house for two weeks on the beach in Maine will cost you the equivalent of spending the entire month of July in Europe. You won’t find luxury in Maine unless you are willing to spend fifteen thousand dollars for a week’s rental. What you will find is decades-old furniture, even older appliances, small and stained showers (indoor or outdoor), some weird smell or other, always, and carpets that should have been ripped out ages ago. Oh, and you have to bring all your sheets, towels, dishrags, and even a bathmat. That’s right, BYOBM. The houses in the small streets within walking distance of the beaches are marginally more affordable and rarely more comfortable. 

This past summer, I rented a house that was a three-minute drive from the beach and found myself for the first time not being able to hear the waves, smell the briny air, and walk on the beach at sun-up and sundown. I gave that up to be able to afford a well-maintained five-bedroom house where furniture was newer, the kitchen was larger and the mattresses didn’t have broken metal springs digging into my back. Was it worth it? To see my son enjoy a week with his cousins in that big house, yes it was. I would not have been able to afford it were it nearer to the ocean, even if according to Revenue Quebec, I’m in the top one percent of earners in the province. I’m not the only one who’s lost her head for Maine and basically paying to be uncomfortable but near the ocean every summer. Thousands of my fellow French Canadians have been vacationing in Maine for generations. My own mother’s obsession with Maine stems from her childhood summers in Biddeford Pool where her parents were annual renters. She passed on the Maine gene to me, and I’ve passed it on to my son, who never stood a chance either way; his father’s family has vacationed in Maine for at least four generations. 

So why, exactly, are people falling in love with Maine and coming back every year, generation after generation?  

First, community is an important part of it. Vacationing in Maine is not an individual pursuit; families and friends congregate year after year and, often, generation after generation. When I walk on the beach in Maine in Pine Point, Ocean Park, or Kennebunk, I will meet dozens of friends or acquaintances from Montreal. My son’s grandparents have been traveling Maine in a pack with at least fifteen of their friends since they were born. Their parents traveled with the parents of their now 70-year-old friends, and their children are now spending summers in Maine with the children of those friends. Entire blocks on the coast house Quebec Inc.’s leaders.

Second, vacationing in Maine allows us to live a simpler life, albeit for a few weeks. Laid-back vibe is a euphemism here and for the duration of our visit, we are free from the tyranny of the big city’s slick professional lifestyle: no more coiffed hair, make-up, or designer clothes. You can wear the same tattered shorts and stained t-shirt every single day of the summer and no one will look at you twice. There’s nothing pretentious or ostentatious about Maine’s people and it’s oddly relaxing to not worry about what you look like heading for the beach. You’d think I’d learn not to overpack after all these years, but I find myself time and time again overpacking, and yet end up wearing the same three bathing suits and Club Monaco cover-up for two weeks.

Breathtaking beaches are another important attraction of Maine. But not all beaches are created equal, and the strip of sand between Pine Point and Ferry Beach is inarguably the most beautiful of the state. The longest, at seven miles long, it’s also the widest, and sunbathers are not pushed to the dunes at high tide like other nearby beaches.

The beach begins at Pillsbury Shores, where you’ll find a handful of majestic oceanfront houses presiding over the white sand coastline. The dunes are home to the endangered and protected Upland Sand Piper and Piping Plover, to the delight of children who see the tiny birds dashing in and out of the tall grass. If you walk up the sand path and cross the street to the marsh side, you’ll come up to Bailey’s Lobster Pound, arguably the best fishmonger in the state. Rush hour is 5 pm, when the crowds rush in, fresh from their post-beach shower, to get their live lobsters and the day’s catch along with made-from-scratch crab cakes, pasta, and the ubiquitous coleslaw and potato salads.

Walking south from Pillsbury Shores, you’ll get to Pine Point, in my opinion, Maine’s best-kept secret. The houses are falling apart and the rental fees are highest here, but the extra-wide sandy beach makes for an almost secluded experience on weekdays before the weekenders from Massachusetts descend. Looking to go out for dinner? Make your way to Pine Point Grill for a comforting bowl of clam chowder and melt-in-your-mouth scallops. Up next is Old Orchard, and you should just keep walking without slowing your stride. Bad food, bad crowds, nothing to see here, ladies and gentlemen. You’ll then get to Ocean Park, an adorable hamlet where you definitely have to stop for an ice cream cone at the Ocean Park Soda Fountain. It’s not the best ice cream you’ll eat but the old-timey atmosphere is too sweet to pass up. The beach at that point starts to narrow dangerously, being eroded year after year at a frightening pace. Kinney Shores, Bayview, and Ferry Beach are found south of Ocean Park and while the quiet streets and secluded area are a dream for a vacationer looking for peace, the narrowing beaches become a sliver of sand come high tide. 

Further south is the well-known Kennebunk Beach and Kennebunk Port. The crowd there is more American than Canadian and it bleeds blue blood. Mother’s Beach is a dream for families of young children who want to set up camp for the day and let the kids run wild.  The beach is small, the water shallow, and there are play structures for your little monkeys to climb on. Get to the beach before 10 am and grab sandwiches, cookies, and chips at Bennett’s Sandwich Shop before getting there, because leaving at lunchtime means giving up the rare and precious parking spot. You didn’t get up at dawn and wrestle your family into your now sand-filled, sunscreen-smeared car, just to leave your hard-won parking spot to the lazy beachgoer who overslept and showed up at noon. 

Finally, fantastic eating is a core part of the Maine experience. So after a day at the beach, you’ll want to reward yourself with al fresco dining at Stripers Waterside for delicate fish fillets, local summer vegetables, and port-side seating. In my opinion, summer is best spent watching the boats sail by while enjoying a crisp white wine, delicious eye-rolling-into-your-head food, and letting the kids run wild on the grass and practice stone skipping in the bay. 

For the gourmet experience, you’ll head to Maine’s largest city, Portland. I cannot emphasize this enough: get there early enough that you’ll be able to snag some Holy Donuts. Made with Maine potatoes, these are far superior to any other donut out there. There are dozens of flavours to choose from, but you won’t want to pass over Pomegranate, Sea salt Chocolate, and Lemon. Once you have your dessert secured, grab lunch at Duck Fat, for gourmet sandwiches, fries, and a shake. Make time for shopping on Commercial St, Market St., and Exchange St. You’ll find dozens of small locally owned shops, with everything from affordable knick-knacks to high-end clothes. If you’re shopping for art, you’ll find several art galleries, pottery shops, and other locally made pieces all over the downtown and old port area. For cocktail hour, oyster fans will want to stop at Eventide Oyster Co for half a dozen. For the main event, you can head to The Corner Room, for elevated Italian, Street & Co for seafood, Fore Street Restaurant for farm-to-table fare, or The Grill Room for a remarkable steak.  

When you’re walking back to your car, eating those sinful Holy Donuts, I guarantee that you’ll have fallen in love with Maine at that point and that you, too, will become a slave to its breathtaking beaches, rickety houses, and easy-going life.  Just don’t forget your bath mat.