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Comparing four federal finance ministers in moments of crisis

Published

2 months ago

9 minute read

From the Fraser Institute

By Grady Munro, Milagros Palacios and Jason Clemens

The sudden resignation of federal finance minister (and deputy prime minister) Chrystia Freeland, hours before the government was scheduled to release its fall economic update has thrown an already badly underperforming government into crisis. In her letter of resignation, Freeland criticized the government, and indirectly the prime minister, for “costly political gimmicks” and irresponsible handling of the country’s finances and economy during a period of great uncertainty.

But while Freeland’s criticism of recent poorly-designed federal policies is valid, her resignation, in some ways, tries to reshape her history into that of a more responsible finance minister. That is, however, ultimately an empirical question. If we contrast the performance of the last four long-serving (more than three years) federal finance ministers—Paul Martin (Liberal), Jim Flaherty (Conservative), Bill Morneau (Liberal) and Freeland (Liberal)—it’s clear that neither Freeland nor her predecessor (Morneau) were successful finance ministers in terms of imposing fiscal discipline or overseeing a strong Canadian economy.

Let’s first consider the most basic measure of economic performance, growth in per-person gross domestic product (GDP), adjusted for inflation. This is a broad measure of living standards that gauges the value of all goods and services produced in the economy adjusted for the population and inflation. The chart below shows the average annual growth in inflation-adjusted per-person GDP over the course of each finance minister’s term. (Adjustments are made to reflect the effects of temporary recessions or unique aspects of each minister’s tenure to make it easier to compare the performances of each finance minister.)

Sources: Statistics Canada Table 17-10-0005-01, Table 36-10-0222-01; 2024 Fall Economic Statement

By far Paul Martin oversaw the strongest growth in per-person GDP, with an average annual increase of 2.4 per cent. Over his entire tenure spanning a decade, living standards rose more than 25 per cent.

The average annual increase in per-person GDP under Flaherty was 0.6 per cent, although that includes the financial recession of 2008-09. If we adjust the data for the recession, average annual growth in per-person GDP was 1.4 per cent, still below Martin but more than double the rate if the effects of the recession are included.

During Bill Morneau’s term, average annual growth in per-person GDP was -0.5 per cent, although this includes the effects of the COVID recession. If we adjust to exclude 2020, Morneau averaged a 0.7 per cent annual increase—half the adjusted average annual growth rate under Flaherty.

Finally, Chrystia Freeland averaged annual growth in per-person GDP of -0.3 per cent during her tenure. And while the first 18 or so months of her time as finance minister, from the summer of 2020 through 2021, were affected by the COVID recession and the subsequent rebound, the average annual rate of per-person GDP growth was -0.2 per cent during her final three years. Consequently, at the time of her resignation from cabinet in 2024, Canadian living standards are projected to be 1.8 per cent lower than they were in 2019.

Let’s now consider some basic fiscal measures.

Martin is by far the strongest performing finance minister across almost every metric. Faced with a looming fiscal crisis brought about by decades of deficits and debt accumulation, he reduced spending both in nominal terms and as a share of the economy. For example, after adjusting for inflation, per-person spending on federal programs dropped by 5.9 per cent during his tenure as finance minister (see chart below). As a result, the federal government balanced the budget and lowered the national debt, ultimately freeing up resources via lower interest costs for personal and business tax relief that made the country more competitive and improved incentives for entrepreneurs, businessowners, investors and workers.

*Note: Freeland’s term began in 2020, but given the influence of COVID, 2019 is utilized as the baseline for the overall change in spending. Sources: Statistics Canada Table 17-10-0005-01, Table 36-10-0130-01; Fiscal Reference Tables 2024; 2024 Fall Economic Statement

Flaherty’s record as finance minister is mixed, in part due to the recession of 2008-09. Per-person program spending (inflation adjusted) increased by 11.6 per cent, and there was a slight (0.6 percentage point) increase in spending as a share of the economy. Debt also increased as a share of the economy, although again, much of the borrowing during Flaherty’s tenure was linked with the 2008-09 recession. Flaherty did implement tax relief, including extending the business income tax cuts started under Martin, which made Canada more competitive in attracting investment and fostering entrepreneurship.

Both Morneau and Freeland recorded much worse financial performances than Flaherty and Martin. Morneau increased per-person spending on programs (inflation adjusted) by 37.1 per cent after removing 2020 COVID-related expenditures. Even if a more generous assessment is used, specifically comparing spending in 2019 (prior to the effects of the pandemic and recession) per-person spending still increased by 18.1 per cent compared to the beginning of his tenure.

In his five years, Morneau oversaw an increase in total federal debt of more than $575 billion, some of which was linked with COVID spending in 2020. However, as multiple analyses have concluded, the Trudeau government spent more and accumulated more debt during COVID than most comparable industrialized countries, with little or nothing to show for it in terms of economic growth or better health performance. Simply put, had Morneau exercised more restraint, Canada would have accumulated less debt and likely performed better economically.

Freeland’s tenure as finance minister is the shortest of the four ministers examined. It’s nonetheless equally as unimpressive as that of her Trudeau government predecessor (Morneau). If we use baseline spending from 2019 to adjust for the spike in spending in 2020 when she was appointed finance minister, per-person spending on programs by the federal government (inflation adjusted) during Freeland’s term increased by 4.1 per cent. Total federal debt is expected to increase from $1.68 trillion when Freeland took over to an estimated $2.2 trillion this year, despite the absence of a recession or any other event that would impair federal finances since the end of COVID in 2021. For some perspective, the $470.8 billion in debt accumulated under Freeland is more than double the $220.3 billion accumulated under Morneau prior to COVID. And there’s an immediate cost to that debt in the form of $53.7 billion in expected federal debt interest costs this year. These are taxpayer resources unavailable for actual services such as health care.

Freeland’s resignation from cabinet sent shock waves throughout the country, perhaps relieving her of responsibility for the Trudeau government’s latest poorly-designed fiscal policies. However, cabinet ministers bear responsibility for the performance of their ministries—meaning Freeland must be held accountable for her previous budgets and the fiscal and economic performance of the government during her tenure. Compared to previous long-serving finances ministers, it’s clear that Chrystia Freeland, and her Trudeau predecessor Bill Morneau, failed to shepherd a strong economy or maintain responsible and prudent finances.

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Business

Worst kept secret—red tape strangling Canada’s economy

Published on February 22, 2025

By

From the Fraser Institute

By Matthew Lau

In the past nine years, business investment in Canada has fallen while increasing more than 30 per cent in the U.S. on a real per-person basis. Workers in Canada now receive barely half as much new capital per worker than in the U.S.

According to a new Statistics Canada report, government regulation has grown over the years and it’s hurting Canada’s economy. The report, which uses a regulatory burden measure devised by KPMG and Transport Canada, shows government regulatory requirements increased 2.1 per cent annually from 2006 to 2021, with the effect of reducing the business sector’s GDP, employment, labour productivity and investment.

Specifically, the growth in regulation over these years cut business-sector investment by an estimated nine per cent and “reduced business start-ups and business dynamism,” cut GDP in the business sector by 1.7 percentage points, cut employment growth by 1.3 percentage points, and labour productivity by 0.4 percentage points.

While the report only covered regulatory growth through 2021, in the past four years an avalanche of new regulations has made the already existing problem of overregulation worse.

The Trudeau government in particular has intensified its regulatory assault on the extraction sector with a greenhouse gas emissions cap, new fuel regulations and new methane emissions regulations. In the last few years, federal diktats and expansions of bureaucratic control have swept the auto industry, child care, supermarkets and many other sectors.

Again, the negative results are evident. Over the past nine years, Canada’s cumulative real growth in per-person GDP (an indicator of incomes and living standards) has been a paltry 1.7 per cent and trending downward, compared to 18.6 per cent and trending upward in the United States. Put differently, if the Canadian economy had tracked with the U.S. economy over the past nine years, average incomes in Canada would be much higher today.

Also in the past nine years, business investment in Canada has fallen while increasing more than 30 per cent in the U.S. on a real per-person basis. Workers in Canada now receive barely half as much new capital per worker than in the U.S., and only about two-thirds as much new capital (on average) as workers in other developed countries.

Consequently, Canada is mired in an economic growth crisis—a fact that even the Trudeau government does not deny. “We have more work to do,” said Anita Anand, then-president of the Treasury Board, last August, “to examine the causes of low productivity levels.” The Statistics Canada report, if nothing else, confirms what economists and the business community already knew—the regulatory burden is much of the problem.

Of course, regulation is not the only factor hurting Canada’s economy. Higher federal carbon taxes, higher payroll taxes and higher top marginal income tax rates are also weakening Canada’s productivity, GDP, business investment and entrepreneurship.

Finally, while the Statistics Canada report shows significant economic costs of regulation, the authors note that their estimate of the effect of regulatory accumulation on GDP is “much smaller” than the effect estimated in an American study published several years ago in the Review of Economic Dynamics. In other words, the negative effects of regulation in Canada may be even higher than StatsCan suggests.

Whether Statistics Canada has underestimated the economic costs of regulation or not, one thing is clear: reducing regulation and reversing the policy course of recent years would help get Canada out of its current economic rut. The country is effectively in a recession even if, as a result of rapid population growth fuelled by record levels of immigration, the GDP statistics do not meet the technical definition of a recession.

With dismal GDP and business investment numbers, a turnaround—both in policy and outcomes—can’t come quickly enough for Canadians.

Matthew Lau

Adjunct Scholar, Fraser Institute
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Business

‘Out and out fraud’: DOGE questions $2 billion Biden grant to left-wing ‘green energy’ nonprofit`

Published on February 22, 2025

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From LifeSiteNews

By Calvin Freiburger

The EPA under the Biden administration awarded $2 billion to a ‘green energy’ group that appears to have been little more than a means to enrich left-wing activists.

The U.S. Environmental Protection Agency (EPA) under the Biden administration awarded $2 billion to a “green energy” nonprofit that appears to have been little more than a means to enrich left-wing activists such as former Democratic candidate Stacey Abrams.

Founded in 2023 as a coalition of nonprofits, corporations, unions, municipalities, and other groups, Power Forward Communities (PFC) bills itself as “the first national program to finance home energy efficiency upgrades at scale, saving Americans thousands of dollars on their utility bills every year.” It says it “will help homeowners, developers, and renters swap outdated, inefficient appliances with more efficient and modernized options, saving money for years ahead and ensuring our kids can grow up with cleaner, pollutant-free air.”

The organization’s website boasts more than 300 member organizations across 46 states but does not detail actual activities. It does have job postings for three open positions and a form for people to sign up for more information.

The Washington Free Beacon reported that the Trump administration’s Department of Government Efficiency (DOGE) project, along with new EPA administrator Lee Zeldin, are raising questions about the $2 billion grant PFC received from the Biden EPA’s National Clean Investment Fund (NCIF), ostensibly for the “affordable decarbonization of homes and apartments throughout the country, with a particular focus on low-income and disadvantaged communities.”

PFC’s announcement of the grant is the organization’s only press release to date and is alarming given that the organization had somehow reported only $100 in revenue at the end of 2023.

“I made a commitment to members of Congress and to the American people to be a good steward of tax dollars and I’ve wasted no time in keeping my word,” Zeldin said. “When we learned about the Biden administration’s scheme to quickly park $20 billion outside the agency, we suspected that some organizations were created out of thin air just to take advantage of this.” Zeldin previously announced the Biden EPA had deposited the $20 billion in a Citibank account, apparently to make it harder for the next administration to retrieve and review it.

“As we continue to learn more about where some of this money went, it is even more apparent how far-reaching and widely accepted this waste and abuse has been,” he added. “It’s extremely concerning that an organization that reported just $100 in revenue in 2023 was chosen to receive $2 billion. That’s 20 million times the organization’s reported revenue.”

Daniel Turner, executive director of energy advocacy group Power the Future, told the Beacon that in his opinion “for an organization that has no experience in this, that was literally just established, and had $100 in the bank to receive a $2 billion grant — it doesn’t just fly in the face of common sense, it’s out and out fraud.”

Prominent among PFC’s insiders is Abrams, the former Georgia House minority leader best known for persistent false claims about having the state’s gubernatorial election stolen from her in 2018. Abrams founded two of PFC’s partner organizations (Southern Economic Advancement Project and Fair Count) and serves as lead counsel for a third group (Rewiring America) in the coalition. A longtime advocate of left-wing environmental policies, Abrams is also a member of the national advisory board for advocacy group Climate Power.

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