Justin Trudeau tries to find a cure for ‘inflationitis’

If the political and public policy challenges posed by inflation were easy to overcome, more governments would have done so by now. Recent elections have shown the current moment to be, in the words of the Financial Times’ John Burn-Murdoch, “arguably the most hostile environment in history for incumbent parties and politicians across the developed world.”

Inflation may not be the sole reason for the defeats incumbents have suffered over the past year, but it seems to be a significant common denominator. David Coletto, the pollster at Abacus Data, has coined the term “inflationitis” to describe the frustrations and anxiety caused by higher prices. Coletto believes that political leaders need to respond with empathy and transparency, acknowledging the real struggles people are facing.

Their actions must provide immediate, practical, and universal relief, according to Coletto. Measures like tax cuts, direct payments, rebates, price controls, or reducing fees on essential services can signal to voters that their governments understand their concerns.

Prime Minister Justin Trudeau and Finance Minister Chrystia Freeland recently announced a two-month pause in federal sales tax on a number of household goods. Additionally, they plan to send $250 cheques to 18.7 million Canadians in the spring. Trudeau emphasized that these measures are meant to help people who are feeling squeezed by rising prices.

Conservative Leader Pierre Poilievre criticized Trudeau’s announcement as a “temporary tax trick” motivated by political self-interest. He argued that repealing the federal carbon tax would be a better solution, ignoring the fact that the revenue generated by the carbon tax is rebated to households.

NDP Leader Jagmeet Singh also expressed disappointment in the temporary nature of the sales tax exemption and its limited coverage. However, the announcement seems to have cleared the way for a temporary break in the Conservative filibuster that has tied up the House of Commons for nearly two months.

The cost of these measures is significant, with the GST pause reducing federal revenue by $1.7 billion and the $250 cheques costing approximately $4.7 billion. Questions have been raised about whether these resources could be better targeted at those who need the most help.

While immediate relief is important, addressing inflationitis requires more than just short-term solutions. Coletto argues that governments must also communicate a long-term plan to restore economic stability and address the scarcity mindset. This involves reassuring the public that their concerns are heard and that there is a path forward where everyone can thrive.

The break on the GST and the $250 cheques may not restore economic stability, but they could buy the Liberals some room to address the broader issues at hand. As they navigate the challenges posed by inflation and work towards rebuilding a stable and fair economy, effective communication and long-term planning will be key to winning back public trust and support.