Emergencies Act’s freezing of bank accounts reflects wider mess at Finance Canada

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Jon Hartley is a PhD student in economics at Stanford University and a research fellow at the Foundation for Research on Equal Opportunity.

Justice Paul Rouleau’s new report says the federal government was justified in its overall use of the Emergencies Act last year, but many of its individual actions remain questionable. We must not forget the most egregious part of the invocation of that legislation: freezing the bank accounts of Parliament Hill protesters.

That policy reflects a long string of incompetent economic decisions by Prime Minister Justin Trudeau’s government. This includes continued deficit spending in a highly inflationary environment and Finance Canada ending the issuance inflation-indexed bonds – a great inflation-hedging instrument for pension funds and indicator of forward-looking inflation expectations.

While Bill Morneau’s tenure as finance minister was marked with controversy ending in being scapegoated for the WE Charity scandal, Chrystia Freeland has continued such a legacy – and is now doubling down with new spending proposals for clean energy and health care, all while inflation sits at 5.9 per cent as of January.

Underscoring all of Finance Canada’s actions has been an increased centralization of economic planning: top-down decision making from politicians seemingly unaware or unmoved by how everything can ripple and escalate. Which brings us to what happened in February, 2022.

Freezing bank accounts of political enemies, the so-called “fringe minority” in Mr. Trudeau’s words, without due process, was easily the worst offence in the entire saga. Confiscating access to private property was completely unnecessary to ending blockades of bridges and public streets.

The Rouleau report endorsed the heinous act of freezing of bank accounts of peaceful protesters without due process, but said with some caveat that there should have been a “delisting mechanism” to unfreeze the accounts of those who subsequently left the demonstrations.

Even if there was such a mechanism, however, it is still reprehensible. It implies Ottawa should have some level of omniscient surveillance on Canadians – knowing at all times whether someone is physically present at a protest or not – and that the government should have the whimsical ability to shut off access to bank accounts. Such a proposed mechanism has eerie similarities with China’s policy to prevent travel to certain areas of the country based on social credit.

As centuries of experience indicates, increased centralization of economic planning rarely leads to better outcomes. But that’s the policy choice and theme that the Trudeau government has clearly made in its economic policy framework.

Increasing government spending while inflation remains high is hardly prudent. Increasing public funding for carbon-capture projects in order to compete with U.S. green subsidies recently passed in the Inflation Reduction Act seems to be overkill for a Canadian economy that already has a carbon price of $65 per tonne, which is only set to increase in future years (Canada carbon emissions have also started to plateau like many countries in the advanced economy world).

Proposals to further increase in federal health payments to provinces also are incredibly poorly timed given the inflationary environment, as broken as the Canadian health care system may be at present.

These are all disparate, complex economic issues. But behind them all is the same type of poor decision-making that Finance Canada showed last winter.

The best path for Ms. Freeland to right the Canadian economic policy ship would be to resist demands for more deficit spending to help keep inflation falling toward a sustainable path of 2 per cent, to start issuing real return bonds again (allowing the public to have its essential inflation-hedging tool back) and to admit that freezing bank accounts was a very regrettable course of action.