Federal government cranked up spending up but Canadians are worse off

“If spending money like water was the answer to our country’s problems,” Margaret Thatcher said in 1980, less than two years after the United Kingdom’s Winter of Discontent, “we would have no problems now. If ever a nation has spent, spent, spent, and spent again, ours has.” That a government cannot spend away the country’s problems is a clear lesson of history. The Trudeau government evidently has not learned this—it has spent, spent and spent more, and the country’s problems have gotten worse.

In 2014-15, before the Liberals took office, federal program spending was 12.8 per cent of GDP (the value of final goods and services produced in Canada). In 2023-24, it’s projected at 15.7 per cent. And relative to 2014-15, annual program spending is $89 billion higher than if it had tracked with overall economic growth.

As Thatcher would have predicted, this extra spending has not solved most problems. Consider health care. The Fraser Institute’s survey of health-care specialists found a median wait time of 27.7 weeks between referral from a general practitioner and receipt of treatment in 2023—a 51 per cent increase versus the 18.3 weeks in 2015. Relative to peer countries, Canada is a big health-care spender but with poor results, and is far below average on key metrics such as physicians and hospital beds per capita.

Another big spending area is climate change. The Liberals boast of pouring more than $120 billion into climate programs, but even with an annually increasing carbon tax and onerous regulation on top of that spending, the government is on track to miss its 2030 climate targets. Given the high cost of its climate policies relative to environmental benefits, that’s not a bad thing. Ottawa’s climate targets are wildly unrealistic, and achieving them would mean devastating the economy further.

Speaking of devasting the economy, when the Trudeau government spends, it claims it will support economic growth, increase affordability or otherwise deliver financial benefits. Eight years in, these benefits have not materialized. As of the third quarter of 2023, after five consecutive quarters of declining real GDP per capita, Canada’s cumulative growth in the past eight years is a paltry 1.6 per cent versus 14.7 per cent in the United States. One way to think about this gap: if Canada’s real GDP per-capita growth tracked with the U.S. since the Liberals took office, Canadian living standards would be about 12.8 per cent higher than they are today.

Finally, the Trudeau government has significantly ramped up child-care spending, but the effect of the national child-care program has been to severely distort and in many cases destroy the child-care sector by applying a discriminatory funding model that pushes child-care entrepreneurs out of the market and discourages private investment. The federal program is composed of separate agreements with the provinces, but with the child-care sector suffering crisis and widespread shortages from coast to coast, it’s reasonable to conclude Ottawa’s plan is fatally flawed.

Wherever you look, the pattern is the same—federal spending is up, but outcomes are worse. The government creates problems and does not solve them when it spends money like water. Margaret Thatcher well understood this fact. Justin Trudeau, unfortunately, evidently does not.

Author:

Matthew Lau

Adjunct Scholar, Fraser Institute

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Carney government should recognize that private sector drives Canada’s economy

Published on July 10, 2025

Todayville

From the Fraser Institute

By Jock Finlayson

An important lesson of the Justin Trudeau era is that economic prosperity cannot be built on the back of an expanding government sector, higher deficits and ever-greater political tinkering with the economy. It’s time for something different.

At the half-way point of what’s shaping up to be a turbulent 2025, how is Canada’s economy faring?

By any measure, the past six months have been a bumpy ride. The Canadian economy lost momentum over much of last year, with economic growth cooling, job creation slowing, and the unemployment rate creeping higher. Then as 2025 began came the shock of Donald Trump’s tariffs and—more recently—the outbreak of increased military conflict in the Middle East.

Amid these developments, indices of global policy and business uncertainty have risen sharply. This creates a difficult backdrop for Canadian businesses and for the re-elected Liberal government led by Prime Minister Carney.

Economic growth in the first quarter of 2025 received a temporary boost from surging cross-border trade as companies in both Canada and the United States sought to “front-run” the risk of tariffs by increasing purchases of manufactured and semi-finished goods and building up inventories. But trade flows are now diminishing as higher U.S. and Canadian tariffs come into effect in some sectors and are threatened in others. Meanwhile, consumer confidence has plunged, household spending has softened, housing markets across most of Canada are in a funk, and companies are pausing investments until there’s greater clarity on the future of the Canada-U.S. trade relationship.

Some forecasters believe a recession will unfold over the second and third quarters of 2025, as the Canadian economy absorbs a mix of internal and external blows, before rebounding modestly in 2026. For this year, average economic growth (after inflation) is unlikely to exceed 1 per cent, down from 1.6 per cent in 2024. The unemployment rate is expected to tick higher over the next 12-18 months. Housing starts are on track to drop, notwithstanding a rhetorical political commitment to boost housing supply in Ottawa and several provincial capitals. And business investment is poised to decline further or—at best—remain flat, continuing the pattern seen throughout the Trudeau era. Even this underwhelming forecast is premised on the assumption that ongoing trade tensions with the U.S. don’t spiral out of control.

How should Canadian policymakers respond to this unsettled economic picture? We do not face a hit to the economy remotely equivalent to that generated by the COVID pandemic in 2020-21, so there’s no argument for additional deficit-financed spending by governments—particularly when public debt already has been on a tear.

For the Carney government, the top priority must be to lessen uncertainty around Canada-U.S. trade and mitigate the threat of sweeping tariffs as quickly as possible. Until this is accomplished, the economic outlook will remain dire.

A second priority is to improve the “hosting conditions” for business growth in Canada after almost a decade of stagnant living standards and chronically weak private-sector investment. This will require significant reforms to current taxation, regulatory and project assessment policies aimed at making Canada a more attractive location for companies, investors and entrepreneurs.

An important lesson of the Justin Trudeau era is that economic prosperity cannot be built on the back of an expanding government sector, higher deficits and ever-greater political tinkering with the economy. It’s time for something different.

Policymakers must recognize that Canada is a largely market-based economy where the private sector rather than government is responsible for the bulk of production, employment, investment, innovation and exports. This insight should inform the design and delivery of economic policymaking going forward.

Automotive

Federal government should swiftly axe foolish EV mandate

Published on July 9, 2025

Todayville

From the Fraser Institute

By Kenneth P. Green

Two recent events exemplify the fundamental irrationality that is Canada’s electric vehicle (EV) policy.

First, the Carney government re-committed to Justin Trudeau’s EV transition mandate that by 2035 all (that’s 100 per cent) of new car sales in Canada consist of “zero emission vehicles” including battery EVs, plug-in hybrid EVs and fuel-cell powered vehicles (which are virtually non-existent in today’s market). This policy has been a foolish idea since inception. The mass of car-buyers in Canada showed little desire to buy them in 2022, when the government announced the plan, and they still don’t want them.

Second, President Trump’s “Big Beautiful” budget bill has slashed taxpayer subsidies for buying new and used EVs, ended federal support for EV charging stations, and limited the ability of states to use fuel standards to force EVs onto the sales lot. Of course, Canada should not craft policy to simply match U.S. policy, but in light of policy changes south of the border Canadian policymakers would be wise to give their own EV policies a rethink.

And in this case, a rethink—that is, scrapping Ottawa’s mandate—would only benefit most Canadians. Indeed, most Canadians disapprove of the mandate; most do not want to buy EVs; most can’t afford to buy EVs (which are more expensive than traditional internal combustion vehicles and more expensive to insure and repair); and if they do manage to swing the cost of an EV, most will likely find it difficult to find public charging stations.

Also, consider this. Globally, the mining sector likely lacks the ability to keep up with the supply of metals needed to produce EVs and satisfy government mandates like we have in Canada, potentially further driving up production costs and ultimately sticker prices.

Finally, if you’re worried about losing the climate and environmental benefits of an EV transition, you should, well, not worry that much. The benefits of vehicle electrification for climate/environmental risk reduction have been oversold. In some circumstances EVs can help reduce GHG emissions—in others, they can make them worse. It depends on the fuel used to generate electricity used to charge them. And EVs have environmental negatives of their own—their fancy tires cause a lot of fine particulate pollution, one of the more harmful types of air pollution that can affect our health. And when they burst into flames (which they do with disturbing regularity) they spew toxic metals and plastics into the air with abandon.

So, to sum up in point form. Prime Minister Carney’s government has re-upped its commitment to the Trudeau-era 2035 EV mandate even while Canadians have shown for years that most don’t want to buy them. EVs don’t provide meaningful environmental benefits. They represent the worst of public policy (picking winning or losing technologies in mass markets). They are unjust (tax-robbing people who can’t afford them to subsidize those who can). And taxpayer-funded “investments” in EVs and EV-battery technology will likely be wasted in light of the diminishing U.S. market for Canadian EV tech.

If ever there was a policy so justifiably axed on its failed merits, it’s Ottawa’s EV mandate. Hopefully, the pragmatists we’ve heard much about since Carney’s election victory will acknowledge EV reality.