Business
Federal government keeps violating self-imposed fiscal rules
From the Fraser Institute
By Jake Fuss and Grady Munro
By continually violating its own fiscal anchor, the Trudeau government has rendered the rule meaningless and abandoned the discipline it’s meant to impose.
Last week, after tabling the Trudeau government’s fall fiscal update, which includes evermore spending and borrowing, Finance Minister Chrystia Freeland called it a “responsible fiscal plan.” Upon closer scrutiny, however, the finance minister has once again abandoned her self-imposed fiscal rules and continues to spend, borrow and tax at unsustainable levels.
Fiscal rules, also known as “fiscal anchors,” help guide policy on government spending, taxes and borrowing. They’re supposed to prevent a deterioration in government finances, with an eye on ensuring debt is sustainable for future generations.
After taking office in 2015, the Trudeau government announced its fiscal anchor—balance the budget by fiscal year 2019-20. When the government quickly realized it would not achieve this goal, it dropped a new fiscal anchor—reduce Canada’s debt-to-GDP ratio, a common measure of a country’s ability to pay back its debt. However, the 2019 fall fiscal update revealed the government had violated its new fiscal anchor before the pandemic, as debt-to-GDP ticked up slightly from 30.8 to 31.0 per cent. In other words, federal debt grew slightly faster than the Canadian economy.
Then the government spent and borrowed hundreds of billions during COVID, driving debt-to-GDP up to 47.2 per cent in 2020-21. Afterwards, as the economy rebounded, the ratio levelled off and stabilized around 42 per cent in 2022-23.
Last week, Minister Freeland indicated the government will violate its own fiscal anchor at least two more times—debt-to-GDP will increase to 42.4 per cent in 2023-24 then climb higher in 2024-25. Again, federal debt is growing faster than the Canadian economy.
By continually violating its own fiscal anchor, the Trudeau government has rendered the rule meaningless and abandoned the discipline it’s meant to impose. There’s little direction for federal finances and almost nothing to ensure the government is disciplined with spending and debt growth. In such a scenario, politics—not responsible fiscal principles—governs decisions over the public purse.
So, what are the consequences to this wholly undisciplined approach to fiscal policy?
All else equal, a rising debt-to-GDP ratio means that debt interest costs will rise relative to the size of the economy. Spending on rising debt interest costs will divert money away from government programs and/or crowd out any fiscal room for tax relief for Canadian families.
And debt interest costs are rising rapidly. In 2020/21, when interest rates were at historic lows, the federal government spent $20.4 billion on debt interest. This year, interest costs will reach a projected $46.5 billion, more than double what they were three years ago. And will hit a projected $60.7 billion by 2028/29—double what the government plans to spend on employment insurance benefits that year.
Finally, according to last week’s fiscal update, debt-to-GDP will begin to decline after 2024/25, but this should be taken with a huge grain of salt since this government has consistently increased spending and debt beyond its original projections. And there’s nothing preventing the government from scrapping these commitments like they have with all their other fiscal anchors. Given the government’s clear preference for spending financed by borrowing, our debt-to-GDP ratio will likely continue to grow.
Unfortunately, there are few signs the Trudeau government will transform into a responsible steward of public finances and take meaningful steps to control debt and debt interest costs. And of course, Canadian taxpayers will pay the price.
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Business
Five Government Programs That Musk’s Government Efficiency Agency Could Put On The Chopping Block
From the Daily Caller News Foundation
Federally-funded progressive pet projects and wasteful spending alike could be on the way out if Elon Musk succeeds in his quest to improve the administrative state’s efficiency.
Right-of-center policy experts previously told the Daily Caller News Foundation that they hope Musk’s Department of Government Efficiency will improve federal data collection practices and cut wasteful expenditures. Musk took to X on Thursday to express his openness to reeling in federal spending on transgender research and diversity, equity and inclusion (DEI) programs.
In July, the United States of America’s debt surpassed $35 trillion for the first time in history, with the balance expected to exceed $36 trillion in the near future.
Over the past year, the DCNF has collected dozens of examples of wasteful or otherwise strange programs the Biden-Harris administration has pumped public funds into, feeding the deficit. Here are five examples of what could come under scrutiny from Musk’s efficiency agency.
1. Improper Payments
The Biden-Harris administration is on track to have paid out over $1 trillion in improper payments by the time President-elect Donald Trump takes office and the Department of Government Efficiency gets to work in January 2025. Federal guidelines define an improper payment as any disbursement “made by the government to the wrong person, in the wrong amount or for the wrong reason.”
Common examples of improper payments include erroneous payments made through the Medicaid and Medicare systems, misallocated COVID-19 aid, benefits paid to dead people and taxpayer funds lost to fraud. Large sums of improper payments are not a problem unique to the Biden-Harris administration. During Trump’s first administration, the government disclosed $814 billion in inflation-adjusted improper payments.
Not all improper payments are totally lost after being sent out. The Biden-Harris administration managed to recover about $51 billion of the $235.7 billion it erroneously disbursed in 2023.
Both parties have expressed concern about the magnitude of improper payments put out by the federal government, with a bipartisan group of legislators in the House pushing the Improper Payments Transparency Act, a bill introduced in May that would require the president’s budget request to identify common payment errors and formulate ways to address them.
2. Tax Dollars Funding LGBT Activism Abroad
Spokespeople for the State Department have previously told the DCNF that promoting LGBT inclusion in other countries is a “foreign policy priority” of the Biden-Harris administration, a statement supported by materials the agency publishes.
Under President Joe Biden, the State Department and The United States Agency for International Development (USAID) have spent millions working to fund transgender surgeries, bankroll LGBT activists and engage pro-transgender in social engineering abroad.
USAID, for instance, gave $2 million to Asociacion Lambda, a Guatemala-based organization, to both engage in pro-LGBT activism and to provide people with “gender-affirming care,” federal records show. Asociacion Lambda attempts to influence elections in Guatemala and meets with government officials to engage in advocacy.
The State Department, meanwhile, funded the production of a play in North Macedonia where God is portrayed as a bisexual that has constant sex with hermaphroditic angels and communists are painted in a positive light.
“Americans are far from agreeing on how to deal with race, sex, and ‘gender’ in schools and workplaces,” Heritage Foundation senior research fellow Simon Hankinson wrote in a 2022 report. “Even when U.S. national consensus is there, restraint is always necessary in attempting to convince other nations that one’s own values should be theirs. The U.S. must balance the likelihood of convincing potential allies with the likelihood of hostile reactions to perceived interference or ‘cultural colonialism.’”
Other programs the Biden-Harris administration approved to push homosexuality and transsexuality abroad included bankrolling the creation of 2,500 “LGBTQI+ allies” in India, using tax dollars to “foster a united and equal queer-feminist discourse in Albanian society,” staging a film festival in Portugal featuring incestual and pedophilic themes, funding gay pride events across the globe and deploying public funds to support the work of “queer” Muslim writers living in India.
3. ‘Indigenous Knowledge’ Grants
In November 2022, the Biden-Harris administration released a memo defining indigenous knowledge as “a body of observations, oral and written knowledge, innovations, practices, and beliefs developed by Tribes and Indigenous Peoples through interaction and experience with the environment” that “is applied to phenomena across biological, physical, social, cultural and spiritual systems.”
From 2021 to 2023, the Biden-Harris administration approved more than $831.8 million in grants that encouraged the use of indigenous knowledge in service of achieving the Biden administration’s goals.
The Department of Commerce, for instance, earmarked $575 million in June 2023, asking third parties to utilize indigenous knowledge to help mitigate the impact of weather events caused by climate change. The Centers for Disease Control and Prevention, meanwhile, made an estimated $18.75 million available in August 2023 for grantees to apply “Indigenous knowledge methods,” alongside other approaches, as part of a program intended to test experimental methods of reducing drug overdose.
The 2022 Biden-Harris administration memo ordered agencies to “recognize and, as appropriate, apply Indigenous Knowledge in decision making, research, and [their] policies.” Agencies were also instructed to consult with Indian spiritual leaders and not to assume that indigenous knowledge is incorrect when “Western” science contradicts it, with the memo calling science a tool of oppression.
“When I start hearing things about how there’s this other dimension where, you know, the animals interact with humans at a different level of reality, that’s just not a thing,” City University professor and biologist Massimo Pigliucci told the Washington Free Beacon, in reference to their reporting on the subject. “You can believe that and you have the right to believe it but it’s not empirical evidence.”
4. DEI at the VA and Beyond
As hundreds of thousands of veterans were stuck on benefit waitlists, Biden’s Department of Veterans Affairs (VA) took at least a dozen actions aimed at expanding DEI within the agency.
The VA had 378,000 claims from veterans that had been pending for at least 125 days at the end of 2023, according to the agency. In September 2021, shortly after Biden took office, the VA had just 210,854 claims that had been backlogged for the same length of time.
While the number of disabled veterans waiting on support grew, the Biden-Harris VA was focused on doing things like establishing an Inclusion, Diversity, Equity and Access Council, working on making its contractors more racially diverse and engaging in marketing campaigns aimed at reaching out to the “LGBTQ+” community and female veterans.
The VA is far from the only federal department that leaned into DEI in recent years as the various branches of the federal government collectively spend millions per year on diversity trainings. The Department of Health and Human Services alone spends tens of million per year on DEI programs and staff. Roughly a third of the funds disbursed by the National Science Foundation promoted DEI, according to a recent Senate Commerce Committee report.
5. Inventing Gay Landmarks
America’s national parks faced an estimated $23.3 billion maintenance backlog at the end of the 2023 fiscal year, according to a July report from the Congressional Research Service. While public parks languished, the National Park Service (NPS) diverted public funds to its “Underrepresented Communities Grant Program,” which is designed to diversify America’s historical landmarks to better include racial and sexual minorities.
During Biden’s tenure in office, NPS paid an array of government agencies and nonprofits to seek out “historic” LGBT locations to be placed on the National Register of Historic Places. When NPS approves a landmark to be added to the National Register of Historic Places, its owner becomes entitled to special tax breaks, with many state and local governments offering special grant programs for such locations.
NPS, for example, paid out $75,000 to Washington State’s Department of Archaeology and Historic Preservation for it to identify an “outstanding representation of queer history” and nominate it to be listed on the National Register of Historic Places. The service has spent $7.5 million on its Underrepresented Communities Grant Program since 2014, with Congress apportioning $1.25 million for the 2024 iteration of the program.
America’s national parks are billions of dollars behind on maintenance related to roads, buildings, water systems and campgrounds, according to the congressional report.
Business
It’s time to supersize charitable tax credits, not political ones
From the Canadian Taxpayers Federation
By Jay Goldberg
Are political parties more valuable than charities?
You’d be hard pressed to find a single Canadian that thinks so, but that’s how they’re treated under today’s tax system.
The way tax credits are handed out in Canada needs to be revamped. The system is broken, both federally and provincially. It’s time to stop giving big tax credits for political donations. Instead, let’s give tax breaks to folks when they donate to charity.
Consider this present-day scenario.
Last year, Sally donated $250 to the Conservative Party of Canada and another $250 to Save the Children. Jim donated $250 to the Ontario Liberals and another $250 to the Make a Wish Foundation.
When tax time came, the federal government let Sally use both her donations to lower her tax bill.
But one donation counted a lot more against Sally’s tax bill than the other. And it’s not the one that you might think.
For the Save the Children donation, Sally’s $250 donation netted a $44.50 credit towards her tax bill. The province added in another $15.90. That means she will get $60.40 back at tax time.
How about her political contribution?
Because it was a federal political party donation, Sally only received a federal tax credit. But the feds will give her back $187.50 when she files her taxes.
In other words, the amount Sally gets back from donating to a political party is three times as much as her donation to charity.
For those paying income tax, the tax credit situation for a $250 donation, both to charities and political parties, is identical at the provincial level.
Jim gets $60.40 back at tax time from his charitable donation and $187.50 from Queen’s Park for his provincial political donation.
That means the money Jim gets back from his provincial political donation, like Sally’s at the federal level, is three times larger than what he gets back for donating to charity.
On what sane planet should both the feds and Queen’s Park be giving out tax credits for political donations so much more generous than tax credits for making donations to charity?
Making a terminally ill child’s wishes come true should be valued more than helping politicians pay for political attack ads.
Canada’s provincial and federal governments should take funds that go toward tax credits for political donations and reallocate them to tax credits for charitable donations. Credits for political donations should be scrapped.
Tax credits exist to try to encourage behaviour. The whole idea behind it is that if you give folks a bit of a financial incentive to make a donation, they’ll be more likely to do so.
That makes sense when it comes to charities. It’s a worthy policy goal to have a tax credit in place to encourage Canadians to make donations to organizations that work to make a meaningful difference in people’s lives.
But why should taxpayers be incentivizing donations to political parties? Why encourage Canadians to shell out money that will end up paying for leaflets, lawn signs and attack ads?
Some try to justify the tax credit regime by arguing that because political parties can’t take corporate or union donations, they need help encouraging individuals to make donations.
But ask anyone on the street, and they’ll tell you it’s charitable donations, not political ones, that should be encouraged.
If political parties can’t raise as much money without the tax credit, they should just spend less money. No one is going to shed tears over seeing fewer attack ads on television.
The sole goal of a political party is to get themselves elected. Why should they get credits of up to 75 per cent while charitable donations get trivial treatment?
It’s time to stop treating political parties like charities on steroids. That means putting political donation tax credits on the chopping block. Instead, the same money can and should be used to supersize tax credits for charitable donations.
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