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Federal budget fails to ‘break the glass’ on Canada’s economic growth crisis

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From the Fraser Institute

By Grady Munro and Jake Fuss

“You’ve seen those signs that say, ‘In emergency, break glass.’ Well, it’s time to break the glass,” said Carolyn Rogers, Bank of Canada senior deputy governor, in a speech last month while warning that Canadians may see living standards fall if nothing is done to promote economic growth.

In advance of the Trudeau government’s 2024 budget released on Tuesday, many called for the government to finally address Canada’s stagnant economic growth. But despite the growing consensus that this issue represents a national crisis, the Trudeau government simply continued with the same approach that helped get us to this point in the first place.

“You’ve seen those signs that say, ‘In emergency, break glass.’ Well, it’s time to break the glass,” said Carolyn Rogers, Bank of Canada senior deputy governor, in a speech last month while warning that Canadians may see living standards fall if nothing is done to promote economic growth.

Ten days later in a joint interview, former Quebec premier Jean Charest and former federal finance minister Bill Morneau urged the Trudeau government to focus on economic growth in the budget. Specifically, Morneau suggested Canada needs more business investment “from other sources than the government.”

These are just two examples of the growing consensus that Canada is suffering an economic and productivity growth crisis.

Economic growth generally refers to the increase in gross domestic product (GDP), which measures the total output of the economy and is driven by three factors—the labour supply, the capital stock and the efficiency in which labour and capital are used.

Canada’s GDP growth in recent years has been driven almost entirely by the labour supply, as the country has experienced historically high population growth. However, although GDP in aggregate has been growing, GDP per person (a common indicator of living standards) has been declining at an alarming rate. Since the second quarter of 2022 (when it peaked post-COVID), inflation-adjusted GDP per person has fallen from $60,178 to $58,111 in the fourth quarter of 2023—and has declined during five of those six quarters, and now sits below where it was at the end of 2014.

Labour productivity, which is the amount of output (GDP) produced per hour worked, has seen a similar decline. Statistics Canada recently reported that the fourth quarter of 2023 represented the first time productivity increased since the beginning of 2022, and that for the prior six quarters labour productivity had declined or remained stagnant.

The consequence of both declining GDP per person and lower productivity, as Carolyn Rogers warned, is a lower standard of living for Canadians. To reverse this crisis, the Trudeau government must address the cause of Canada’s weak economic growth—a severe lack of business investment.

Business investment provides the capital needed to equip workers with the technology and equipment to become more efficient and productive. Yet according to a recent study, from 2014 to 2021, inflation-adjusted business investment per worker in Canada fell from $18,363 to $14,687.

This decline in business investment is partly the result of the Trudeau government’s disinterest in encouraging entrepreneurship and private-sector business investment. Indeed, the government’s  approach of high spending, more regulation and significant involvement in the economy has done little to foster widespread economic growth.

And by raising capital gains taxes on individuals and businesses, which the Trudeau government did in this latest budget, in the words of former Bank of Canada governor David Dodge, the government is doing “exactly the wrong thing” to boost productivity. Rather, these measures simply provide more reason for people and businesses to invest elsewhere.

This latest Trudeau budget doubles down on a failed approach. Spending is up, government involvement in the economy is increasing, and increased capital gains taxes will only make our investment challenges more difficult. We need a complete reversal in policy to solve our economic growth crisis.

Business

Canadian Businessman Kevin O’Leary Proposes ‘Erasing The Border’ Between US, Canada To Combat China

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From the Daily Caller News Foundation

By Jason Cohen

Canadian businessman Kevin O’Leary proposed on Thursday that the United States and Canada eliminate the border between them to form a united front against China and Russia.

Trump suggested in a Christmas Day Truth Social post that Canada should become the United States’ 51st state, which the president-elect asserted would boost the northern country’s economy and provide it with military security. O’Leary, on “The Big Money Show,” said the potential economic and security benefits of the countries uniting are attractive prospects.

WATCH:

“There’s 41 million Canadians, basically the population of California, sitting on the world’s largest amounts of all resources, including the most important, energy and water. Canadians over the holidays the last two days have been talking about this. They want to hear more,” O’Leary said. “And so there’s obviously a lot of issues and more details, but what this could be is the beginning of an economic union. Think about the power of combining the two economies, erasing the border between Canada and the United States and putting all that resource up to the northern borders where China and Russia are knocking on the door.”

“So secure that, give a common currency, figure out taxes across the board, get everything trading both ways, create a new, almost EU-like passport. I like this idea and at least half of Canadians are interested. The problem is the government’s collapsing in Canada right now,” he continued. “Nobody wants [Canadian Prime Minister Justin] Trudeau to negotiate this deal. I don’t want him doing it for me. So I’m going to go to Mar-a-Lago. I’ll start the narrative. The 41 millions Canadians, I think most of them would trust me on this deal.”

Trump in November threatened to place a 25% tariff on all products from Canada and Mexico unless they do more to curb the flow of illegal immigration and drugs entering the United States, with the Canadian government subsequently boosting its border security apparatus. Trudeau also met with Trump at his Mar-a-Lago residence following the president-elect’s threat.

 

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Global Affairs Canada Foreign Aid: An Update

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The Audit

 

 David Clinton

Canadian Taxpayers are funding programs in foreign countries with little effect

Back in early November I reached out to Global Affairs Canada (GAC) for a response to questions I later posed in my What Happens When Ministries Go Rogue post. You might recall how GAC has contributed billions of dollars to the Global Fund to Fight AIDS, Tuberculosis and Malaria, only to badly miss their stated program objectives. Here, for the record, is my original email:

I’m doing research into GAC program spending and I’m having trouble tracking down information. For instance, your Project Browser tool tells me that, between 2008 and 2022, Canada committed $3.065 billion to the Global Fund to Fight AIDS, Tuberculosis and Malaria. The tool includes very specific outcomes (like a drop of at least 40 per cent in malaria mortality rates). Unfortunately, according to reliable public health data, none of the targets were even close to being achieved – especially in the years since 2015.

Similarly, Canada’s $125 million of funding to the World Food Programme between 2016 and 2021 to fight hunger in Africa roughly corresponded to a regional rise in malnutrition from 15 to 19.7 percent of the population since 2013.

I’ve been able to find no official documentation that GAC has ever conducted reviews of these programs (and others like it) or that you’ve reconsidered various funding choices in light of such failures. Is there data or information that I’m missing?

Just a few days ago, an official in the Business Intelligence Unit for Global Affairs Canada responded with a detailed email. He first directed me to some slightly dated but comprehensive assessments of the Global Fund, links to related audits and investigations, and a description of the program methodology.

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To their credit, the MOPAN 2022 Global Fund report identified five areas where important targets were missed, including the rollout of anti-corruption and fraud policies and building resilient and sustainable systems for health. That self-awareness inspires some confidence. And, in general, the assessments were comprehensive and serious.

What initially led me to suggest that GAC was running on autopilot and ignoring the real world impact of their spending was, in part, due to the minimalist structure of the GAC’s primary reporting system (their website). But it turns out that the one-dimensional objectives listed there did not fully reflect the actual program goals.

Nevertheless, none of the documents addressed my core questions:

  • Why had the programs failed to meet at least some of their mortality targets?
  • Why, after years of such shortfalls, did GAC continue to fully fund the programs?

The methodology document did focus a lot of attention on modelling counterfactuals. In other words, estimating how many people didn’t die due to their interventions. One issue with that is, by definition, counterfactuals are speculative. But the bigger problem is that, given at least some of the actual real-world results, they’re simply wrong.

As I originally wrote:

Our World in Data numbers give us a pretty good picture of how things played out in the real world. Tragically, Malaria killed 562,000 people in 2015 and 627,000 in 2020. That’s a jump of 11.6 percent as opposed to the 40 percent decline that was expected. According to the WHO, there were 1.6 million tuberculosis victims in 2015 against 1.2 million in 2023. That’s a 24.7 percent drop – impressive, but not quite the required 35 per cent.

I couldn’t quickly find the precise HIV data mentioned in the program expectations, but I did see that HIV deaths dropped by 26 percent between 2015 and 2021. So that’s a win.

I’m now inclined to acknowledge that the Global Fund is serious about regularly assessing their work. It wouldn’t be fair to characterize GAC operations as completely blind.

But at the same time, over the course of many years, the actual results haven’t come close to matching the programs objectives. Why has the federal government not shifted the significant funding involved to more effective operations?

The Audit is a reader-supported publication. To receive new posts and support my work, consider becoming a free or paid subscriber.

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