Premier Scott Moe speaks during a media event at the University of Saskatchewan campus in Saskatoon, Tuesday, June 28, 2022. “Moe money” could add to Saskatchewan’s inflation woes, but it depends on how people spend it, some economists say. This week, Premier Scott Moe announced his Saskatchewan Party government will give $500 checks to 900,000 residents in October as a way to offset rising costs from decades of high inflation. “It smells like politics, and politics will always trump economics, but that doesn’t mean it’s the right thing to do,” said Moshe Lander of Concordia University in Montreal. Lander has seen this move from premiers before — and not just in Quebec, where Premier Francois Legault recently announced another round of $500 checks if the Avenir Québec government is re-elected. He also experienced it as a senior economist working for the Alberta government when former Progressive Conservative premier Ralph Klein announced what would become known as “Ralph bucks.” Everyone in the province got $400 as a way to celebrate high oil prices and paid off debt. “It was clearly an effort to create some kind of legacy for people to remember him by, and here we are 20 years later and we’re still calling them Ralph bucks,” Lander said. “But even my first-year macroeconomics students will know that this is bad fiscal policy.” Lander said the payouts in Saskatchewan — which will total nearly half a billion dollars — are completely inflationary as he predicts people spending their checks on luxury items or going out for a nice dinner. “In Alberta…Brick (furniture store) was running ads saying you don’t even have to have your check in your hand, just come here, spend your $400 and when you get the check, bring it in,” Lander said. The debate ultimately boils down to what’s driving inflation, which stands at 7.6 percent in Canada. If people are saving or paying down debt, the checks won’t be particularly inflationary, said Jaqueline Best, a political studies professor at the University of Ottawa. “If much of the current inflation is due to increased demand for goods and services, then giving people more cash will likely increase that demand further and increase inflation,” Best said in an email. If businesses are raising prices to increase profits, giving people more cash won’t have the same effect on prices, he said. Inflation comes from two sides of the economy: supply and demand. Lander said the supply side is out of the control of governments and the Bank of Canada. “There’s no way to predict a war in Ukraine or droughts and adverse weather affecting food prices or global supply chain challenges related to COVID,” explained Trevor Tombe, an economics professor at the University of Calgary. Lander said the demand side is influenced by consumers, businesses, governments and overseas visitors. “If any of them are more or less happy with their spending for a given amount of supply, that pushes prices up,” he said, noting that it’s like teenagers clamoring to get used Harry Styles concert tickets. The price rises because there is a given amount of supply and demand, Lander said. Vivek Dehejia, an associate professor of economics at Carleton University, said he did not believe cash would be inflationary because food and fuel prices – most affected by inflation – are determined by national and global markets. “The potential inflationary impact is very low at best,” Dehejia said, noting that half a billion dollars is a “drop in the bucket” against Canada’s $2 trillion economy. Peter Dungan, an economics professor at the University of Toronto, agreed. “I wouldn’t consider it contributing to inflation in any serious way, maybe a little bit more in Saskatchewan itself,” he said. Saskatchewan Finance Minister Donna Harpower said economists will disagree about the money’s inflationary potential. “Do I think this one-time (check) will distort inflation in the long run? I don’t.”
