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It is a measure of the interventionist and anti-business reflex of this Cabinet that Morneau could be thought of as one of its few representatives of the business community
Recent leaks from the PMO about Trudeau and Morneau’s springtime sparring over excessive spending put Morneau’s choice of Macklem in a different light. Knowing he was on thin ice with the free spenders, Morneau installed a governor who will be accommodative with monetary policy while the crisis persists but will not keep interest rates low just to bail the government out of a fiscal mess of its own making. Over time, choosing Macklem may prove Morneau’s most important move, the one time he was able to effectively put fiscal shackles on his profligate colleagues, whose ignorance of economics prevented their understanding the importance of what was happening.
What is crucial now is whether new Finance Minister Chrystia Freeland attempts to change the government’s stance towards business or deficits. Freeland will have more clout within Cabinet, having become indispensable after taking on the difficult tasks of negotiating trade deals with both the EU and the Trump administration and then addressing Western Canada alienation. As a result, she is in a position to choose to say no to her free-spending colleagues, including even the prime minister, which is a must for any finance minister. Freeland faces the daunting task of encouraging the recovery of Canada’s shuttered economy while lowering its suddenly voluminous debt, all with no prospect of being bailed-out by the Bank of Canada.
Philip Cross is a senior fellow at the Macdonald-Laurier Institute.