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Economy

Federal government’s fiscal plan raises red flags

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5 minute read

From the Fraser Institute

By Jason Clemens, Jake Fuss and Grady Munro

The Trudeau government recently released its fiscal update, which provides revised estimates of spending, taxing and borrowing. A careful examination of the update raises several red flags about the state of Canada’s national finances.

First, some analyses raised concerns about the state of federal borrowing, which are well founded. While the government downplays the level of potential borrowing over the six years covered in the fiscal update, the projected deficit—that is, the amount of spending in a specific year in excess of the amount of revenues—will reach $40.0 billion this year (2023-24) and $38.4 billion next year. However, the estimate for next year does not include the national pharmacare plan that the Trudeau government has agreed to as part of its governing agreement with the NDP.

The Parliamentary Budget Officer (PBO) estimated that a national pharmacare plan modelled on the Quebec system would cost $11.2 billion in 2024-25 (the provinces would likely cover some of this). The 2019 report of the Advisory Council on the Implementation of National Pharmacare, better known as the Hoskins Commission, estimated that a national pharmacare program would cost $15.3 billion in 2027.

Consequently, if the government introduces national pharmacare next year, without any offsetting reduction in other spending and/or meaningful tax increases, the deficit for 2024-25 would reach $49.6 billion, not the reported $38.4 billion. The higher borrowing needed to finance pharmacare continues each and every year, meaning that the overall level of federal debt would also increase.

A second red flag, which the fiscal update ignored, relates to Canada meeting its international commitment for defence spending. Canada is a party to the NATO agreement calling on member countries to spend 2.0 per cent of GDP on national defence. In 2022, Canada spent just 1.3 per cent of GDP on defence. According to the PBO, for the federal government to meet its NATO spending obligations next year (2024-25), it must spend an additional $14.5 billion. That means annual borrowing could be as high as $64.1 billion if both additional defence and pharmacare spending were financed entirely by new borrowing.

And there are legitimate reasons to believe the government would not raise taxes to finance a new pharmacare program. According to polling data in 2022, 79 per cent of survey respondents supported a new national pharmacare program—but support plummeted to just 40 per cent when the new hypothetical program was financed by higher taxes, specifically a higher GST.

That brings us to the third red flag. The total national debt will reach a projected $2.1 trillion next year (excluding the additional potential spending and borrowing noted on pharmacare and defence) and the interest costs on that debt are expected to reach $52.4 billion. For reference, the total national debt stood at $1.1 trillion in 2015-16 when the Trudeau Liberals took office.

By 2028-29, the last year included in the fiscal update, the federal government expects interest costs to reach $60.7 billion. That’s only slightly less than total planned health-care spending by Ottawa for the same year ($62.9 billion). And this is actually a conservative estimate since it excludes potential higher borrowing for programs such as pharmacare and thus higher debt levels. It also ignores any possibility of a downgrading in the ratings for Canada’s debt, which would result in higher interest costs. And it ignores the risk of an economic slowdown or recession that would further increase borrowing and ultimately debt interest costs.

While the federal government, particularly the prime minister and his finance minister, continue to describe their stewardship of federal finances as prudent and responsible, close examination of their fiscal update reveals that federal finances may soon deteriorate from their already worrying position.

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Economy

The White Pill: Big Government Can Be Defeated (Just Ask the Soviet Union)

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From StosselTV

People have been “black pilled” to think the world is doomed. Michael Malice says there’s hope.

In his book, “The White Pill,” he argues that tyrannical regimes, like the Soviet Union, can be toppled.

Today, media and universities distort history, and push socialism. It used to be worse. The New York Times once covered up Stalin’s famine, even as millions starved. Why? Malice says it’s because NYT star reporter Walter Duranty liked communism’s utopian promises, and status he got from his exclusive Stalin interviews.

Malice says the fall of the Soviet Union should give us hope that America can resist the universities and media’s brainwashing – or any tyranny that someone is “black pilled” about.

Our video explains Malice’s “white pill” and why you might want to take it.

After 40+ years of reporting, I now understand the importance of limited government and personal freedom.

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Libertarian journalist John Stossel created Stossel TV to explain liberty and free markets to young people.

Prior to Stossel TV he hosted a show on Fox Business and co-anchored ABC’s primetime newsmagazine show, 20/20.

Stossel’s economic programs have been adapted into teaching kits by a non-profit organization, “Stossel in the Classroom.” High school teachers in American public schools now use the videos to help educate their students on economics and economic freedom. They are seen by more than 12 million students every year.

Stossel has received 19 Emmy Awards and has been honored five times for excellence in consumer reporting by the National Press Club. Other honors include the George Polk Award for Outstanding Local Reporting and the George Foster Peabody Award.

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To get our new weekly video from Stossel TV, sign up here: https://www.johnstossel.com/#subscribe

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Alberta

Emissions cap threatens Indigenous communities with higher costs, fewer opportunities

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Dale Swampy, founder of the National Coalition of Chiefs. Photograph for Canadian Energy Centre

From the Canadian Energy Centre

By Deborah Jaremko

National Coalition of Chiefs founder Dale Swampy says Canada needs a more sustainable strategy for reducing emissions

The head of the National Coalition of Chiefs (NCC) says Ottawa’s proposed oil and gas emissions cap couldn’t come at a worse time for Indigenous communities.

Dale Swampy says the cap threatens the combined prospect of higher costs for fuel and groceries, along with fewer economic opportunities like jobs and revenues from involvement in energy projects.   

“Any small fluctuation in the economy is affected on our communities tenfold because we rely so much on basic necessities. And those are going to be the products that increase in price significantly because of this,” says Swampy, who founded the NCC in 2016 to fight poverty through partnerships with the natural resource sector.

He says that of particular concern is the price of fuel, which will skyrocket under the emissions cap because it will force reduced Canadian oil and gas production.

Analysis by S&P Global found that meeting the cap’s requirements would require a production cut of over one million barrels of oil equivalent per day (boe/d) in 2030, and 2.1 million boe/d in 2035.

“Production gets reduced, and the cost of fuel goes up,” Swampy says.

“Our concern is that everything that has to do with both fuel for transportation and fuel to heat our homes is amplified on First Nation communities because we live in rural Canada. We live in isolated communities, and it costs much more for us to operate our daily lives because we have to travel much further than anybody in a metropolitan area. So, it’s going to impact us greatly.”

Indigenous communities are already stretched financially, he says.

“What you could buy in 2019 terms of meat and produce is almost double now, and even though the inflation rate is trending downwards, we still haven’t gotten over the impact of what it costs for a bag of groceries these days,” Swampy says.

“In our communities, more than half are under the age of 21, so there’s a lot of bigger families out there struggling to just get food on the table.”

The frustrating timing of the cap is that it comes amid a rising tide of Indigenous involvement in Canadian oil and gas. Since 2022, more than 75 Indigenous communities in Alberta and B.C. have agreed to become part owners of energy projects.

Three major projects – the Trans Mountain Pipeline Expansion, Coastal GasLink Pipeline and LNG Canada export terminal – together have spent more than $11 billion with Indigenous and local businesses.

“We’re at a turning point right now. There’s a real drive towards getting us involved in equity opportunities, employment opportunities, and contracting opportunities,” Swampy says.

“Everybody who didn’t talk to us in the past is coming to our front door and saying, ‘Do you want to work with us?’ It couldn’t come at a worse time when we have this opportunity. The emissions cap is going to reduce the amount of activity, and it’s going to reduce the amount of investment,” he says.

“We’re part of that industry now. We’re entrenched in it now, and we have to support it in order to support our people that work in this industry.”

Economic growth, and more time, is needed to fund development of low emissions energy sources without ruining the economy, he says.

“I think we need more consultation. We’d like to see them go back to the table and try to incorporate more of a sustainable strategy for emission reductions,” Swampy says.

“We’re the only country in the world that’s actually incorporating this type of legislation. Do you think the rest of the world is going to do this type of thing? No, they’re going to eat our lunch. They’re going to replace the production that we give up, they’re going to excel in the economy because of it, and they won’t talk about significant emission reduction initiatives.”

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