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Federal government clearly misstates its economic record

Published

2 years ago

4 minute read

From the Fraser Institute

By Jock Finlayson

“since 2015 Canada has posted some of the weakest economic growth numbers, measured on a per-person basis, in half a century”

“Denominator blindness” refers to situations where people fail to put what seem to be big numbers into proper context. The affliction is especially common among governments seeking to justify their spending and other policy decisions. In Canada, denominator blindness has become a central feature of the narratives peddled by many politicians.

For example, the Trudeau government’s recent economic update, which includes a forward by Finance Minister Chrystia Freeland where she notes that the International Monetary Fund expects Canada to have “the strongest economic growth in the G7 next year.” She also insists her government is fostering economic growth that “creates middle class jobs, raises incomes, and makes middle class communities more prosperous.”

Both claims lack context and misstate the government’s economic record.

Prosperity is measured using both a numerator, typically the amount of output the economy produces in a year, and a denominator, the size of the population. A larger population means the economic pie must be divided into more slices to estimate how much “output” is available to the average resident. With a rapidly expanding population, the economy must generate a lot more output merely to stop the individual pie slices from shrinking.

Minister Freeland is correct that Canada’s economy has been growing, both since the worst of the COVID shock in late-2020/early-2021 and over the period when the Trudeau government has been in power. But she ignores the bigger picture, which shows two important things.

First, since 2015 Canada has posted some of the weakest economic growth numbers, measured on a per-person basis, in half a century. The pattern of feeble economic growth was evident before the onset of COVID.

Second, Canada is among the few advanced economies where output or gross domestic product (GDP) per person in 2023 has still not returned to pre-pandemic levels. In part, this reflects surging population growth, which affects the denominator that helps determine whether economic growth is producing gains in average incomes and living standards. In Canada’s case, modest economic growth combined with a skyrocketing population has resulted in a multi-year decline in per-person income and erosion of overall prosperity. Adjusted for inflation, GDP per person is still 2 per cent lower than in 2019.

Denominator blindness also characterizes recent attempts by the federal, Ontario and Quebec governments to explain why they’re allocating up to $50 billion in subsidies and tax incentives to lure a handful of electric vehicle battery manufacturers to Canada. The politicians making these decisions point to the several thousand jobs the EV manufacturing facilities will support once they are fully operational. But they won’t discuss how this fits within the larger job market.

Total employment in Canada is 20.1 million, with almost 1.8 million jobs in manufacturing. The vast sums being thrown at EV battery manufacturers will have essentially no impact on the aggregate job numbers and barely make a ripple, even in the manufacturing sector. Moreover, not all the promised EV jobs will be “new” positions—many workers attracted to the EV industry will likely be drawn from other businesses, worsening skill shortages that are plaguing Canadian manufacturers.

Perhaps aspiring politicians should be required to study the basic arithmetic of fractions before they run for office.

Author:

Jock Finlayson
Senior Fellow, Fraser Institute
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Over two thirds of Canadians say Ottawa should reduce size of federal bureaucracy

Published on October 15, 2025

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From the Fraser Institute

By Matthew Lau

From 2015 to 2024, headcount at Natural Resources Canada increased 39 per cent even though employment in Canada’s natural resources sector actually fell one per cent. Similarly, there was 382 per cent headcount growth at the federal department for Women and Gender Equality—obviously far higher than the actual growth in Canada’s female population.

According to a recent poll, there’s widespread support among Canadians for reducing the size of the federal bureaucracy. The support extends across the political spectrum. Among the political right, 82.8 per cent agree to reduce the federal bureaucracy compared to only 5.8 per cent who disagree (with the balance neither agreeing nor disagreeing); among political moderates 68.4 per cent agree and only 10.0 per cent disagree; and among the political left 44.8 per cent agree and 26.3 per cent disagree.

Taken together, “67 per cent agreed the federal bureaucracy should be significantly reduced. Only 12 per cent disagreed.” These results shouldn’t be surprising. The federal bureaucracy is ripe for cuts. From 2015 to 2024, the federal government added more than 110,000 new bureaucrats, a 43 per cent increase, which was nearly triple the rate of population growth.

This bureaucratic expansion was totally unjustified. From 2015 to 2024, headcount at Natural Resources Canada increased 39 per cent even though employment in Canada’s natural resources sector actually fell one per cent. Similarly, there was 382 per cent headcount growth at the federal department for Women and Gender Equality—obviously far higher than the actual growth in Canada’s female population. And there are many similar examples.

While in 2025 the number of federal public service jobs fell by three per cent, the cost of the federal bureaucracy actually increased as the number of fulltime equivalents, which accounts for whether those jobs were fulltime or part-time, went up. With the tax burden created by the federal bureaucracy rising so significantly in the past decade, it’s no wonder Canadians overwhelmingly support its reduction.

Another interesting poll result: “While 42 per cent of those surveyed supported the government using artificial intelligence tools to resolve bottlenecks in service delivery, 32 per cent opposed it, with 25 per cent on the fence.” The authors of the poll say the “plurality in favour is surprising, given the novelty of the technology.”

Yet if 67 per cent of Canadians agree with significantly shrinking the federal bureaucracy, then solid support for using AI to increasing efficiency should not be too surprising, even if the technology is relatively new. Separate research finds 58 per cent of Canadian workers say they use AI tools provided by their workplace, and although many of them do not necessarily use AI regularly, of those who report using AI the majority say it improves their productivity.

In fact, there’s massive potential for the government to leverage AI to increase efficiency and control labour expenses. According to a recent study by a think-tank at Toronto Metropolitan University (formerly known as Ryerson), while the federal public service and the overall Canadian workforce are similar in terms of the percentage of roles that could be made more productive by AI, federal employees were twice as likely (58 per cent versus 29 per cent) to have jobs “comprised of tasks that are more likely to be substituted or replaced” by AI.

The opportunity to improve public service efficiency and deliver massive savings to taxpayers is clearly there. However, whether the Carney government will take advantage of this opportunity is questionable. Unlike private businesses, which must continuously innovate and improve operational efficiency to compete in a free market, federal bureaucracies face no competition. As a result, there’s little pressure or incentive to reduce costs and increase efficiency, whether through AI or other process or organizational improvements.

In its upcoming budget and beyond, it would be a shame if the federal government does not, through AI or other changes, restrain the cost of its workforce. Taxpayers deserve, and clearly demand, a break from this ever-increasing burden.

Matthew Lau

Adjunct Scholar, Fraser Institute
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Former Trump Advisor Says US Must Stop UN ‘Net Zero’ Climate Tax On American Ships

Published on October 15, 2025

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From the Daily Caller News Foundation

By Stephen Moore

Later this week the United Nations will hold a vote on a multi-billion climate-change tax targeted squarely at American industry. Without quick and decisive action by the White House,  this U.N. tax on fossil fuels will become international law.

This resolution before the International Maritime Organization will impose a carbon tax on cargo and cruise ships that carry $20 trillion of merchandise over international waters. Roughly 80% of the bulkage of world trade is transported by ship.

The resolution is intended to advance the very “net zero” carbon emissions standard that has knee-capped the European economies for years and that American voters have rejected.

This tax is clearly an unnecessary restraint on world trade, thus making all citizens of the world poorer.

It is also an international tax that would be applied to American vessels and, as such, is a dangerous precedent-setting assault on U.S. sovereignty. Since when are American businesses subject to international taxes imposed by the United Nations?

The U.S maritime industry believes the global tax would cost American shippers more than $100 billion over the next seven years if enacted.

Worst of all, if the resolution passes, it will require the retirement of older ships and enable a multi-billion-dollar wealth transfer to China, which has come to dominate shipbuilding in recent years. China STRONGLY supports the tax scheme, even though, ironically, no nation has emitted more pollutants into the atmosphere than they have. Yet WE are getting socked with a tax that indirectly pays for THEIR pollution.

Despite the fact that we pay a disproportionate share of the tax, the U.S. has almost no say on how the revenues are spent. This is the ultimate form of taxation without representation.

Even if the United States chooses not to implement the tax on domestic shipping, it will still be enforced by foreign ports of origin or destination as well as by flag states. As a result, American importers and exporters will be required to pay the tax regardless of domestic policy decisions.

Secretary of State Marco Rubio, Secretary of Energy Chris Wright, and Secretary of Transportation Sean Duffy have jointly stated that America “will not accept any international environmental agreement that unduly or unfairly burdens the United States or our businesses.” They call the financial impact on the U.S. of this global carbon tax “disastrous, with some estimates forecasting global shipping costs increasing as much as 10% or more.”

The U.S. maritime industry complains that although American vessels carry only about 12% of the globally shipped merchandise, U.S. flag vessels would bear almost 20% of this tax. No wonder China and Europe are for it. The EU nations get 17 yes votes to swamp the one no vote out of Washington.

Unfortunately, right now without White House pressure, we could lose this vote because of defections by our allies.

To prevent this tax, the White House should announce a set of retaliation measures. This could include a dollar-for-dollar reduction in U.S. payments to NATO, the U.N., IMF and World Bank.

At a time when financial markets are dealing with trade disputes, the last thing the world — least of all the United States — needs is a United Nations excise tax on trade.

Stephen Moore is co-founder of Unleash Prosperity and a former Trump senior economic advisor.

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