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Forget identity politics — growth and investment must be Canada’s top priorities: Jack Mintz


7 minute read

From the MacDonald Laurier Institute

Canadians’ real per capita incomes have stalled in the past five years, but that hasn’t been the case in other rich countries

By Jack Mintz

Last week, I wrote about Canada’s poor economic performance over the past five years compared to the United States and other industrialized countries. To recap, Canada’s standard of living has been becalmed, “as a painted ship upon a paint ocean.” Sure, we went through a bad year with the pandemic in 2020. So did other countries. Yet, we fell behind. Over the last five years, as our growth stalled, U.S. per capita GDP grew 9.3 per cent, the OECD average 5.6 per cent, resource-rich Australia 4.8 per cent and Ireland an astonishing 31 per cent.

According to IMF statistics, our share of world GDP (in purchasing-power-parity dollars), has fallen six per cent, from 1.44 per cent in 2018 to 1.36 per cent in 2023. We shouldn’t even be a G7 country anymore: in PPP dollars our economy is only the world’s 16th biggest, right behind Spain.

But that’s the past. What about the future? In 2021, the OECD projected that our economy would perform worse this decade than all other member countries, with per capita real GDP  growing only 0.7 per cent annually — though at least that would be an improvement over the past five years. The big question is why Canada is at the bottom of the heap. There are several reasons:

• The demographic time bomb: Economic growth will be more challenging this decade as many boomers retire and begin supporting their consumption by cashing in pension and other assets. Many other high-income countries, no different than Canada, are also aging rapidly, with retirees rising from roughly 25 per cent of the working population in 2020 to 40 per cent in 2035. With fewer people working and saving, GDP per capita will naturally decline (even if GDP per worker rises). Canada traditionally has been able to attract younger immigrants to make up for the output loss but international markets for skilled labour are increasingly competitive as workers, including ones born in Canada, pick and choose the country they feel offers them the best opportunities.

• Indebtedness: With interest rates higher than they have been, indebtedness also hurts economic growth. To cope with higher payments on mortgages and consumer debt, households, corporations and governments will deleverage by consuming fewer goods and services. Canada’s governments may be carrying less debt than their U.S. and G7 counterparts, but Canadian households and corporations are carrying more — fully 216 per cent of GDP in 2022, compared to 186 in Japan, 153 in the U.S., 150 in the U.K., 127 in German and just 110 per cent in Italy.  Only France, with private debts equal to 228 per cent of its GDP, will experience a greater debt drag on growth than we will.

• Shrinking world trade: Growing protectionism will especially hurt countries that rely, as we do, on trade as a source of economic growth. We currently export 33 per cent of GDP, primarily to the U.S. Geo-political tensions and decoupling from China will hit us harder than other places, like the U.S., where trade matters less.

• A costly energy transition: The extraordinary cost of building new transportation, heating and industrial energy systems over the next few years won’t realize benefits for decades, if at all.  The highest value-added per working hour in 2022 was earned in non-conventional oil extraction at $997 — more than 16 times the average of all industries ($61) and almost five times more than in mining ($205). Shifting labour out of an activity where value-added is that high means GDP will surely fall.

Energy is our largest source of export earnings so any reduction in exports will push the Canadian dollar down. With the federal government hell-bent on stopping new fossil-fuel development, especially of liquified natural gas, we will spend the next couple of decades throwing away wealth that could provide income to Canadians and taxes for governments. Our ideologically driven energy transition will cause us to lag countries like the U.S., Norway and Australia, which continue to develop and export energy while also working on clean technologies.

New technologies: The coming decade does offer the growth-friendly promise of new technologies. AI, continuing digitization and any number of innovations we can’t anticipate will allow us to produce more with the resources we have. On the other hand, adopting new technologies requires investing in new capital. And this is where Canada is weak. Since 2018 Canadian corporate investment has been about 10 per cent of GDP — almost a fifth below the United States and the OECD in general. The OECD says our poor investment performance will cost us 0.4 percentage points in per capita GDP growth every year this decade, more than in any other OECD country.

Why is our standard of living slipping compared to other industrialized economies? Demographics aside, we impose higher barriers to economic growth than our major trading partners do, especially the U.S. Innovation continues to generate great opportunities for us but if business investment remains moribund, we will miss out on many of them. Forget identity politics — growth and investment are now our top priorities.

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Carbon tax, not carve out, Trudeau’s real failure

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From the Canadian Taxpayers Federation

Author: Franco Terrazzano 

Prime Minister Justin Trudeau stepped in it when he removed the carbon tax from furnace oil, while leaving 97 per cent of Canadians out in the cold.

Even in Atlantic Canada, where Trudeau tried to buy off MPs with the carve out, 77 per cent of people in the region support carbon tax relief for everyone.

But Trudeau’s mistake wasn’t providing relief. The real lesson here is Trudeau never won the hearts and minds of Canadians. And he lost credibility early on.

Months before the 2019 election, the former environment minister said the government had “no intention” of raising the carbon tax beyond 11 cents per litre of gas.

After the election, Trudeau announced he would keep cranking up his carbon tax until it reached 37 cents per litre.

Trudeau and his ministers repeat the myth that eight-out-of-ten families get more money in rebates than they pay in carbon taxes.

Their favourite talking point limps on despite the obvious reality that a government can’t raise taxes, skim money off the top to pay for hundreds of administration bureaucrats and still make everyone better off.

In fact, the carbon tax will cost the average family up to $710 more than they get back in rebates this year, according to the Parliamentary Budget Officer.

The government said carbon taxes reduce emissions.

But even in British Columbia, which had the first and (for years) costliest carbon tax, emissions rose. B.C. imposed its carbon tax in 2008. B.C.’s emissions have increased between 2007 and 2019 – the last year before the pandemic brought economic activity to a screeching halt.

And even if the carbon tax cut emissions at home, “Canada’s own emissions are not large enough to materially impact climate change,” as the PBO explains.

Making it more expensive to live in Canada won’t reduce emissions in China, Russia, India or the United States. And this leads to Trudeau’s diplomatic failure.

At the United Nations, the Trudeau government launched the Global Carbon Pricing Challenge to get more countries to impose carbon taxes.

“The impact and effectiveness of carbon pricing increases as more countries adopt pricing solutions,” the Trudeau government acknowledged.

The world’s largest economy, the United States, rejects carbon taxes.

President Joe Biden, a Democrat, hasn’t imposed a carbon tax. Good luck convincing a Republican president to impose one.

The U.S. is the rule, not the exception.

About three-quarters of countries don’t have a national carbon tax, according to the World Bank’s Carbon Pricing Dashboard.

And while Trudeau raised taxes, peers like the United KingdomSwedenAustraliaSouth Korea, the NetherlandsGermanyNorwayIrelandIndiaIsraelItalyNew Zealand and Portugal, among others, cut fuel taxes.

If Canada’s carbon tax is essential for the environment, shouldn’t all taxpayers pay the same rate?

A driver in Alberta pays a carbon tax of 14 cent per litre of gas. In Quebec, the carbon tax is about 12 cents. By 2030, that gap will grow to more than 14 cents per litre.

Quebec’s special deal proves Trudeau’s carbon tax is about politics, not the environment.

When crafting the carbon tax, the government never truly asked the people what they thought. Everyone wants a better environment. You won’t find opposition to that.

But did anyone ask Canadians if they support a carbon tax even if it means average families will lose hundreds of dollars every year? Did anyone ask Canadians if they support a carbon tax even though most countries don’t?

Trudeau is displaying rank regional favouritism. But his real mistake wasn’t the carve out that favoured Atlantic Canada. It’s that he never won the hearts and minds of the people and failed to acknowledge carbon taxes cause real pain.

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Budget update proves Trudeau isn’t serious about federal finances

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From the Canadian Taxpayers Federation

Author: Franco Terrazzano

“when you pay the GST on a hockey stick, a tank of gas or bar of soap, every penny will go to interest charges on the federal debt. In fact, interest charges will surpass federal health-care transfers next year”

Taxpayers should brace for impact based on the finance minister’s latest projections.

Interest charges on the federal debt will go from $47 billion this year to $61 billion in 2028-29, according to the budget update.

But what does $61 billion mean to you?

Sixty-one billion is the same amount the government plans to collect with the GST in 2028-29.

So, in a few short years, when you pay the GST on a hockey stick, a tank of gas or bar of soap, every penny will go to interest charges on the federal debt.

In fact, interest charges will surpass federal health-care transfers next year.

Let the shock sink in just a little deeper: what could we do if it weren’t for the federal debt?

We could virtually double federal health spending.

Or we could completely eliminate the GST in a couple years.

Somehow the government is communicating these perplexing projections with considerable calmness.

Finance Minister Chrystia Freeland claims “the foundation of our Fall Economic Statement is our responsible fiscal plan.”

But last year the government spent $474 billion. And this year the feds plan on spending $489 billion. By 2029, the government will be spending $595 billion a year.

Pro-tip for Freeland: when you spend billions of dollars more every year, you’re saving money wrong.

And all that spending comes on top of an already ballooned base line. Even before the pandemic, the Trudeau government was spending all-time highs. And that’s after accounting for inflation and population differences.

Last year’s $35-billion deficit will increase to $40 billion this year. The feds have no plan to balance the budget. And that’s pushing up interest charges.

Again, brace yourself, because in 2028, federal debt interest charges will cost taxpayers $61 billion. For context, pre-pandemic interest charges were around $20 billion a year.

Meanwhile, if you’re hoping for meaningful tax relief from this government, you shouldn’t hold your breath.

“I absolutely understand that after three difficult years – with a global pandemic, global inflation, and global interest rate hikes – Canadians are worn out, frustrated, and feeling the squeeze,” Freeland said. “What Canadians deserve today is for us to address the very real pain that so many are feeling.”

The easiest and simplest way for Freeland to help Canadians is to stop taking so much money from taxpayers’ wallets in the first place.

But Freeland and Prime Minister Justin Trudeau aren’t even willing to provide the simplest forms of tax relief like ending the sales tax-on-tax at the gas pumps. The GST on the carbon tax alone will cost taxpayers $429 million this year.

The government isn’t willing to end the anti-democratic escalator that increases alcohol taxes every year without a single vote in Parliament. Next year’s hike will cost taxpayers about $100 million.

The government isn’t even willing to extend the same relief to all Canadians that it gave Atlantic Canadian families and remove the carbon tax from everyone’s home heating bills. The carbon tax on natural gas will cost the average family $300 this year.

The budget update is an admission that the government has a spending problem, but it still isn’t serious about managing our finances or providing real tax relief.

The solution for Trudeau and Freeland should be simple: put down the credit card and pick up some scissors.

This column was originally published in the Toronto Sun on Nov. 24, 2023.

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