Business
Spending sprees by governments across Canada help fuel inflation and high interest rates
From the Fraser Institute
By Jake Fuss and Grady Munro
While the prime minister and many premiers justified their high spending levels during the pandemic as merely a temporary development, the federal government and seven provincial governments still plan to run budget deficits this year
Earlier this year, premiers in Ontario, British Columbia, and Newfoundland and Labrador wrote letters to Tiff Macklem, Governor of the Bank of Canada, cautioning against further interest rate hikes, citing the potential negative effects on residents including homeowners with mortgages. But instead of blaming the central bank, Canadian premiers—and the prime minister—should stop their spending sprees, which help fuel inflation and increase interest rates.
Indeed, when governments increase spending, particularly when financed by debt, they add more money to the economy and can help fuel inflation. And high rates of government spending put pressure on the Bank of Canada to maintain interest rates at current levels, or even hike the rate further, to counteract inflation. According to a recent report from Scotiabank, government spending has contributed significantly to higher interest rates in Canada, accounting for an estimated 42 per cent of the increase in the Bank of Canada’s rate since the first quarter of 2022.
Yet the spending sprees continue.
While the prime minister and many premiers justified their high spending levels during the pandemic as merely a temporary development, the federal government and seven provincial governments still plan to run budget deficits this year. Government spending across the country remains at elevated levels or, in some cases, even increased beyond pandemic levels.
Ontario is a prime example. Provincial program spending (total spending minus interest costs) will reach an estimated $193.0 billion in 2023/24—$24.0 billion more than at the peak of COVID. Debt interest costs have also grown due to debt accumulation and rising interest rates.
Despite a considerable increase in revenue over recent years, the Ford government had planned for a $1.3 billion deficit in its spring budget. By November, the government increased spending again and quadrupled the projected deficit to $5.6 billion.
Similarly, British Columbia outlined plans in February to increase program spending and run a $4.2 billion deficit while adding $13.1 billion in debt to the books this year. Just over a half-year later, the B.C. government increased spending again and the deficit was revised to $5.6 billion with debt rising by $14.0 billion instead of $13.1 billion.
Prime Minister Trudeau and his government followed a similar path. According to the recent federal fiscal update, between 2024/25 and 2027/28, the government has increased projected spending by $30.7 billion more than previously forecasted.
According to projections, only two provinces (Alberta and New Brunswick) will run budget surpluses this year, but in Alberta this is largely due to elevated resource revenues stemming from high commodity prices rather than any significant spending restraint. If resource revenues declined to historical average levels, the Smith government in Alberta would likely run deficits similar to other provinces.
Simply put, the excessive spending habits of many premiers and the prime minister are a big reason why interest rates have climbed and inflation remains sticky.
If Canadian politicians want to help tame inflation and bring down interest rates, they should look in the mirror for solutions and show leadership. Complaining about elevated interest rates helps no one, but ensuring fiscal policy is rowing in the same direction as monetary policy would be a good start.
Authors:
From the Canadian Taxpayers Federation
By Ryan Thorpe
“It would have been cheaper for each member of the prime minister’s delegation to go to the Keg, order a prime rib steak, a Caesar salad, baked garlic shrimp and a bottle of pinot noir for every meal.”
Break out the DVD player and aerate a few bottles of the 2015 Riesling, because Prime Minister Justin Trudeau has an important work trip.
The food bill for Trudeau’s four-day trip to Italy and Switzerland this June cost more than $71,000, including at least $43,000 spent on airplane food alone, according to the records.
That works out to an average meal cost of $145. Add it up and the total food bill averaged more than $1,700 per member of the Canadian delegation.
To put that in context: the average Canadian family of four spends about $1,400 on food per month, according to Canada’s Food Price Report.
“The per person food bill for Trudeau and his entourage on this trip was more than the average Canadian family spends on groceries in a month,” said Franco Terrazzano, CTF Federal Director. “It would have been cheaper for each member of the prime minister’s delegation to go to the Keg, order a prime rib steak, a Caesar salad, baked garlic shrimp and a bottle of pinot noir for every meal.”
The total taxpayer tab for the four-day trip came to nearly $1 million, according to access-to-information records obtained by the Canadian Taxpayers Federation from the Department of National Defence and the Privy Council Office.
The cost of the trip could be even higher, as “some accommodations were covered by Global Affairs Canada,” according to the records.
Trudeau travelled to Apulia, Italy, and Lucerne, Switzerland, between June 13 and 16, 2024, to attend a G7 Summit and a Summit on Peace in Ukraine.
All told, the trip cost Canadian taxpayers at least $918,000, according to the records.
Prior to take-off, government bureaucrats purchased $812 worth of junk food from a grocery store – including Red Bull, pop (Pepsi, Coke, Sprite), chocolate bars (Kit Kats, Twix’s, Reece’s Pieces) and candy (Swedish Berries, Fuzzy Peaches).
Government bureaucrats also swung by a record store and purchased $102 worth of DVDs for the flight, according to the records.
The purchases included the first season of Wednesday, a supernatural coming-of-age TV show based on the Addams Family, Madame Web, a superhero film, the sci-fi thriller Chronicle, and Witness, a 1995 crime movie starring Harrison Ford.
During the flights, the passengers were served meals that would be at home on the menu of a fine dining restaurant, alongside four types of wine – a 2021 Chardonnay, a 2015 Riesling, a 2018 Baco Noir and a 2021 Merlot.
Meals included veal piccata Milanese with potato, buttered green peas and broccoli, and lamb ribs with whole grain mustard sauce, rice pilaf and sauteed spinach.
Other dinner options included cheese ravioli with rose sauce, roasted red peppers and parmesan cheese, grilled chicken with lemon caper sauce, mashed potatoes and glazed carrots, and beef stroganoff with buttered noodles and snow peas.
For dessert, passengers chose between raspberry cheesecake coulis, chocolate and pistachio cake and Swiss chocolate cake.
“I like Sydney Sweeney as much as the next guy, but maybe Trudeau could do some actual work or download a movie on Netflix the next time he flies, instead of billing taxpayers for a DVD copy of Madame Web,” Terrazzano said. “While he’s at it, maybe Trudeau could forgo the Swiss chocolate cake while Canadians back home are lining up at food banks in record numbers.”
Trudeau travelled with an entourage ranging from 36 to 41 people during the four-day trip, including two coordinators of digital and creative content, a videographer, and a photographer, according to the records.
This is far from the first time a short trip for Trudeau meant a big bill for taxpayers.
Trudeau’s six-day trip to the Indo-Pacific region in September 2023 included more than $223,000 spent on airplane food, according to records obtained by the CTF.
That entire trip came with a taxpayer tab of nearly $2 million.
In 2022, Stewart Wheeler, who was Canada’s chief of protocol at the time, told a Parliamentary committee the government would bring down the cost of international travel.
“We recognize that the system that we had in place was not delivering the kind of oversight and control that Canadian taxpayers deserve,” Wheeler said.
Wheeler’s comments came after Governor General Mary Simon spent $100,000 on inflight catering during a nine-day trip to the Middle East in March 2022.
“The government promised to bring the cost of international travel down, but taxpayers are still getting stuck with outrageous bills,” Terrazzano said. “The government needs to figure out how to fly overseas without spending more on food in a few days than four families spend on groceries in an entire year.”
From StosselTV
The government promised to expand broadband, build hundreds of thousands of EV chargers, and to bring back semiconductor jobs. They delivered delays, waste, and failure. Why? Because they spend your money, not their own.
After three years and $65 billion spent to expand broadband, not a single person has yet been connected.
Also, two years into Biden’s $7.5 billion EV charging stations initiative, which was supposed to build 500,000 stations, only seven have been built.
The CHIPS Act promised to bring semiconductor jobs back to America. But the money got tied up in DEI quotas, climate pledges, and union mandates.
When bureaucrats spend other people’s money, they have little incentive to spend it carefully. Our new video explains why government should leave building things to the private sector.
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