From the Fraser Institute

By Matthew Lau

From the third quarter of 2015 to the fourth quarter of 2023, growth in real GDP per-person (a common indicator of living standards) was less than 1 per cent cumulatively versus more than 15 per cent in the United States. This despite—or more accurately, because of—massive government spending including on corporate subsidies

Reading the federal budget, which the Trudeau government tabled last week, is not an activity likely to improve the equanimity of Canadians suffering from over-taxation and anxious about stagnating living standards. The fact is, the budget sets Canadians even further behind with increased costs and higher taxes, which are sure to reduce productivity and investment further.

In terms of taxes, the main headline is the increase to the capital gains tax to a two-thirds inclusion rate for amounts over $250,000 per year. With Canada’s business investment numbers already dismal, the capital gains tax hike makes things worse by discouraging entrepreneurship and distorting economic decisions to favour present day consumption instead of saving and investment. Indeed, because people know the money they earned today will be taxed more heavily when they invest it tomorrow, the capital gains tax hike reduces incentives to work and earn today.

When it comes to costs, the “total expenses” line in the fiscal tables is most instructive. In last year’s budget, the Trudeau government said it would spend $496.9 billion in 2023-24 and $513.5 billion in 2024-25, rising to $556.9 billion by 2027-28 for a total of $2.6 trillion over five years. But according to this year’s budget, its $505.1 billion for 2023-24, $537.6 billion in 2024-25 and $588.2 billion by 2027-28, for a total of $2.8 trillion over the same five-year period, with both higher program spending and greater borrowing costs contributing to the increase.

In other words, the Trudeau government overspent its budget last year by an estimated $8.2 billion, has increased its spending for this year by $24.1 billion, and will now overspend last year’s fiscal plan by a total of $120.8 billion over five years. And that’s assuming the Liberals stick to the spending plan they just tabled. The Trudeau government has a track record of blowing past its original spending targets, often by astonishing margins, a trend continued in its latest budget. So taxpayers might reasonably expect even the significantly increased costs presented in this latest budget are an understatement.

Canadians might find the exorbitant costs of federal spending easier to accept if they saw some benefits commensurate to the spending, but they have not. From the third quarter of 2015 to the fourth quarter of 2023, growth in real GDP per-person (a common indicator of living standards) was less than 1 per cent cumulatively versus more than 15 per cent in the United States. This despite—or more accurately, because of—massive government spending including on corporate subsidies and other initiatives the government claimed would boost economic growth. Clearly, such growth has not materialized.

The latest budget increased spending for the national child-care program, but the thing has been a disaster  from coast to coast, with families unable to find spots, daycare operators in dire straits, and costs to taxpayers ballooning. Similarly, while health-care spending has risen over the years, access to medical care has gone down. Spending and regulation related to climate change have exploded under the Trudeau government, but the environmental benefits of initiatives such as electric vehicle consumer subsidies and plastic bans, if there are any environmental benefits at all, are nowhere near high enough to offset the burden to taxpayers and consumers.

Clearly, the Trudeau government’s ramp-up in spending and increased taxation, as the GDP and investment figures show, have produced severely negative outcomes for eight years. By ramping spending and taxation up yet higher, it will help continue these negative outcomes.

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.