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Economy

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

Published

7 months ago

8 minute read

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.

Authors:

Jake Fuss and Grady Munro
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Business

Premiers fight to lower gas taxes as Trudeau hikes pump costs

Published on November 1, 2024

By

From the Canadian Taxpayers Federation

By Jay Goldberg 

Thirty-nine hundred dollars – that’s how much the typical two-car Ontario family is spending on gas taxes at the pump this year.

You read that right. That’s not the overall fuel bill. That’s just taxes.

Prime Minister Justin Trudeau keeps increasing your gas bill, while Premier Doug Ford is lowering it.

Ford’s latest gas tax cut extension is music to taxpayers’ ears. Ford’s 6.4 cent per litre gas tax cut, temporarily introduced in July 2022, is here to stay until at least next June.

Because of the cut, a two-car family has saved more than $1,000 so far. And that’s welcome news for Ontario taxpayers, because Trudeau is planning yet another carbon tax hike next April.

Trudeau has raised the overall tax burden at the pumps every April for the past five years. Next spring, he plans to raise gas taxes by another three cents per litre, bringing the overall gas tax burden for Ontarians to almost 60 cents per litre.

While Trudeau keeps hiking costs for taxpayers at the pumps, premiers of all stripes have been stepping up to the plate to blunt the impact of his punitive carbon tax.

Obviously, Ford has stepped up to the plate and has lowered gas taxes. But he’s not alone.

In Manitoba, NDP Premier Wab Kinew fully suspended the province’s 14 cent per litre gas tax for a year. And in Newfoundland, Liberal Premier Andrew Furey cut the gas tax by 8.05 cents per litre for nearly two-and-a-half years.

It’s a tale of two approaches: the Trudeau government keeps making life more expensive at the pumps, while premiers of all stripes are fighting to get costs down.

Families still have to get to work, get the kids to school and make it to hockey practice. And they can’t afford increasingly high gas taxes. Common sense premiers seem to get it, while Ottawa has its head in the clouds.

When Ford announced his gas tax cut extension, he took aim at the Liberal carbon tax mandated by the Trudeau government in Ottawa.

Ford noted the carbon tax is set to rise to 20.9 cents per litre next April, “bumping up the cost of everything once again and it’s absolutely ridiculous.”

“Our government will always fight against it,” Ford said.

But there’s some good news for taxpayers: reprieve may be on the horizon.

Federal Conservative leader Pierre Poilievre’s promises to axe the carbon tax as soon as he takes office.

With a federal election scheduled for next fall, the federal carbon tax’s days may very well be numbered.

Scrapping the carbon tax would make a huge difference in the lives of everyday Canadians.

Right now, the carbon tax costs 17.6 cents per litre. For a family filling up two cars once a week, that’s nearly $24 a week in carbon taxes at the pump.

Scrapping the carbon tax could save families more than $1,200 a year at the pumps. Plus, there would be savings on the cost of home heating, food, and virtually everything else.

While the Trudeau government likes to argue that the carbon tax rebates make up for all these additional costs, the Parliamentary Budget Officer says it’s not so.

The PBO has shown that the typical Ontario family will lose nearly $400 this year due to the carbon tax, even after the rebates.

That’s why premiers like Ford, Kinew and Furey have stepped up to the plate.

Canadians pay far too much at the pumps in taxes. While Trudeau hikes the carbon tax year after year, provincial leaders like Ford are keeping costs down and delivering meaningful relief for struggling families.

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Business

Bank of Canada admits ‘significant’ number of citizens would resist digital dollar

Published on October 31, 2024

By

From LifeSiteNews

By Anthony Murdoch

A significant number’ of Canadians are suspicious of government overreach and would resist any measures by the government or central bank to create digital forms of official money.

A Bank of Canada study has found that Canadians are very wary of a government-backed digital currency, concluding that “significant number” of citizens would resist the implementation of such a system.

The study, conducted by the Bank of Canada, found that a “significant number” of Canadians are suspicious of government overreach, and would resist any measures by the government or central bank to create digital forms of official money.  

According to results from the BOC’s report titled The Consumer Value Proposition For A Hypothetical Digital Canadian Dollar, “cash remains an important method of payment” for Canadians and “[c]ertain groups may strongly resist a digital dollar if they conflate its launch with the end of cash issuance.” 

The BOC noted that not only would a “significant number” of Canadians “reject” digital money, but that for some “mindset segments, their lack of interest in a hypothetical digital Canadian dollar was heavily influenced by perceptions of government overreach.” 

As reported by LifeSiteNews in September, the BOC has already said that plans to create a digital “dollar,” also known as a central bank digital currency (CBDC), have been shelved. 

The shelving came after the BOC had already forged ahead and filed a trademark for a digital currency, as LifeSiteNews previously reported.  

Officials from Canada’s central bank said that a digital currency, or electronic “loonie,” will no longer be considered after years of investigating bringing one to market.  

However, that does not mean the BOC is still not researching or exploring other options when it comes to digital money. As noted by researchers, despite there being some “interest” in a “hypothetical digital Canadian dollar,” that “interest does not necessarily translate to adoption.” 

“Most participants felt well served by current means of payment,” noted the study, adding, “Individuals who support the issuance of a hypothetical digital Canadian dollar did not imagine themselves using it regularly.” 

“They were skeptical of the need for this new form of money and of its reliability,” read the report, which also noted, “They did not trust that concepts were secure or that their personal information would be kept private.” 

Given the results from the report, the bank concluded that “[b]road early adoption” of a digital dollar “is unlikely given that available payment methods meet the needs of most users.” 

“Financially vulnerable segments often have the most to gain from this payment method but are most resistant to adoption. Important considerations for appeal and adoption potential include universal merchant acceptance, low costs, easy access, simplified online payments, shared payment features, budgeting tools and customizable security and privacy settings,” it noted.  

Digital currencies have been touted as the future by some government officials, but, as LifeSiteNews has reported before, many experts warn that such technology would restrict freedom and could be used as a “control tool” against citizens, similar to China’s pervasive social credit system.  

Most Canadians do not want a digital dollar, as previously reported by LifeSiteNews. A public survey launched by the BOC to gauge Canadians’ taste for a digital dollar revealed that an overwhelming majority of citizens want to “leave cash alone” and not proceed with a digital iteration of the national currency.  

The BOC last August admitted that the creation of a CBDC is not even necessary, as many people rely on cash to pay for things. The bank concluded that the introduction of a digital currency would only be feasible if consumers demanded its release.  

In August, LifeSiteNews also reported that the Conservative Party is looking to gather support for a bill that would outright ban the federal government from ever creating a digital currency and make it so that cash is kept as the preferred means of settling debts.    

Conservative leader Pierre Poilievre promised that if he is elected prime minister, he would stop any  implementation of a “digital currency” or a compulsory “digital ID” system.  

Prominent opponents of CBDCs have been strongly advocating that citizens use cash whenever possible and boycott businesses that do not accept cash payments as a means of slowing down the imposition of CBDCs.  

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