Tag: Politics

Muddling Through or Zombie CUSMA: Five economic scenarios for uncertain times

John Deutsch Institute for the Study of Economic Policy (JDI)

By Christopher Cotton
Jarislowsky-Deutsch Chair in Economic & Financial Policy, Queen’s University
Director of the John Deutsch Institute for the Study of Economic Policy

Last week, I had the pleasure of presenting on the future of the Canadian economy during the 38th Annual Forecast Lunch hosted by the Smith School of Business and the Kingston Economic Development Corporation. This article is Part 2 in a 2-part series summarizing my presentation. Part 1 of this series shows that Canada is facing declining incomes stemming from structural issues beyond current trade woes.

Providing an economic forecast for the next year is an impossible task. At least, it is impossible to do with any degree of legitimate confidence. While some forecasters may get lucky with their guesstimates and claim their accuracy is an indication of brilliance, the reality is that no one knows for sure what the next year holds. The margin of error for 2026 is wider than it has been in decades.

The outlook for 2026 is clouded by three distinct sources of deep structural uncertainty:

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Canadians are getting poorer: The economic crisis runs deeper than trade woes

John Deutsch Institute for the Study of Economic Policy (JDI)

By Christopher Cotton
Jarislowsky-Deutsch Chair in Economic & Financial Policy, Queen’s University
Director of the John Deutsch Institute for the Study of Economic Policy

Last week, I had the pleasure of presenting on the future of the Canadian economy during the 38th Annual Forecast Lunch put on by the Smith School of Business and the Kingston Economic Development Corporation. This article is Part 1 in a 2-part series summarizing my presentation. Part 2 presents five economic scenarios for uncertain times.

On the surface, the Canadian economy appears to be finding its footing. Headline inflation has largely returned to target, interest rates have moderated from their 2024 peaks, and Canada continues to report relatively high GDP growth compared to many of our G7 and OECD peers.

But these positive trends mask deep structural concerns about a country that is struggling to attract investment, retain talent, and improve its standard of living. Layered on top of these domestic challenges is an unprecedented level of economic, political, and international uncertainty, making sustainable growth elusive.

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Interprovincial Trade Barriers: What are they? How costly are they for Canada? And How Can We Address Them?

John Deutsch Institute for the Study of Economic Policy (JDI)

By Daniel Teeter and Christopher Cotton, Queen’s Economics Department

While Canada champions free trade on the international stage, its internal market remains fragmented by a web of provincial regulations, a lack of infrastructure, and other barriers to businesses operating across provincial borders. Our recent JDI Policy Insight article, “Breaking Down Canada’s Internal Trade Barriers,” considers the impediments to within-Canada trade, the costs of these barriers, and summarizes 22 potential reforms and investments that may help alleviate the barriers.

The Cost of Division

The paper underscores a startling reality: interprovincial trade barriers are potentially as costly as a 7% tariff on goods crossing provincial lines, inflating consumer prices by an estimated 7.8% to 14.5%. This artificial inflation stifles competition, hampers innovation, and curtails economic growth. The authors estimate that dismantling these barriers could boost Canada’s GDP by up to $161 billion annually, or an additional $2,300 to $4,000 per Canadian per year. Yet, despite these potential gains, such barriers persist.

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Buying Votes on Credit

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By Peter Shannon, M.A. Economics, Queen’s University

Ontario’s 2018 budget was released March 28, projecting an unanticipated deficit of $6.7 billion for the 2018-19 fiscal year. The 2017 budget projected that Ontario was on track for consecutive balanced budgets and indeed, Ontario ended a 10 year string of deficits with a $642 million surplus in 2016-17. [1] Given the province’s rapid growth and low unemployment in recent years, tighter fiscal policy seemed imminent. However, pre-election promises of free childcare, expanded prescription drug coverage and increased health care spending will push Ontario back into red ink this year. [2]

The political motivations of Ontario’s 2018 budget are clear: with the June 7 election looming, Premier Wynne’s Liberals are attempting to replicate the success of their federal counterparts. Like Justin Trudeau in 2015, the Ontario Liberals are promising to run a series of deficits to expand social programs, with an emphasis on families with young children, seniors, and mental health. [2] Both governments display a shift in focus from net debt levels to debt-to-GDP ratios as a measure of sustainability.

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Campaign finance reform and the market for access

John Deutsch Institute for the Study of Economic Policy (JDI)

img_0928By Christopher Cotton, Queen’s University

Earlier this year, the government of Ontario was involved in a campaign finance scandal, accused of selling access to ministers in exchange for campaign donations. Most people see the exchange of contributions for access to politicians as obvious evidence of corruption. But, this view is too simple. Much of my academic research has focused on how special interests influence policy making. This research has led to a number of insights.Read More »

Campaign finance reform not enough: More public research funding also needed

John Deutsch Institute for the Study of Economic Policy (JDI)

Even when one takes the most optimistic view of interest groups and lobbying, their participation in the policy making process can lead to worse policy. This doesn’t mean that campaign finance reform is not worthwhile. Just that it may not go far enough to eliminate the biases in favor of interest groups. We shouldn’t fool ourselves. Although removing private money from elections will help, it isn’t enough to fully eliminate the disproportionate influence of rich and powerful special interests on policy making. 

By Christopher Cotton, Queen’s University
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Be scared of politicians who refuse to disclose information

John Deutsch Institute for the Study of Economic Policy (JDI)

Game theory makes a clear prediction about when people will disclose information, and when they will keep it hidden. The prediction: they will disclose their information when it is better than others expect, and they will refuse to do so only when it is worse than expected. Game theory says that Clinton will choose not to release her speeches, and Trump will choose not to make public his recorded conversations or tax returns, only if they are worse than their voters anticipate.

By Christopher Cotton, Queen’s University
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How long campaigns can make candidates more extreme

John Deutsch Institute for the Study of Economic Policy (JDI)

By Christopher Cotton, Queen’s University

An except from an article published in The Washington Post.

As the 2016 U.S. presidential hopefuls begin announcing their candidacies, Americans are readying themselves for more than a year and a half of political campaigning.  That’s a long time. Long enough to perhaps cost $5 billion.

There are benefits to a long campaign season. As Calvin Coolidge said, “The purpose of a campaign is to send an intelligent and informed voter to the ballot box.” Campaigns may help inform voters and enable them to develop more accurate assessments of the candidates. Long campaigns have the potential to do this even more effectively.

But there is also a downside. In a new article (ungated here) Raphael Boleslavsky and I show that informative campaigns can also decrease the incentives for candidates to moderate their views. In other words, more informative campaigns encourage polarization between politicians, which tends to make voters worse off.

Keep reading at The Washington Post

How corporate money will reshape politics: Help for challengers

John Deutsch Institute for the Study of Economic Policy (JDI)

By Christopher Cotton (Queen’s University)

Critics of the court’s decision in Citizens United say that deep-pocketed interests (the oil, electricity, and telecommunications businesses, for example) have been given a dangerous level of influence over election outcomes. It is true that the absence of spending limits increases the likelihood of politicians accepting campaign funding for policy favors. But the overall impact may be less harmful than critics fear.

Continue reading the original article at The New York Times