Budget update proves Trudeau isn’t serious about federal finances

From the Canadian Taxpayers Federation

“when you pay the GST on a hockey stick, a tank of gas or bar of soap, every penny will go to interest charges on the federal debt. In fact, interest charges will surpass federal health-care transfers next year”

Taxpayers should brace for impact based on the finance minister’s latest projections.

Interest charges on the federal debt will go from $47 billion this year to $61 billion in 2028-29, according to the budget update.

But what does $61 billion mean to you?

Sixty-one billion is the same amount the government plans to collect with the GST in 2028-29.

So, in a few short years, when you pay the GST on a hockey stick, a tank of gas or bar of soap, every penny will go to interest charges on the federal debt.

In fact, interest charges will surpass federal health-care transfers next year.

Let the shock sink in just a little deeper: what could we do if it weren’t for the federal debt?

We could virtually double federal health spending.

Or we could completely eliminate the GST in a couple years.

Somehow the government is communicating these perplexing projections with considerable calmness.

Finance Minister Chrystia Freeland claims “the foundation of our Fall Economic Statement is our responsible fiscal plan.”

But last year the government spent $474 billion. And this year the feds plan on spending $489 billion. By 2029, the government will be spending $595 billion a year.

Pro-tip for Freeland: when you spend billions of dollars more every year, you’re saving money wrong.

And all that spending comes on top of an already ballooned base line. Even before the pandemic, the Trudeau government was spending all-time highs. And that’s after accounting for inflation and population differences.

Last year’s $35-billion deficit will increase to $40 billion this year. The feds have no plan to balance the budget. And that’s pushing up interest charges.

Again, brace yourself, because in 2028, federal debt interest charges will cost taxpayers $61 billion. For context, pre-pandemic interest charges were around $20 billion a year.

Meanwhile, if you’re hoping for meaningful tax relief from this government, you shouldn’t hold your breath.

“I absolutely understand that after three difficult years – with a global pandemic, global inflation, and global interest rate hikes – Canadians are worn out, frustrated, and feeling the squeeze,” Freeland said. “What Canadians deserve today is for us to address the very real pain that so many are feeling.”

The easiest and simplest way for Freeland to help Canadians is to stop taking so much money from taxpayers’ wallets in the first place.

But Freeland and Prime Minister Justin Trudeau aren’t even willing to provide the simplest forms of tax relief like ending the sales tax-on-tax at the gas pumps. The GST on the carbon tax alone will cost taxpayers $429 million this year.

The government isn’t willing to end the anti-democratic escalator that increases alcohol taxes every year without a single vote in Parliament. Next year’s hike will cost taxpayers about $100 million.

The government isn’t even willing to extend the same relief to all Canadians that it gave Atlantic Canadian families and remove the carbon tax from everyone’s home heating bills. The carbon tax on natural gas will cost the average family $300 this year.

The budget update is an admission that the government has a spending problem, but it still isn’t serious about managing our finances or providing real tax relief.

The solution for Trudeau and Freeland should be simple: put down the credit card and pick up some scissors.

This column was originally published in the Toronto Sun on Nov. 24, 2023.

Up Next

$6.5 billion investment! World’s first ‘net-zero’ ethyelene plant announced for Fort Saskatchewan

Don't Miss

Indigenous loan program must include oil and gas

Todayville

Todayville is a digital media and technology company. We profile unique stories and events in our community. Register and promote your community event for free.

Follow Author

Trump Abolishes DEI for the Feds

Business / 5 hours ago

Trump, taunts and trade—Canada’s response is a decade out of date

Business / 5 hours ago

Trade retaliation might feel good—but it will hurt Canada’s economy

Business

Trump, taunts and trade—Canada’s response is a decade out of date

Published on January 21, 2025

Todayville

From the Fraser Institute

By Ross McKitrick

Canadian federal politicians are floundering in their responses to Donald Trump’s tariff and annexation threats. Unfortunately, they’re stuck in a 2016 mindset, still thinking Trump is a temporary aberration who should be disdained and ignored by the global community. But a lot has changed. Anyone wanting to understand Trump’s current priorities should spend less time looking at trade statistics and more time understanding the details of the lawfare campaigns against him. Canadian officials who had to look up who Kash Patel is, or who don’t know why Nathan Wade’s girlfriend finds herself in legal jeopardy, will find the next four years bewildering.

Three years ago, Trump was on the ropes. His first term had been derailed by phony accusations of Russian collusion and a Ukrainian quid pro quo. After 2020, the Biden Justice Department and numerous Democrat prosecutors devised implausible legal theories to launch multiple criminal cases against him and people who worked in his administration. In summer 2022, the FBI raided Mar-a-Lago and leaked to the press rumours of stolen nuclear codes and theft of government secrets. After Trump announced his candidacy in 2022, he was hit by wave after wave of indictments and civil suits strategically filed in deep blue districts. His legal bills soared while his lawyers past and present battled well-funded disbarment campaigns aimed at making it impossible for him to obtain counsel. He was assessed hundreds of millions of dollars in civil penalties and faced life in prison if convicted.

This would have broken many men. But when he was mug-shotted in Georgia on Aug. 24, 2023, his scowl signalled he was not giving in. In the 11 months from that day to his fist pump in Butler, Pennsylvania, Trump managed to defeat and discredit the lawfare attacks, assemble and lead a highly effective campaign team, knock Joe Biden off the Democratic ticket, run a series of near daily (and sometimes twice daily) rallies, win over top business leaders in Silicon Valley, open up a commanding lead in the polls and not only survive an assassination attempt but turn it into an image of triumph. On election day, he won the popular vote and carried the White House and both Houses of Congress.

It’s Trump’s world now, and Canadians should understand two things about it. First, he feels no loyalty to domestic and multilateral institutions that have governed the world for the past half century. Most of them opposed him last time and many were actively weaponized against him. In his mind, and in the thinking of his supporters, he didn’t just defeat the Democrats, he defeated the Republican establishment, most of Washington including the intelligence agencies, the entire corporate media, the courts, woke corporations, the United Nations and its derivatives, universities and academic authorities, and any foreign governments in league with the World Economic Forum. And it isn’t paranoia; they all had some role in trying to bring him down. Gaining credibility with the new Trump team will require showing how you have also fought against at least some of these groups.

Second, Trump has earned the right to govern in his own style, including saying whatever he wants. He’s a negotiator who likes trash-talking, so get used to it and learn to decode his messages.

When Trump first threatened tariffs, he linked it to two demands: stop the fentanyl going into the United States from Canada and meet our NATO spending targets. We should have done both long ago. In response, Trudeau should have launched an immediate national action plan on military readiness, border security and crackdowns on fentanyl labs. His failure to do so invited escalation. Which, luckily, only consisted of taunts about annexation. Rather than getting whiny and defensive, the best response (in addition to dealing with the border and defence issues) would have been to troll back by saying that Canada would fight any attempt to bring our people under the jurisdiction of the corrupt U.S. Department of Justice, and we will never form a union with a country that refuses to require every state to mandate photo I.D. to vote and has so many election problems as a result.

As to Trump’s complaints about the U.S. trade deficit with Canada, this is a made-in-Washington problem. The U.S. currently imports $4 trillion in goods and services from the rest of the world but only sells $3 trillion back in exports. Trump looks at that and says we’re ripping them off. But that trillion-dollar difference shows up in the U.S. National Income and Product Accounts as the capital account balance. The rest of the world buys that much in U.S. financial instruments each year, including treasury bills that keep Washington functioning. The U.S. savings rate is not high enough to cover the federal government deficit and all the other domestic borrowing needs. So the Americans look to other countries to cover the difference. Canada’s persistent trade surplus with the U.S. ($108 billion in 2023) partly funds that need. Money that goes to buying financial instruments can’t be spent on goods and services.

So the other response to the annexation taunts should be to remind Trump that all the tariffs in the world won’t shrink the trade deficit as long as Congress needs to borrow so much money each year. Eliminate the budget deficit and the trade deficit will disappear, too. And then there will be less money in D.C. to fund lawfare and corruption. Win-win.

Ross McKitrick

Professor of Economics, University of Guelph

Business

Trade retaliation might feel good—but it will hurt Canada’s economy

Published on January 21, 2025

Todayville

From the Fraser Institute

By Steven Globerman

To state the obvious, president-elect Donald Trump’s threat to impose an across-the-board 25 per cent tariff on Canadian exports to the United States has gotten the attention of Canadian policymakers who are considering ways to retaliate.

Reportedly, if Trump makes good on his tariff threat, the federal government may levy retaliatory tariffs on a wide range of American-made goods including orange juice, ceramic products such as sinks and toilets, and some steel products. And NDP Leader Jagmeet Singh said he wants Canada to block exports of critical minerals such as aluminum, lithium and potash to the United States, saying that if Trump “wants to pick a fight with Canada, we have to make sure it’s clear that it’s going to hurt Americans as well.”

Indeed, the ostensible goal of tariff retaliation is to inflict economic damage on producers and workers in key U.S. jurisdictions while minimizing harm to Canadian consumers of products imported from the U.S. The hope is that there will be sufficient political blowback from Canada’s retaliation that Republican members of Congress will eventually view Trump’s tariffs as an unacceptable risk to their re-election and pressure him to roll them back.

But while Canadians might feel good about tit-for-tat retaliation against Trump’s trade bullying and taunting, it might well make things worse for the Canadian economy. For example, even selective tariffs will increase the cost of living for Canadians as importers of tariffed U.S. goods pass the tax along to domestic consumers. Retaliatory tariffs might also harm productivity growth in Canada by encouraging increased domestic production of goods that are produced relatively inefficiently here at home compared to in the U.S. Make no mistake—once trade protections are put in place, the beneficiaries have a strong vested interest in having the protections maintained indefinitely. While Trump will be gone in four years, tariffs imposed by Ottawa to retaliate against his actions will likely remain in place for longer.

The U.S. president has substantial leeway under existing legislation to implement trade measures such as tariffs. While Trump has several legislative options to impose new tariffs against Canada and Mexico, he’ll likely use the International Emergency Powers Act (IEEPA), which grants the president power to regulate imports and impose duties in response to an emergency involving any unusual and extraordinary threat to national security, foreign policy or the economy. According to Trump’s rhetoric, the emergency is illegal immigration and drug traffic originating in Canada and Mexico.

However risible Trump’s emergency claim might be when applied to Canada, overturning any action under the IEEPA, or some other enabling legislation, would require a legal challenge. And in fact, because no president has yet used the IEEPA to impose tariffs, the legality of Trump’s actions remains in doubt. In this context, a group of governors sympathetic to Canada’s position (and their own political fortunes) might spearhead a legal challenge to Trump’s tariffs with encouragement and support from the Canadian government.

To be sure, any legal challenge would take time to work its way through the U.S. court system. But it will likely also take time for domestic opposition to Trump’s tariffs to gain sufficient political momentum to effect any change. Indeed, given the current composition of Congress, it’s far from clear that a Team Canada effort to rally broad anti-tariff support among U.S. politicians and business leaders would bear fruit while Trump is in office.

While direct retaliation might be emotionally satisfying to Canadians, it would likely do more economic harm than good. And while a legal challenge will not obviate the immediate economic harm Canada will suffer from Trump’s tariffs, it might help limit the ability of Trump (and any future president) to use trade policy for political leverage in our bilateral relationship. After all, there’s no guarantee that the next president will not be a Trump acolyte.