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Fraser Institute

Federal government’s fiscal record—one for the history books

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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.

Economy

The Good, the Bad and the Ugly—government budgets in 2024

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From the Fraser Institute

By Grady Munro and Jake Fuss

Research showed the federal government could balance its budget in two years by slowing spending growth, yet instead the government doubled down and increased spending well past its previous estimates (against the wishes of Canadians)

This fiscal year, most provinces (and the federal government) demonstrated irresponsible fiscal management, although some were better than others. Therefore, in the words of the 1966 film starring Clint Eastwood, let’s discuss The Good, the Bad and the Ugly of Canadian government budgets in 2024.

Falling in the “good” category are Alberta and New Brunswick—the only two provinces planning to run a balanced budget in 2024/25, with Alberta forecasting a $367 million surplus and New Brunswick forecasting a $41 million surplus. Both provinces forecast surpluses until at least 2026/27, and expect net debt (total debt minus financial assets) as a share of the economy to decline in the years to come. However, what keeps these provinces from having a great budget is that both chose to further increase spending in the face of higher revenues, while failing to deliver much-needed tax relief.

Alberta in particular remains at risk of seeing future surpluses disappear, as the province relies on historically high resource revenues to fund its high spending. Should these volatile revenues decline, the province would return to operating at a deficit and growing its debt burden.

Provinces in the “bad” category include, but aren’t limited to, Saskatchewan and Newfoundland and Labrador. Largely due to quick growth in program spending that wipes out any revenue gains, both provinces expect deficits in 2023/24 and 2024/25 before planning to balance their budgets in 2025/26. The risks of unchecked spending growth are most salient in Saskatchewan, where just one year ago the province projected surpluses in both 2023/24 and 2024/25. And resulting from many years of deficits and debt accumulation, debt interest costs in Newfoundland and Labrador are expected to reach $2,123 per person in 2024/25, the highest in Canada.

Key governments among the “ugly” are the federal government, Ontario and British Columbia. Let’s take them one by one.

The federal government delivered a budget that continues the same failed approach that’s produced nearly a decade of stagnation in Canadian living standards. The Trudeau government plans to run a $39.8 billion deficit in 2024/25, followed by deficits of $20.0 billion or higher until at least 2028/29. Prior to the budget, research showed the federal government could balance its budget in two years by slowing spending growth, yet instead the government doubled down and increased spending well past its previous estimates (against the wishes of Canadians).

In addition to continuous spending increases and debt accumulation, the Trudeau government increased capital gains taxes on all businesses and many Canadians. Presented as a way to make the tax system more “fair” while generating $20 billion in revenue, in reality it is a harmful tax increase that is unlikely to generate the planned amount of revenues while simultaneously hindering economic growth and prosperity.

Similar to the federal government, in its 2024 budget Ontario’s Ford government simply doubled down on the same approach it’s taken in previous years. This “stay the course” fiscal plan added an average of $3.8 billion in new annual program spending (compared to last year’s budget) over the three years from 2023/24 to 2025/26. This new spending delays the province’s expected return to surpluses until 2026/27, and rather than run a $200 million surplus in 2024/25 the Ford government now plans to run a $9.8 billion deficit.

Importantly, the Ford government failed to deliver any meaningful tax relief for Ontarians in this budget, which once again breaks its promise to reduce personal income tax rates. Given that Ontarians face some of the highest personal income tax rates in North America, relief would help keep money in people’s pockets while also promoting economic growth.

Finally, the Eby government in B.C. tabled a budget that can be best described as a generational error in terms of the planned debt accumulation. The government plans to run a $7.9 billion deficit in 2024/25, followed by deficits of $7.8 billion and $6.4 billion in 2025/26 and 2026/27, respectively. In other words, the Eby government plans to run deficits in the coming years that are nearly as large or larger than those expected in Ontario, despite B.C. having a little over one-third of Ontario’s population.

Runaway spending drives these deficits and will contribute to a $55.1 billion (74.7 per cent) increase in provincial net debt from 2023/24 to 2026/27. This massive runup in debt will result in higher debt interest costs, which leaves less money available for services such as healthcare and education, or pro-growth tax relief for British Columbians.

By and large, governments across Canada demonstrated an irresponsible approach to managing public finances in this year’s round of budgets. While there were a couple of bright spots, the majority of provinces instead chose to increase spending, grow deficits and debt, and introduce little to no meaningful tax relief.

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Fraser Institute

Enough talk, we need to actually do something about Canadian health care

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From the Macdonald Laurier Institute

By J. Edward Les for Inside Policy

Canada spends more on health care as a percentage of GDP than almost all other OECD countries, yet we rank behind most of them when it comes to outcomes that matter.

I drove a stretch of road near Calgary’s South Health Campus the other day, a section with a series of three intersections in a span of less than a few hundred metres. That is, I tried to drive it – but spent far more time idling than moving.

At each intersection, after an interminable wait, the light turned green just as the next one flipped to red, grinding traffic to a halt just after it got rolling. It was excruciating; I’m quite sure I spied a snail on crutches racing by – no doubt making a beeline (snail-line?) for the ER a stone’s throw away.

The street’s sluggishness is perhaps reflective of the hospital next to it, given that our once-cherished universal health care system has crumbled into a universal waiting system – a system seemingly crafted (like that road) to obstruct flow rather than enable it. In fact, the pace of medical care delivery in this country has become so glacial that even a parking lot by comparison feels like the Indianapolis Speedway.

The health care crisis grows more dire by the day. Reforms are long overdue. Canada spends more on health care as a percentage of GDP than almost all other OECD countries, yet we rank behind most of them when it comes to outcomes that matter.

And we’re paying with our lives: according to the Canadian Institute for Health Information, thousands of Canadians die each and every year because of the inefficiencies of our system.

Yet for all that we are paralyzed by the enormity and complexity of the mushrooming disaster. We talk about solutions – and then we talk and talk some more. But for all the talking, precious little action is taken.

I’m reminded of an Anne Lamotte vignette, related in her bestselling book Bird By Bird:

Thirty years ago my older brother, who was ten years old at the time, was trying to get a report written on birds that he’d had three months to write, which was due the next day. We were out at our family cabin in Bolinas, and he was at the kitchen table close to tears, surrounded by binder paper and pencils and unopened books about birds, immobilized by the hugeness of the task ahead. Then my father sat down beside him, put his arm around my brother’s shoulder, and said, “Bird by bird, buddy. Just take it bird by bird.”

So it is with Canadian health care: we’ve wasted years wringing our hands about the woeful state of affairs, while doing precious little about it.

Enough procrastinating. It’s time to tackle the crisis, bird by bird.

One thing we can do is to let doctors be doctors.  A few weeks ago, in a piece titled “Should Doctors Mind Their Own Business?”, I questioned the customary habit of doctors hanging out their shingles in small independent community practices. Physicians spend long years of training to master their craft, years during which they receive no training in business methods whatsoever, and then we expect them to master those skills off to the side of their exam rooms. Some do it well, but many do not – and it detracts from their attention to patients.

We don’t install newly minted teachers in classrooms and at the same time task them with the keeping the lights on, managing the supply chain, overseeing staffing and payroll, and all the other mechanics of running schools. Why do we expect that of doctors?

Keeping doctors embedded within large, expensive, inefficient, bureaucracy-choked hospitals isn’t the solution, either.

There’s a better way, I argued in my essay: regional medical centres – centres built and administered in partnership with the private sector.

Such centres would allow practitioners currently practicing in the community to ply their trade unencumbered by the nuts and bolts of running a business; and they would allow us to decant a host of services from hospitals, which should be reserved for what only hospitals can do: emergency services, inpatient care, surgeries, and the like.

In short, we should let doctors be doctors, and hospitals be hospitals.

To garner feedback, I dumped my musings into a couple of online physician forums to which I belong, tagged with the query: “Food for thought, or fodder for the compost bin?”

The verdict? Hands down, the compost bin.

I was a bit taken aback, initially. Offended, even – because who among us isn’t in love with their own ideas?

But it quickly became evident from my peers’ comments that I’d been misunderstood. Not because my doctor friends are dim, but because I hadn’t been clear.

When I proposed in my essay that we “leave the administration and day-to-day tasks of running those centres to business folks who know what they’re doing,” my colleagues took that to mean that doctors would be serving at the beck and call of a tranche of ill-informed government-enabled administrators – and they reacted to the notion with anaphylactic derision. And understandably so: too many of us have long and painful experience with thick layers of health care bureaucracy seemingly organized according to the Peter Principle, with people promoted to – and permanently stuck at – the level of their incompetence.

But I didn’t mean to suggest – not for a minute – that doctors shouldn’t be engaged in running these centres. I also wrote: “None of which is to suggest that doctors shouldn’t be involved, by aptitude and inclination, in influencing the set-up and management of regional centres – of course, they should.”

Of course they should. There are plenty of physicians equipped with both the skills and interest needed to administer these centres; and they should absolutely be front and centre in leading them.

But more than that: everyone should have skin in the game. All workers have the right to share in the success of an enterprise; and when they do, everybody wins.  When everyone is pulling in the same direction because everyone shares in the wins, waste and inefficiencies are rooted out like magic.

Contrast that to how hospitals are run, with scarcely anyone aware of the actual cost of the blood tests or CT scans they order or the packets of suture and gauze they rip open, and with the motivations of administrative staff, nurses, doctors, and other personnel running off in more directions than a flock of headless chickens. The capacity for waste and inefficiencies is almost limitless.

I don’t mean to suggest that the goal of regional medical centres should be to turn a profit; but fiscal prudence and economic accountability are to be celebrated, because money not wasted is money that can be allocated to enhancing patient care.

Nor do I mean to intimate that sensible resource management should be the only parameter tracked; patient outcomes and patient satisfaction are paramount.

What should government’s role be in all this? Initially, to incentivize the creation of these centres via public-private partnerships; and then, crucially, to encourage competition among them and to reward innovation and performance, with optimization of the three key metrics – patient outcomes, patient satisfaction, and economic accountability – always in focus.

No one should be mandated to work in non-hospital regional medical centres. It’s a free country (or it should be): doctors should be free to hang out their own community shingles if they wish. But if we build the model correctly, my contention is that most medical professionals will prefer to work collaboratively under one roof with a diverse group of colleagues, unencumbered by the mundanities of running a business, but also free of choking hospital bureaucracy.

I connected a couple weeks ago with the always insightful economist Jack Mintz (who is also a distinguished fellow at the Macdonald-Laurier Institute). Mintz sits on the board of a Toronto-area hospital and sees first-hand “the problems with the lack of supply, population growth, long wait times between admission and getting a bed, emergency room overuse,” and so on.

“Something has to give,” he said. “Probably more resources but better managed. We really need major reform.”

On that we can all agree. We can’t carry on this way.

So, let’s stop idling; and let’s green-light some fixes.

As Samwise Gamgee said in The Lord of the Rings, “It’s the job that’s never started as takes longest to finish.”


Dr. J. Edward Les is a pediatrician in Calgary who writes on politics, social issues, and other matters.

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