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Prime minister rejects ‘austerity’ despite massive debt and dismal economic growth

Published

3 months ago

5 minute read

From the Fraser Institute

By Grady Munro and Jake Fuss

Adjusting for population growth and inflation, the Trudeau government has recorded the five-highest years (2018-2022) of per-person spending in Canadian history, and is on track to record a sixth.

This week, at the Liberal cabinet retreat in Montreal, Prime Minister Justin Trudeau told reporters he’s against “austerity and cuts” and believes his government must “invest” to “create greater growth” in the economy, thus dashing hopes for any meaningful spending restraint in the upcoming federal budget.

But evidence shows the government’s current plan has not helped the economy despite the prime minister’s claims. Rather than double-down on a failed strategy of higher spending, taxes and borrowing, the Trudeau government should change direction immediately.

Let’s look at the evidence.

According to its latest fiscal projections, the federal government will spend $449.8 billion on programs and services in 2023/24—up 75.5 per cent (nominally) from 2014/15 when program spending was $256.2 billion. Adjusting for population growth and inflation, the Trudeau government has recorded the five-highest years (2018-2022) of per-person spending in Canadian history, and is on track to record a sixth. But have we seen a corresponding increase in economic growth?

No, in fact Canada has experienced an economic growth crisis for the last decade.

One of the best ways to measure economic growth is to use inflation-adjusted per-person gross domestic product (GDP), which provides the broadest measure of living standards for Canadians. According to a recent study by Philip Cross, former chief economic analyst at Statistics Canada, between 2013 and 2022 Canada’s per-person GDP (inflation-adjusted) grew at its slowest pace since the 1930s. Moreover, economic growth in Canada has fallen well behind growth in the United States, showing that Canada’s stagnation was not inevitable.

And there’s little room for optimism. According to OECD estimates, Canada will have the slowest growth in per-person GDP among advanced economies from 2020 to 2030 and 2030 to 2060.

Simply put, the data show that increased government spending has not produced greater prosperity for Canadians.

Indeed, rather than “invest” in Canadians, the Trudeau government has burdened Canadians with mountains of debt. The Trudeau government has yet to balance the budget, despite campaign promises, and this year will likely run its ninth consecutive deficit. Nearly a decade of uninterrupted deficits has increased the federal debt by $941.9 billion. This not only imposes costs on Canadians today—primarily through higher debt interest costs—but also increases the tax burden on future generations who are ultimately responsible for paying off today’s debt.

If the Trudeau government needs a blueprint for reform, it can find it within its own party, which has a history of spending reductions and strong economic growth.

During the mid-1990s, the Chrétien Liberal government introduced meaningful spending reductions that ultimately balanced the federal budget in 1997, marking the first federal budget surplus in nearly 30 years. In addition to spending reductions, the Chrétien government also introduced tax relief and other growth-enhancing policies. And the results were immediate.

Between 1997 and 2007, Canada’s average annual increase in per-person GDP (inflation-adjusted) was 2.2 per cent, which was higher than the OECD average. During the same time period, Canada’s average rate of employment growth was nearly double the average in the OECD and the United States. And the national poverty rate fell from 7.8 per cent in 1996 to 4.9 per cent in 2004. Overall, the Canadian economy outperformed many other industrialized economies during this time and living standards improved for Canadians—despite reductions in government spending.

Despite claims by Prime Minister Trudeau, less government spending (not more) is necessary to help reverse the trend of stagnant economic growth. The Trudeau government should recognize that the current plan isn’t working and change course in its upcoming budget.

Authors:

Grady Munro
Policy Analyst, Fraser Institute
Jake Fuss
Director, Fiscal Studies, Fraser Institute
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Business

When politicians gamble, taxpayers lose

Published on May 2, 2024

By

From the Canadian Taxpayers Federation

Author: Jay Goldberg

Trudeau and Ford bragged about how a $5 billion giveaway to Honda is going to generate 1,000 jobs. In case you’re thinking of doing the math, that’s $5 million per job.

Politicians are rolling the dice on the electric vehicle industry with your money.

If they bet wrong, and there’s a good chance they have, hardworking Canadians will be left holding the bag.

Prime Minister Justin Trudeau and Premier Doug Ford announced a $5-billion agreement with Honda, giving another Fortune 500 automaker a huge wad of taxpayer cash.

Then Trudeau released a video on social media bragging about “betting big” on the electric vehicle industry in Canada. The “betting” part of Trudeau’s statement tells you everything you need to know about why this is a big mistake.

Governments should never “bet” with taxpayer money. That’s the reality of corporate welfare: when governments give taxpayer money to corporations with few strings attached, everyday Canadians are left hoping and praying that politicians put the chips on the right numbers.

And these are huge bets.

When Trudeau and Ford announced this latest giveaway to Honda, the amount of taxpayer cash promised to the electric vehicle sector reached $57 billion. That’s more than the federal government plans to spend on health care this year.

Governments should never gamble with taxpayer money and there are at least three key reasons why this Honda deal is a mistake.

First, governments haven’t even proven themselves capable of tracking how many jobs are created through their corporate welfare schemes.

Trudeau and Ford bragged about how a $5 billion giveaway to Honda is going to generate 1,000 jobs. In case you’re thinking of doing the math, that’s $5 million per job.

Five million dollars per job is already outrageous. But some recent reporting from the Globe and Mail shows why corporate welfare in general is a terrible idea.

The feds don’t even have a proper mechanism for verifying if jobs are actually created after handing corporations buckets of taxpayer cash. So, while 1,000 jobs are promised through the Honda deal, the government isn’t capable of confirming whether those measly 1,000 jobs will materialize.

Second, betting on the electric vehicle industry comes with risk.

Trudeau and Ford gave the Ford Motor Company nearly $600 million to retool a plant in Oakville to build electric cars instead of gasoline powered ones back in 2020. But just weeks ago, Ford announced plans to delay the conversion for another three years, citing slumping electric vehicle sales.

Look into Ford’s quarterly reports and the danger of betting on electric vehicles becomes clear as day: Ford’s EV branch lost $1.3 billion in the first quarter of 2024. Reports also show Ford lost $130,000 on every electric vehicle sold.

The decline of electric vehicle demand isn’t limited to Ford. In the United States, electric vehicle sales fell by 7.3 per cent between the last quarter of 2023 and the first quarter of 2024.

Even Tesla’s sales were down 13 per cent in the first quarter of this year compared to the first quarter of 2023.

A Bloomberg headline from early April read “Tesla’s sales miss by the most ever in brutal blow for EVs.”

There’s certainly a risk in betting on electric vehicles right now.

Third, there’s the question of opportunity cost. Imagine what else our governments could be doing with $57 billion?

For about the same amount of money, the federal government could suspend the federal sales tax for an entire year. The feds could also use $57 billion to double health-care spending or build 57 new hospitals.

The solution for creating jobs isn’t to hand a select few companies buckets of cash just to lure them to Canada. Politicians should be focusing on creating the right environment for any company, large or small, to grow without a government handout.

To do that, Canada must be more competitive with lower business taxes, less red tape and more affordable energy. That’s a real recipe for success that doesn’t involve gambling with taxpayer cash.

It’s time for our politicians to kick their corporate welfare addiction. Until they do, Canadians will be left paying the price.

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Business

WEF panelist suggests COVID response accustomed people to the idea of CBDCs

Published on May 1, 2024

By

Central Bank of Bahrain governor Khalid Humaidan

From LifeSiteNews

By Tim Hinchliffe

When asked how he would convince people that CBDCs would be a trusted medium of exchange, Bahrain’s central bank governor said that COVID made the digital transformation ‘something of a requirement’ that had ‘very little resistance.’

Central bank digital currencies (CBDCs) will hopefully replace physical cash and become fully digital, a central banker tells the World Economic Forum (WEF).

Speaking at the WEF Special Meeting on Global Collaboration, Growth and Energy Development on Sunday, Central Bank of Bahrain governor Khalid Humaidan told the panel “Open Forum: The Digital Currencies’ Opportunity in the Middle East” that one of the goals of CBDC was to replace cash, at least in Bahrain, and to go “one hundred percent digital.”

Humaidan likened physical cash to being an antiquated “analogue” technology and that CBDC was the digital solution that would hopefully replace cash:

“I thank this panel and this opportunity. It forced me to refine my thoughts and opinions where I’m at a place comfortably now that I’m ready to verbalize what I think about CBDC,” said Humaidan.

If we think cash is the analogue and digital currency is the form of digital – CBDC is the digital form of cash – today, clearly we’re in a hybrid situation; we’re using both.

We know in the past when it comes to cash, central bankers were very much in control with all aspects of cash, and now we’re comfortable to the point where the private sector plays a big role in the printing of the cash, in the distribution of the cash, and with the private sector we use interest rates to manage the supply of cash.

The same thing is likely to happen with CBDC. Yes, the central bank will have a role, but at some point in time – the same way we don’t call it ‘central bank cash’ – we’re probably going to stop calling it central bank digital currency.

“It’s going to be a digital form of the cash, and at some point in time hopefully we will be able to be one hundred percent digital,” he added.

When asked how he would convince people that CBDC would be a trusted medium of exchange, Bahrain’s central bank governor said that people were already used to it and that COVID made the digital transformation “necessary” and “something of a requirement” that had “very little resistance.”

“Right now, many of our payments are digital. The truth is, I said that we’re in a hybrid model; there’s less and less use of cash,” said Humaidan.

I think from predominantly digital with a little physical, I think the transition to fully digital is not going to be a stretch.

People are used to it, people have engaged in it and certain circumstances did help. Its adoption rates increased because of COVID.

“This is where contactless started to become something of a necessity, something of safety, something of a requirement, and because of that there is very little resistance; trust is already there,” he added.

Meanwhile, European Central Bank president Christine Lagarde has been going around the world telling people that the digital euro CBDC would not eliminate cash, and that cash would always be an option.

Speaking at the Bank for International Settlements (BIS) Innovation Summit in March 2023, Lagarde said that a digital currency will never be as anonymous as cash, and for that reason, cash will always be around.

“Is it [digital euro] going to be as private as cash? No,” she said.

A digital currency will never be as anonymous and as protecting of privacy in many respects as cash, which is why cash will always be around.

If people want to use cash in some countries or in some transactions, cash should be available.

“A digital currency is an alternative, is another means of payment and will not provide exactly the same level of privacy and anonymity as cash, but will be pretty close in terms of complete neutrality in relation to the data,” she added.

A WEF Agenda blog post from September, 2017, lists the “gradual obsolescence of paper currency” as being “characteristic of a well-designed CBDC.”

Last year at the WEF’s 14th Annual Meeting of the New Champions, aka “Summer Davos,” in Tianjing, China, Cornell University professor Eswar Prasad said that “we are at the cusp of physical currency essentially disappearing,” and that programmable CBDCs could take us to either a better or much darker place.

“If you think about the benefits of digital money, there are huge potential gains,” said Prasad, adding, “It’s not just about digital forms of digital currency; you can have programmability – units of central bank currency with expiry dates.

You could have […] a potentially better – or some people might say a darker world – where the government decides that units of central bank money can be used to purchase some things, but not other things that it deems less desirable like say ammunition, or drugs, or pornography, or something of the sort, and that is very powerful in terms of the use of a CBDC, and I think also extremely dangerous to central banks.

The WEF’s Special Meeting on Global Collaboration, Growth and Energy Development took place from April 27-29 in Riyadh, Saudi Arabia.

“Saudi Arabia’s absolute monarchy restricts almost all political rights and civil liberties,” according to D.C.-based NGO Freedom House.

In the kingdom, “No officials at the national level are elected,” and “the regime relies on pervasive surveillance, the criminalization of dissent, appeals to sectarianism and ethnicity, and public spending supported by oil revenues to maintain power.”

Reprinted with permission from The Sociable.

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