At the start of the 2019 federal election campaign, Andrew Scheer claimed it was obvious how the Liberals would be pitching their bid for another four years in power. “We all know what the next 40 days are going to look like for the Liberals,” the Conservative leader said. “Justin Trudeau is going to go across Canada telling you that you’ve never had it so good.” Not surprisingly, Scheer staked a claim to the opposite viewpoint. “Everywhere I go,” he said, “I keep hearing the same thing: things just keep getting more and more expensive, people keep working harder and are just not getting ahead.”
Scheer’s way of framing the contrast between the two big parties boiled down to this: self-satisﬁed (them) vs. sympathetic (us). But Trudeau didn’t co-operate by going around boasting of boom times. “I’ve been talking to Canadians across the country, and I keep hearing the same thing. Even with our strong economy and record unemployment, it’s still tough to make ends meet,” he said at the outset, sounding a lot like Scheer. Then the Prime Minister ﬁlled in some details: “Groceries, cellphone bill, child care—it all adds up. And that’s what today is all about—being there for families when they need it most.”
The affordability battle was on. The opening stages of the campaign were dominated—well, aside from the matter of old photos and video of a younger Trudeau in blackface surfacing—by duelling promises to leave Canadian families with more money at the end of the month. Both the Liberal and Conservative platforms feature a broad-based tax cut. Both Trudeau and Scheer vow to make it easier for some Canadians to buy a house, arguably the single most worrisome affordability issue for many voters. Both parties target their make-life-less-expensive messaging largely at parents.
They know the mindset of the middle class is primed to have its anxieties about family ﬁnances conﬁrmed by politicians. There’s no upside for any politician to tell voters they’re not doing so badly. Still, Statistics Canada’s latest data shows that the income of the median family—the mythical middle-of-the-pack household, leaving aside seniors—rose to $92,400 in 2017, up 2.7 per cent from 2016. That doesn’t sound terrible. Worries about affordability, however, aren’t really about how much ordinary Canadians make. The anxiety is about how much they borrow.
The number most often pointed to as proof that Canadians are worrisomely stretched is what’s called the debt-to-income ratio. According to the latest Statistics Canada ﬁgures, Canadians owe roughly $1.74 for every dollar of disposable income. That’s historically high—higher even than the ratio in the U.S. before its mortgage crisis rocked the world economy in 2008. Benjamin Tal, deputy chief economist of CIBC World Markets Inc., has quipped that the ratio gets so much attention as a sign of impending doom that it “probably should be featured in Canada’s citizenship test.”
But Tal also says the debt-to-income ratio doesn’t really tell much of anything useful about how close most Canadians might be to the ﬁnancial edge. The issue isn’t the amount of debt, he says, it’s the amount of “lousy debt.” “And that’s too complicated for a headline,” Tal adds. The really troubling indebtedness just isn’t evenly spread among families. In fact, about eight per cent of indebted Canadians owe at least 350 per cent of their income, putting them on the hook for 20 per cent of all household debt.
Bank of Canada Governor Stephen Poloz says these are the borrowers he’s watching closely, given the risk they pose to “both the ﬁnancial system and the economy.” But politicians on the campaign trail don’t tailor their policies for the most deeply in-the-red families. They are looking at platform ideas that could appeal to lots of voters—especially uncommitted voters in the suburbs of Toronto and Vancouver, where it happens the competition to win dozens of key ridings is very tight, and the houses are very expensive.
So, in the broader affordability debate, the cost of buying a home, especially for the ﬁrst time, is perhaps the hottest topic. Polling by the Angus Reid Institute lists housing affordability fourth among the top issues for uncommitted voters, with 58 per cent of those polled ranking it a top issue for them (about equal to climate change, but well behind health care and government transparency and honesty, which tied as a top concern for around 70 per cent). It’s no surprise, then, that Trudeau and Scheer are touting policies to make it easier to get into the housing market.
The Liberal plan involves expanding the government’s existing First-Time Home Buyer Incentive, which was announced in this year’s federal budget, to cover homes worth up to $789,000—way higher than the current cap of $480,000—in the supercharged real estate markets of Toronto, Vancouver and Victoria. For their part, the Conservatives would stretch the allowed mortgage amortization periods for ﬁrst-time buyers to 30 years from the current 25-year limit, and ease the so-called “stress test,” which keeps buyers who might not be able to handle a hike in interest rates from taking out mortgages.
The Conservative policy flies in the face of the advice Evan Siddall, president of the Canada Mortgage and Housing Corporation, gave MPs on a House committee earlier this year in a letter. “Critics of the stress test ignore the fact that high house prices are the overwhelming reason why home ownership is out of reach,” Siddall wrote. “In fact, the stress test has helped moderate house prices, making home ownership easier.”
Tsur Somerville, a professor of real estate ﬁnance at University of British Columbia’s Sauder School of Business, agrees that the stress test is good policy, especially in hot markets. “The problem in Toronto and Vancouver is that house prices are too high,” Somerville said, “not that people can’t borrow enough.” As for the Liberals’ incentive, he doubts it often means the difference between buying or not. Research into a similar program in Britain, Somerville said, showed it was more likely to allow buyers to afford somewhat bigger or better homes.
So both parties have had trouble devising targeted policies on housing that satisfy the experts. There are plenty more narrowly focused affordability items in their platforms—from a Liberal pledge to somehow work with wireless companies to cut cellphone bills 25 per cent, to the Conservative promises to restore Stephen Harper-era tax credits for transit passes and kids’ art and ﬁtness activities.
And both parties say they’d bring in a broad income-tax cut. The Liberals would raise the so-called basic personal amount, income that’s not taxed, to $15,000 by 2023 from about $12,000 now, but only for those making less than $147,000. The Conservatives would lower the tax rate on income under $47,630 from 15 per cent to 13.75 per cent. These are big-ticket platform items, both sacrificing nearly $6 billion in tax revenue. But they’re not the same. University of Calgary economist Trevor Tombe points out that in single-earner families the basic amount can be claimed by both the working parent and a non-working spouse or a dependent child—doubling the tax benefit. So the Liberal policy ends up being quite a bit more advantageous than the Tory proposal for lower-income families.
The two parties are also going toe-to-toe with competing promises for new parents. The Conservatives promise a non-refundable tax credit of 15 per cent on employment insurance paid to new parents, which Scheer says would be worth about $4,000 at tax-ﬁling time to a parent whose salary is $50,000. The Liberals counter with their own promise to make EI parental leave beneﬁts tax-free to begin with, so nobody has to wait to ﬁle their tax return to see the beneﬁt.
Ottawa MP Pierre Poilievre, who was Scheer’s ﬁnance critic and, before then, a cabinet minister in Stephen Harper’s Conservative government, says the way the Liberals are competing with the Conservatives over affordability amounts to a signiﬁcant win for his party. Back before 2015 election, Poilievre says, Liberals pushed policies like creating more daycare spaces, not providing direct ﬁnancial support or tax cuts for parents.
The turning point, according to Poilievre, was Harper’s introduction of the Universal Child Care Beneﬁt (UCCB)—monthly cheques that went straight to parents. It forced the Liberals to come up with their own alternative. In 2015, they ran on the Canada Child Beneﬁt (CCB)—streamlining a raft of payments to parents, including Harper’s UCCB, into one tax-free program. “They completely performed a reversal in the last election and ran on a Conservative idea,” Poilievre says. “To their credit, they were wise to do so.”
Still, he refuses to engage in a straightforward compare-and-contrast discussion of Conservative promises on affordability and the Liberals’ parallel commitments. He argues that Trudeau pledged in the 2015 campaign to run small deﬁcits for three years, then balance the books, but federal deﬁcits have ballooned much larger with no end in sight. As well, he points out that the Liberals pressed ahead with tax increases, especially for some small businesses, that weren’t in their last platform. “It doesn’t matter what he’s promising now,” Poilievre concludes. “He can’t overcome the fact that his numbers don’t add up. He will have to raise taxes to pay for it all.”
If Poilievre is the insistent, unabashedly partisan voice of small-government Conservative policy, his opposite number is Jean-Yves Duclos, the reticent former Laval University economics professor Trudeau made his families, children and social development minister. Duclos bristles at the suggestion that Liberals did an about-face in 2015, creating the CCB mostly to outdo Harper’s UCCB with even bigger monthly cheques. “I think that’s an incorrect statement,” Duclos says. “If you look at the history of social policy, you will see the origin of the CCB in the Jean Chrétien/Paul Martin years.”
It’s possible to see the history of Canadian child beneﬁts that way. When Chrétien was prime minister in the late 1990s, with Martin as his powerful ﬁnance minister, Ottawa and the provinces worked out a new deal that saw the federal government introduce what was called the Canada Child Tax Beneﬁt. Duclos argues that Trudeau’s CCB is actually rooted in that Chrétien-era innovation. “Unfortunately, the previous government, the Harper government, distorted those roots by introducing all sorts of boutique tax beneﬁts,” he said.
The split over history between Poilievre and Duclos—with each claiming his party deserves the credit for an approach that’s now dominating this fall’s campaign debate—is more than partisan sniping. It highlights a real philosophical split. Poilievre says Canadian taxpayers, parents in particular, want tax cuts and direct payments because they don’t trust government programs to deliver tangible beneﬁts. “Parents want to make their own decisions,” he says.
Duclos argues that even when the Liberals also deliver tax breaks and payments, they design them carefully to work with—not in place of—other government programs. For instance, the CCB pays parents directly, but the Liberals also committed $7.5 billion over 11 years for child care programs, and in the 2019 platform, pledge another $535 million a year to create 250,000 more before- and after-school child care spaces, while cutting the cost of those programs by 10 per cent.
It’s not hard to see a policy link between giving parents more cash while pumping some money into child care programs. Other elements of the Liberals’ affordability pitch to parents can be harder to connect to any coherent strategy. Trudeau’s somewhat vague promise to “work with telecom companies” to bring cellphone costs down 25 per cent looked like a nod to a common source of consumer annoyance. His promise to spend $150 million a year to give 75,000 lower-income families up to $2,000 to go camping for a few days in national or provincial parks was among the odder stand-alone platform novelties of recent memory.
For the Conservatives, too, efforts to link their affordability offers to some bigger policy goals often ring hollow. Scheer framed his promise to restore the transit tax credit partly as a green initiative. “This will decrease congestion, allowing Canadians to get home faster at the end of the workday. It will also help our environment as more Canadians choose public transit.” But that’s not what various experts who studied the transit tax credit under the Harper government found. The federal commissioner of environment and sustainable development said it had a “negligible impact on Canada’s greenhouse gas emissions.”
Sometimes affordability policies within the same platform appear to be working against each other. Scheer promises to remove the federal sales tax from home-heating bills, which the Conservatives say would save Canadians on average more than $100 a year. At the same time, he pledges to introduce a 20 per cent refundable tax credit for energy-efﬁcient home renovations, like installing better windows or new furnaces. The Liberals counter-punched by promising interest-free loans through CMHC for energy-saving home retroﬁts.
With the two big parties trying to outdo each other with parallel commitments to make life more affordable, voters have their work cut out for them trying to decide which menu looks more appetizing. Poilievre and Duclos might be right that, underneath it all, the parties have truly deep philosophical differences about the role of government. On the surface, though, and out on the campaign trail, it’s sounding more like what Trudeau and Scheer signalled from the start of this race. They’ve both been hearing from Canadians worried about getting ahead and making ends meet. Neither thinks he can get elected unless he persuades voters that he’s been listening.
This article appears in print in the November 2019 issue of Maclean’s magazine with the headline, “Show you the money.” Subscribe to the monthly print magazine here.