Armine Yalnizyan is a senior economist with the Canadian Centre for Policy Alternatives
Back in September, Bank of Canada Governor Mark Carney noted that the Harper government’s decision to scrap the mandatory census long-form questionnaire would impact the Bank’s ability to assess how the economy is faring. He left unspoken how that might affect monetary policy.
Alice Nakamura – past president of the Canadian Economics Association and professor of economics in the department of finance and statistical analysis at University of Alberta’s School of Business – recently raised another alarm: Mr. Harper’s census decision affects how the CPI (Consumer Price Index) is measured. She spelled out how that might affect fiscal policy, and more.
The CPI tracks changes in price levels through a weighted index of consumer prices. The reliability of the CPI can be compromised with a) less accurate measurement of consumer spending patterns and b) interference with the independence of Statistics Canada and its pursuit of international best practices, including expert advice on weighting the CPI.
In conversation, Ms. Nakamura noted that simply changing the weights could lead to CPI under-estimating actual inflation. That could help government budgets achieve politically preferred results.
On the revenue side, if personal incomes rise faster than measured CPI, more people get bumped into higher tax brackets. (Tax brackets are indexed to CPI.) That amounts to a tax increase without any discussion in Parliament.
On the expenditure side, CPP and other inflation-adjusted transfers grow more slowly, as do public sector wages and benefits. This holds down government spending below what it would otherwise be.
Lower-than-actual values for CPI would be valuable to the Harper government in other ways too. It would make Canada look good to both foreign and domestic investors who value price stability. It also puts less pressure on the Bank of Canada to raise interest rates.
Ms. Nakamura’s comments were made in passing at a recent gathering of the Ottawa chapter of the Canadian Association of Business Economists (CABE) where econometric pioneer Mike McCracken, founder of Informetrica Limited, received two awards of distinction, one of which was presented by Ms. Nakamura.
Ian Stewart, former Deputy Minister of Finance and one of the first econometricians at the Bank of Canada, and Steve Poloz, newly appointed president and CEO of the Export Development Corporation also addressed the audience of about 100 influential analysts.
They all spoke to the notion of service and the role of economics in providing an evidence base for decision-making, for those governing and those being governed alike. Some took on the census issue directly. (Read more about CABE’s position here.)
In their understated comments, economists on both sides of the political spectrum point to an unsettling truth that goes far beyond the census decision: What’s at stake is the integrity of Statistics Canada and Canada’s official statistics, the lifeblood of economic decision-making from the living rooms to the board rooms of the nation.
Ms. Nakamura cautions that a government that proved itself willing to meddle with the census and the de facto independence of Statistics Canada might have few qualms about fiddling with data-processing choices for other key statistics like the CPI in order to meet short-term political needs.
This most unlikely activist from Alberta thinks it’s high time that Canada’s economists organize and save Statistics Canada, for the good of us all - young and old, left and right, inside and outside government.
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