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National

Federal government’s promises of deficit reduction ring hollow

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5 minute read

From the Fraser Institute

By Ben Eisen and Jake Fuss

” the most credible promises are introduced with immediate action “

As budget season approaches, it’s worth remembering that policymakers must pair promises of fiscal discipline with concrete action.

According to projections, the Trudeau government will run a $40.0 billion deficit this fiscal year, which is slightly larger than last year’s $35.3 billion deficit, even though revenues are up almost $10.0 billion. Finance Minister Chrystia Freeland has repeatedly said that the era of large deficits won’t last forever and promised that starting in 2026/27 the federal deficit will be held every year to less than one per cent of GDP (the value of all goods and services produced in the economy).

But Freeland’s promises should be taken with more than a grain of salt because all governments have spotty track records when it comes to fiscal promises, particularly when they’re based on spending restraint in the future. Conversely, the most credible promises are introduced with immediate action.

The most famous example in Canada’s recent fiscal history came in the 1990s when Paul Martin, the then-Liberal government’s finance minister, vowed to slay Canada’s crippling budget deficit and repair federal finances “come hell or high water.” Martin’s words were accompanied by immediate action in the form of the transformative 1995 federal budget that began a process of deep budget cuts and major policy reforms that immediately put the government on a path to fiscal balance. The deficit was quickly eliminated and Canada was put on a sound fiscal footing that served the country well for almost two decades.

The “hell or high water” episode shows us how governments must match strong commitments with strong actions to increase the likelihood of success. On the other hand, promises for fiscal improvements in the future—unaccompanied by any concurrent action—usually aren’t worth the paper (or Tweets) they’re printed on.

The Trudeau government has produced many examples of incredible promises. First, on the campaign trail back in 2015, Trudeau and his team promised small and temporary deficits, and to shrink the national debt burden. Since then, the prime minister and his finance ministers have never been shy about promising to improve the bottom line. However, the target dates associated with these promises came and went without much notice, and the government pivoted to new plausible-sounding targets, using only words without policy change.

Again, the Trudeau government is far from alone in this tendency. In Ontario, Premier Wynne’s government repeatedly promised to shrink that province’s daunting debt burden, yet failed to decisively act. Basically, it was wishful thinking.

After Ontarians voted out the Wynne government, the Ford government promised to break from the Wynne approach and introduce real reforms that would slay the deficit quickly. But after a few half-hearted feints in the direction of fiscal discipline, the Ford government also failed to make good on its promises of debt reduction and as a result Ontario remains stuck under a mountain of government debt.

Canadian history is clear—unless government promises coincide with concrete actions to immediately start shrinking budget deficits, these promises of fiscal restraint at some future date shouldn’t be given much credence. Minister Freeland’s recent promises fall into this category. In the upcoming federal budget, if the Trudeau government and its cabinet want its promises to be credible, it must learn from its Liberal predecessors and their “hell or high water” moment, and reduce spending to immediately begin a process of deficit reduction.

armed forces

Trudeau pledges another $500 million to Ukraine as Canadian military suffers

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From LifeSiteNews

By Clare Marie Merkowsky

Despite the nation’s own armed forces grappling with an alarming recruitment crisis, Justin Trudeau and his government have poured over $13.3 billion into Ukraine.

More Canadians tax dollars are being sent overseas as Prime Minister Justin Trudeau has promised an additional $500 million in military aid to Ukraine. 

During a July 10 meeting with Ukrainian President Volodymyr Zelensky, Trudeau announced that he would send another $500 million to Ukraine as it continues its war against Russia, despite an ongoing decline in Canada’s military recruitment.  

“We’re happy to offer we’re announcing today $500 million more military aid this year for Ukraine, to help through this very difficult situation,” Trudeau said. 

In addition to the $500 million, Canada will also provide much of Ukraine’s fighter jet pilot training as Ukraine receives its first F-16s. 

Trudeau’s statement comes after Canada has been under fire for failing to meet NATO’s mandate that all members commit at least two percent of their gross domestic product (GDP) to the military alliance. 

According to his 2024 budget, Trudeau plans to spend $8.1 billion over five years, starting in 2024-25, and $73.0 billion over 20 years on the Department of National Defence.   

Interestingly, $8.1 billion divided equally over five years is $1,620,000 each year for the Canadian military. Therefore, Trudeau’s pledge of $500 million means he is spending just under a third on Ukraine compared to what he plans to spend on Canadians.  

Indeed, Trudeau seems reluctant to spend money on the Canadian military, as evidenced when Canadian troops in Latvia were forced to purchase their own helmets and food when the Trudeau government failed to provide proper supplies.  

Weeks later, Trudeau lectured the same troops on “climate change” and disinformation.       

However, at the same time, Trudeau readily sends Canadian tax dollars overseas to Ukraine. Since the Russia-Ukraine war began in 2022, Canada has given Ukraine over $13.3 billion, including $4 billion in direct military assistance.    

In May, Trudeau’s office announced $3.02 billion in funding for Ukraine, including millions of taxpayer dollars to promote “gender-inclusive demining.”  

Trudeau’s ongoing funding for Ukraine comes as many Canadians are struggling to pay for basics such as food, shelter, and heating. According to a recent government report, fast-rising food costs in Canada have led to many people feeling a sense of “hopelessness and desperation” with nowhere to turn for help.  

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Economy

Prime minister and premier combine to reduce living standards in B.C.

Published on

From the Fraser Institute

By Jake Fuss

In B.C., the Eby government is following the prime minister’s lead. After nearly two decades of spending restraint  (1999/00 to 2016/17), the province has experienced an explosion in government spending. Program spending will increase from $46.1 billion in 2016-17 to a projected $85.3 billion this year, a nominal increase of more than 85 per cent.

Recently, Prime Minister Justin Trudeau and Premier David Eby had a tête-à-tête and vowed to always “work together on important issues.” While they belong to two different political parties, their visions rely on a larger role for government, which includes more spending, regulation, borrowing and higher taxes. Unsurprisingly, this economic strategy hasn’t worked and has instead led to stagnant living standards in British Columbia and across Canada.

Under the NDP, British Columbians have seen their incomes completely stagnate. B.C.’s per-person GDP, a broad measure of living standards, is expected to be lower this year than in 2018, and decline by an average annual rate of 0.9 per cent from 2022 to 2024—the third biggest drop among the provinces during this period.

This represents a marked departure from the economic results under the previous government. From 2001 to 2017, per-person GDP grew (on average) by 1.4 per cent. And the average British Columbian’s income increased by 27 per cent over these 16 years.

The decline in living standards is also occurring nationally. Canada’s per-person GDP was lower at the end of 2023  than it was in 2014.

Why?

Since first elected in 2015, Prime Minister Trudeau has greatly expanded the federal government’s role in the Canadian economy. Federal program spending (total spending excluding debt interest costs) will increase from $256.2 billion in the final full year of the Harper government to a projected $483.6 billion in 2024-25, an increase of nearly 90 per cent over a decade. The government has financed this spending surge through tax increases and borrowing.

Specifically, the Trudeau government in 2016 raised the top personal income tax rate (which applies to many entrepreneurs and businessowners) and also opaquely increased taxes on middle-income Canadians by eliminating several tax credits (as a result, 86 per cent of middle-income families now pay higher taxes). Federal debt has spiked considerably to finance the government’s insatiable appetite for spending, reaching nearly $2.1 trillion this year, almost double the level in 2014-15.

In B.C., the Eby government is following the prime minister’s lead. After nearly two decades of spending restraint  (1999/00 to 2016/17), the province has experienced an explosion in government spending. Program spending will increase from $46.1 billion in 2016-17 to a projected $85.3 billion this year, a nominal increase of more than 85 per cent.

With Premier Eby’s plan to ramp up spending further in the next few years and incur substantial deficits, B.C.’s net government debt is projected to reach a whopping $128.8 billion by 2026/27—a 227 per cent increase since 2016-17.

The B.C. NDP has also raised one tax after another to feed its appetite for spending. The government hiked personal income tax rates from 14.7 per cent to 16.8 per cent on income between roughly $181,000 and $253,000, and introduced a new top tax rate of 20.5 per cent for top-income earners. And raised the business tax rate from 11.0 to 12.0 per cent in 2018, deterring badly needed investment in the province.

Prime Minister Trudeau and Premier Eby are pursuing the same policies and achieving the same miserable economic results. Simply put, the Trudeau-Eby zero economic growth alliance has reduced the living standards of British Columbians and Canadians.

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