The problem with attacking the rising cost of living is that it always fights back.
It happened this week when the federal Conservatives made an election promise to trim the rate on the lowest tax bracket. The party said individual taxpayers would save as much as $440 per year in taxes, which is just about how much extra someone might end up paying if gas prices surged and stayed higher as a result of the drone attack on Saudi Arabia’s oil fields.
Crude oil prices jumped 15 per cent as financial markets initially considered how the attack might affect the global energy supply. If you apply that rate of increase to the average $1.14-per-litre Canadian gasoline price as per Gasbuddy.com as of Monday, you get an annualized price increase of $444.60 for a driver who burns 50 litres of gas per week.
The Liberals announced a plan last week to make housing more affordable through improvements to the First-Time Home Buyer Incentive. In the background, house prices are rising enough to reduce the effectiveness of any program aimed at making it cheaper to buy and own a home.
When national home sales figures for August were released earlier this week, the average price was up 3.9 per cent on a year-over-year basis to $493,448. That could result in more than $900 in extra annual mortgage costs, assuming you bought with 10 per cent down and you received a well-discounted five-year fixed-rate mortgage.
The NDP proposes putting a cap on cellphone and internet bills that would save families almost $250 per year. A family’s grocery bill would only have to rise just $5 a week to offset that savings.
As it happens, the latest inflation report from Statistics Canada shows food prices climbed 3.6 per cent in August over the same month of 2018. For a household that spent $140 per week on groceries 12 months ago, food inflation has worked out to an extra $5 or so per week.
Politicians can get elected by promising to help people fight the rising cost of living, but can they get re-elected? Real life has a way of absorbing affordability measures introduced by government and leaving little trace of them in the minds of voters.
The Liberals’ Canada Child Benefit, a key plank in the party’s 2015 election campaign, offers a maximum annual $6,639 per child under age 6 and up to $5,602 per child aged 6 to 17 on a tax-free basis. The program has had an impact – it has been linked to a significant drop in child poverty in Canada. Yet surveys done in the workplace consistently show that money remains a top source of anxiety today at the household level.
Sample: The actuarial and consulting firm Eckler reported earlier this month that 32 per cent of participants in its latest national survey on financial wellness felt a high degree of stress about their finances, and 54 per cent felt some degree of stress.
This feeling of unease about money helps explain why helping to make everyday life more affordable has been the focus of the federal election campaign so far. This isn’t a contrived storyline – people are feeling overwhelmed by the cost of living, and they want help.
A question we should be asking in this election campaign is why past tax breaks and programs to help parents and home buyers haven’t delivered financial security to Canadians. There are a few themes to discuss here – global economic trends that have suppressed growth and will probably continue to do so for a while yet, weak income growth in recent years and non-stop accumulation of household debt.
Will more tax breaks and programs to help parents and home buyers help turn things around? The federal parties certainly act like it. We’re even seeing a kind of greatest hits package of previous tax breaks – for example, the Conservatives’ vow to revive tax credits for the cost of children’s fitness and arts programs as well as public transit passes.
Enjoy any bump in income you get from programs like these, because it will almost certainly be temporary. All it takes is a flare-up in the Middle East or a rise in home prices. You know, stuff that’s happening as we speak.
PERSONAL FINANCE COLUMNIST
The Globe and Mail, September 18, 2019