From the Fraser Institute

By Jake Fuss and Grady Munro

Per-person federal spending is expected to equal $11,901 this year. To put this into perspective, this is significantly more than Ottawa spent during the global financial crisis in 2008 or either world war.

The Trudeau government tabled its 2024 budget earlier this month and the contents of the fiscal plan laid bare the alarming state of federal finances. Both spending and debt per person are at or near record highs and prospects for the future don’t appear any brighter.

In the budget, the Trudeau government outlined plans for federal finances over the next five years. Annual program spending (total spending minus debt interest costs) will reach a projected $483. billion in 2024/25, $498.7 billion in 2025/26, and continue growing in the years following. By 2028/29 the government plans to spend $542.0 billion on programs—an 18.4 per cent increase from current levels.

This is not a new or surprising development for federal finances. Since taking office in 2015, the Trudeau government has shown a proclivity to spend at nearly every turn. Prime Minister Trudeau has already recorded the five highest levels of federal program spending per person (adjusted for inflation) in Canadian history from 2018 to 2022. Projections for spending in the 2024 budget assert the prime minister is now on track to have the eight highest years of per-person spending on record by the end of the 2025/26 fiscal year.

Per-person federal spending is expected to equal $11,901 this year. To put this into perspective, this is significantly more than Ottawa spent during the global financial crisis in 2008 or either world war. It’s also about 28.0 per cent higher than the full final year of Stephen Harper’s time as prime minister, meaning the size of the federal government has expanded by more than one quarter in a decade.

The government has chosen to borrow substantial sums of money to fund a lot of this marked growth in spending. Federal debt under the Trudeau government has risen before, during and after COVID regardless of whether the economy is performing relatively well or comparatively poor. Between 2015 and 2024, Ottawa is expected to run 10 consecutive deficits, with total gross debt set to reach $2.1 trillion within the next 12 months.

The scale of recent debt accumulation is eye-popping even after accounting for a growing population and the relatively high inflation of the past two years. By the end of the current fiscal year, each Canadian will be burdened with $12,769 more in total federal debt (adjusted for inflation) than they were in 2014/15.

You can attribute some of this increase in borrowing to the effects of COVID, but debt had already grown by $2,954 per person from 2014 to 2019—before the pandemic. Moreover, budget estimates show gross debt per person (adjusted for inflation) is expected to rise by more than $2,500 by 2028/29.

As with spending, the Trudeau government is on track to record the six highest years of federal debt per-person (adjusted for inflation) in Canadian history between 2020/21 and the end of its term next autumn. Why should Canadians care about this record debt?

Simply put, rising debt leads to higher interest payments that current and future generations of taxpayers must pay—leaving less money for important priorities such as health care and social services. Moreover, all this spending and debt hasn’t helped improve living standards for Canadians. Canada’s GDP per person—a broad measure of incomes—was lower at the end of 2023 than it was nearly a decade ago in 2014.

The Trudeau government’s track record with federal finances is one for the history books. Ottawa’s spending continues to be at near-record levels and Canadians have never been burdened with more debt. Those aren’t the type of records we should strive to achieve.

From the Fraser Institute

By Jake Fuss and Tegan Hill

If Honda, Volkswagen and Stellantis are unwilling to build their EV battery plants in Ontario without corporate welfare, that sends a strong signal that those projects make little economic sense.

On Thursday, the Trudeau and Ford governments announced they will dole out an estimated $5 billion in corporate welfare to Honda so the auto giant can build an electric vehicle (EV) battery plant and manufacture EVs in Ontario. This is the third such deal in Ontario, following similar corporate welfare handouts to Volkswagen ($13.2 billion) and Stellantis ($15.0 billion). Like the previous two deals, the Honda deal comes at a significant cost to taxpayers and will almost certainly fail to create widespread economic benefits for Ontarians.

The Trudeau and Ford governments finalized the Honda deal after more than a year of negotiations, with both governments promising direct incentives and tax credits. Of course, this isn’t free money. Taxpayers in Ontario and the rest of Canada will pay for this corporate welfare through their taxes.

Unfortunately, corporate welfare is nothing new. Governments in Canada have a long history of picking their favoured firms or industries and using a wide range of subsidies and other incentives to benefit those firms or industries selected for preferential treatment.

According to a recent study, the federal government spent $84.6 billion (adjusted for inflation) on business subsidies from 2007 to 2019 (the last pre-COVID year). Over the same period, provincial and local governments spent another $302.9 billion on business subsidies for their favoured firms and industries. (Notably, the study excludes other forms of government support such as loan guarantees, direct investments and regulatory privileges, so the total cost of corporate welfare during this period is actually much higher.)

Of course, when announcing the Honda deal, the Trudeau and Ford governments attempted to sell this latest example of corporate welfare as a way to create jobs. In reality, however, there’s little to no empirical evidence that corporate welfare creates jobs (on net) or produces widespread economic benefits.

Instead, these governments are simply picking winners and losers, shifting jobs and investment away from other firms and industries and circumventing the preferences of consumers and investors. If Honda, Volkswagen and Stellantis are unwilling to build their EV battery plants in Ontario without corporate welfare, that sends a strong signal that those projects make little economic sense.

Unfortunately, the Trudeau and Ford governments believe they know better than investors and entrepreneurs, so they’re using taxpayer money to allocate scarce resources—including labour—to their favoured projects and industries. Again, corporate welfare actually hinders economic growth, which Ontario and Canada desperately need, and often fails to produce jobs that would not otherwise have been created, while also requiring financial support from taxpayers.

It’s only a matter of time before other automakers ask for similar handouts from Ontario and the federal government. Indeed, after Volkswagen secured billions in federal subsidies, Stellantis stopped construction of an EV battery plant in Windsor until it received similar subsidies from the Trudeau government. Call it copycat corporate welfare.

Government handouts to corporations do not pave the path to economic success in Canada. To help foster widespread prosperity, governments should help create an environment where all businesses can succeed, rather than picking winners and losers on the backs of taxpayers.