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Economy

Federal budget’s scale of spending and debt reveal a government lacking self-control

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From the Fraser Institute

By Jake Fuss and Grady Munro

Had the government simply limited the growth in annual program spending to 0.3 per cent for two years, it could have balanced the budget by 2026/27 and avoided significant debt accumulation.

Instead, the government chose to increase annual program spending by an average of 4.4 per cent over the next two years and kick the debt problem down the road for another government to solve.

Time and time again, Prime Minister Justin Trudeau and Finance Minister Chrystia Freeland have emphasized the importance of being fiscally responsible with federal finances. Unfortunately, this year’s federal budget ensures once again their rhetoric rings hollow due to their ongoing mismanagement of federal finances.

This mismanagement is rooted in the government’s insatiable appetite for new and expanded programs or services, which has endured for nine years and will continue for the foreseeable future. The budget introduces billions of dollars in additional spending for a national school food program, housing initiatives and artificial intelligence. As such, program spending (total spending minus debt interest costs) is now expected to be $77.2 billion higher over the next four years than the government forecasted last spring.

In 2024/25 alone, federal program spending will reach a projected $483.6 billion—an increase of $16.1 billion compared to the previous budget’s estimates. On a per-person inflation-adjusted basis, federal program spending is forecasted to reach $11,901, which is approximately 28.0 per cent higher than during the final full year of Stephen Harper’s tenure as prime minister (2014/15). The Trudeau government has already recorded the five (2018 to 2022) highest levels of federal program spending per person in Canadian history (inflation-adjusted), and budget projections suggest it’s now on track to possess the eight highest levels of per-person spending by the end of its term next autumn.

This is despite recent polling data that shows the majority of Canadians (59 per cent) think the Trudeau government is spending too much. Nearly two-thirds (64 per cent) of Canadians are also concerned about the size of the federal deficit.

As it has done nine times before, the Trudeau government will borrow to fund some of its spending spree, resulting in a projected budget deficit of $39.8 billion this year, which is $4.8 billion higher than previously forecasted. And it doesn’t intend to stop borrowing, with annual deficits exceeding $20 billion planned for the subsequent four years. This represents a notable increase in deficits compared to what was expected in the last year’s budget. Simply put, there’s no plan for a return to balanced budgets any time soon. As a result, federal debt (net debt minus non-financial assets) is expected to climb $156.2 billion from now until April 2029.

To make matters worse, the government is also increasing the capital gains inclusion tax rate from 50.0 per cent to 66.6 per cent for capital gains realized above $250,000. This will act as a huge disincentive for individuals and businesses to invest in Canada at a time when the country already struggles to attract the very investment we need to improve productivity, economic growth and living standards. Businesses and individuals will now simply invest their capital elsewhere.

There’s a large body of research that finds low or no capital gains taxes increase the supply and lower the cost of capital for new and growing firms, leading to higher levels of entrepreneurship, economic growth and job creation—precisely what Canada needs more of today and in the future.

While the government did boast about its ability to hold the 2023/24 deficit at $40.0 billion, this had little to do with responsible fiscal management. Instead, the government enjoyed higher-than-anticipated revenues of $8.3 billion, but repeated its all too frequent and ill-advised approach of spending that money and wiping out any chance to reduce the deficit.

Growing federal debt leads to higher debt interest costs, all else equal, which eat up taxpayer dollars that could otherwise have provided services or tax relief for Canadians. For context, the government now spends more ($54.1 billion) on debt interest as on health-care transfers to the provinces ($52.1 billion). Accumulating debt today also increases the tax burden on future generations of Canadians who are ultimately responsible for paying off this debt. Research suggests this effect could be disproportionate, with future generations needing to pay back a dollar borrowed today with more than one dollar in future taxes.

But again, it didn’t have to be this way. As we pointed out before the budget, had the government simply limited the growth in annual program spending to 0.3 per cent for two years, it could have balanced the budget by 2026/27 and avoided significant debt accumulation.

Instead, the government chose to increase annual program spending by an average of 4.4 per cent over the next two years and kick the debt problem down the road for another government to solve. Simply put, the government’s fiscal strategy is not all that different from an overzealous child that eats all their Halloween candy in one night even though they fully understand it won’t end well.

Yet for all this spending and debt, living standards have not improved for Canadians. In fact, inflation-adjusted GDP per person was actually lower at the end of 2023 than it was nine years prior in 2014. And going forward, the OECD predicts Canada will record the lowest growth rates in per-person GDP up to 2060 of any industrialized country—meaning countries such as New Zealand, Italy, Korea, Turkey and Estonia would all surpass Canada with higher living standards.

The combination of tax hikes and scale of spending and debt in this year’s federal budget demonstrate the Trudeau government has no interest in being fiscally responsible or improving living standards for Canadians. Instead of showing restraint, the government chose to repeat its mistakes and lead federal finances down an increasingly perilous path.

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Economy

‘What constitutes a border crisis?’ Sanctuary cities have found out

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Migrants and migrant bedding inside O’Hare International Airport in Chicago.                 

From The Center Square

By

Yeah, you liked them when it wasn’t your problem because you’re not a border state. And then when they show up in Chicago and New York, you’re like ‘What the [expletive] are we going to do with these people?’”

In March 2021, the Los Angeles Times published a story with a headline that asked, “What constitutes a border crisis?”

The story quoted then House Republican Leader Kevin McCarthy as saying, “There is no other way to claim it than a Biden border crisis.”

Then the LA Times asked, “But is it a crisis?”

Just a month later in April 2021, New York City Mayor Bill de Blasio released a statement about his city being a sanctuary city.

“New York City is proud to be a welcoming and inclusive city for immigrants,” de Blasio said at the time.

The debate in the U.S. on migrants took off in April 2022 when Texas Gov. Greg Abbott decided to take a stand against President Joe Biden and what Abbott called an open border policy.

Abbott stated that Biden’s repeal of Title 42 – a pandemic-era policy that allowed the government to quickly expel arriving asylum seekers – had created an “unprecedented surge of illegal aliens” into the country with as many as 18,000 apprehensions a day.

Abbott said that Texas border towns were being overrun by migrants and were overwhelmed. His solution was to bus many of the arriving migrants to sanctuary cities across the U.S.

In August 2022, when the first bus of migrants leaving Texas arrived in New York, Abbott was clear why he had his state paid for the trip. New York had a new mayor by then.

“New York City is the ideal destination for these migrants, who can receive the abundance of city services and housing that Mayor Eric Adams has boasted about within the sanctuary city,” Abbott stated in a news release. “I hope he follows through on his promise of welcoming all migrants with open arms so that our overrun and overwhelmed border towns can find relief.”

And just over a year later, New York Gov. Kathleen Hochul was on CNN in September 2023 pleading with immigrants to “go somewhere else.”

How it has played out was not lost on liberal comedian Bill Maher.

“Could everyone just stop the posturing?” Maher said on a July 2023 podcast with Sharon Osbourne. “Don’t pretend that you love migrants so much and then when we send them to you, you don’t like them. You know? You’re full of [expletive]. And we can see that. Yeah, you liked them when it wasn’t your problem because you’re not a border state. And then when they show up in Chicago and New York, you’re like ‘What the [expletive] are we going to do with these people?’”

New York wasn’t the only destination for Abbott’s buses. He also targeted other sanctuary cities, such as Washington, D.C, Chicago and Denver.

The New York Times published an article in July 2023 that had a headline that asked, “Is Texas’ Busing Responsible for the Migrant Crisis Across Cities?”

On June 14, Abbott’s office stated that it had bused 119,200 migrants to six sanctuary cities since August 2022. That included 45,700 migrants to New York City and 36,900 migrants to Chicago since August 2022. There were also 19,200 migrants bused to Denver since May 2023 and 12,500 migrants bused to Washington D.C. since April 2022.

But Abbott wasn’t alone in busing migrants from the border to locations throughout the country. The Democratic-run city of El Paso also bused migrants north.

Democratic Arizona Gov. Katie Hobbs stated in September 2023 that Arizona was “overwhelmed” by the flow of migrants into her state. Arizona spent $10.5 million transporting 10,247 migrants out of state as of September 2023.

That’s just part of a bigger surge of migrants into the U.S. Since Biden took office in January 2021, about 12 million illegal border crossings have been documented, according to U.S. Customs and Border Protection data and a compilation of “gotaway” data obtained from border agents by The Center Square. Gotaways is the official CBP term to describe those who illegally crossed the border between ports of entry but who were not apprehended. CBP does not publicly release “gotaway” data.

The increase in migrants has hammered the budgets of sanctuary cities.

Washington, D.C. created an Office of Migrant Services with an initial start-up cost of $10 million in 2022. In 2025, the city budgeted $39 million for that office.

Chicago has spent $299 million on migrants since 2022, according to a March 2024 report by the Illinois Policy Institute, and that does not include the hundreds of millions of dollars state taxpayers have paid for costs such as migrant health care.

New York City Mayor Adams said in August 2023 the migrant crisis may cost his city $12 billion over three years.

The city of Denver stated in April 2024 that the increase in migrants has cost it $63 million.

The cost to taxpayers in the state of Texas was $13.4 billion in 2023, according to the Federation For American Immigration Reform. Only California had a higher cost at $30.9 billion.

Ira Mehlman, spokesman for the Federation For American Immigration Reform, said Abbott’s busing strategy has worked.

“His busing policy exposed the hypocrisy of many sanctuary jurisdiction politicians who extolled the virtues of mass immigration regardless of its legality, but are not so happy when they actually have to deal with the real impact of large numbers of migrants,” Mehlman said in an email to The Center Square. “So long as it was someone else’s problem, they were happy to virtue signal and criticize others. Once it became their problem, they demanded that Abbott and others stop sending them migrants. For years, these sanctuary proponents claimed that illegal aliens were a benefit to the country, but are now demanding federal assistance to manage to cover their costs, exposing the fact that illegal immigration imposes huge fiscal costs.”

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Economy

Toronto, Vancouver named “Impossibly Unaffordable”

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From the Frontier Centre for Public Policy

By Courtney Greenberg

Two Canadian cities — Toronto and Vancouver — have earned the title of “impossibly unaffordable” in a new report.

“There has been a considerable loss of housing affordability in Canada since the mid-2000s, especially in the Vancouver and Toronto markets,” according to the Demographia International Housing Affordability report, which is released annually.

“During the pandemic, the increase in remote work (working at home) fuelled a demand increase as many households were induced to move from more central areas to suburban, exurban and even more remote areas. The result was a demand shock that drove house prices up substantially, as households moved to obtain more space, within houses and in yards or gardens.”

Vancouver was the least affordable market in Canada, and the third least affordable out of all of the 94 markets observed in the report. The West Coast city’s affordability issue has “troublingly” spread to smaller areas like Chilliwack, the Fraser Valley, Kelowna, and markets on Vancouver Island, per the report.

Toronto was named as the second least affordable market in Canada. However, it fared slightly better than Vancouver when it came to the other markets, ranking 84 out of 94 in international affordability.

“As in Vancouver, severely unaffordable housing has spread to smaller, less unaffordable markets in Ontario, such as Kitchener-cambridge-waterloo, Brantford, London, and Guelph, as residents of metro Toronto seek lower costs of living outside the Toronto market,” the report says.

The findings of the report have “grave implications on the prospects for upward mobility,” said Joel Kotkin, the director at the Center for Demographics and Policy at Chapman University, a co-publisher of the report along with Canada’s Frontier Centre for Public Policy.

“As with any problem, the first step towards a resolution should be to understand the basic facts,” he said. “This is what the Demographia study offers.”

The report looked at housing affordability in 94 metropolitan areas in Australia, China, Ireland, New Zealand, Singapore, the United Kingdom, the United States and Canada. The data analyzed was taken from September 2023. The ratings are based on five categories (affordable, moderately unaffordable, seriously unaffordable, severely unaffordable, and impossibly unaffordable) with a points system to classify each area.

The report determined affordability by calculating the median price-to-income ratio (“median multiple”) in each market.

“There is a genuine need to substantially restore housing affordability in many markets throughout the covered nations,” said Frontier Centre for Public Policy president Peter Holle, in a statement. “In Canada, policymakers are scrambling to ‘magic wand’ more housing but continue to mostly ignore the main reason for our dysfunctional costly housing markets — suburban land use restrictions.”

Toronto and Vancouver both received the worst possible rating for affordability, making them stand out as the most expensive Canadian cities in which to buy a home. However, other Canadian markets — like Calgary, Montreal and Ottawa-gatineau — stood out as well. They were considered “severely unaffordable.”

“This is a long time coming,” senior economist with the Canadian Centre for Policy Alternatives David Macdonald told CTV News.

“We haven’t been building enough housing, we certainly haven’t had enough government investment in affordable housing for decades, and the chickens are coming home to roost.”

The most affordable Canadian city in the report was Edmonton, which was given a rating of “moderately unaffordable.” The city in Alberta was “at least twothirds more affordable” than Vancouver.

Overall, Canada ranked third in home ownership compared to the other regions observed in the report. The highest home ownership rate was in Singapore, at 89 per cent, followed by Ireland, at 70 per cent. In Canada, the rate was 67 per cent.

First published in the National Post here, June 17, 2024.

Courtney Greenberg is a Toronto-based freelance journalist writing for the National Post.

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