Federal government poised to pile on more spending and debt

Next week, the Trudeau government will release its fall fiscal update, which, considering the sorry state of federal finances, should demonstrate a newfound approach to spending and borrowing. But don’t hold your breath.

Although the Trudeau government describes itself as “fiscally responsible,” in reality it has a track record of unrestrained spending and large budget deficits. And it’s overseen the five highest years (2018 to 2022) of per-person program spending (adjusted for inflation) in Canadian history. Even excluding COVID-related spending, 2020 and 2021 remain the two highest years of per-person spending on record.

The Trudeau government has also run deficits every year since it took office in 2015—according to forecasts, this year’s deficit will eclipse $40 billion even though COVID is in the rearview mirror. Consequently, federal debt will have increased nearly $900 billion since 2014/15, up to $1.9 trillion for 2023/24.

While the prime minister and Finance Minister Chrystia Freeland often downplay the level of debt accumulation by noting that Canada has the lowest net debt-to-GDP ratio among the G7 countries (Germany, Italy, Japan, France, the United Kingdom and the United States), this is misleading.

Net debt is calculated as total (gross) debt minus all financial assets, with the implicit assumption that those assets could be used to offset debt. However, the Canada and Quebec Pension Plans (CPP and QPP) are included in the financial assets used to calculate net debt in Canada. But because CPP/QPP assets are needed for existing and future retirees, in reality they can’t be used to offset government debt.

Therefore, a better measure is gross debt, which measures all liabilities that require future payment of interest and/or principal by the debtor to the creditor. Compared to 29 other advanced economies, including the G7 countries, Canada’s gross debt as a share of the economy ranks 20th—meaning Canada is among the most indebted countries.

Clearly, the Trudeau government has been anything but fiscally responsible. And the current levels of spending and borrowing impose real costs on Canadians.

For example, since 2014/15 federal government debt interest costs have nearly doubled—reaching an estimated $43.9 billion, or 9.6 per cent of total revenues, for 2023/24. This means roughly one in every 10 dollars Ottawa collects from Canadian taxpayers this year will go towards debt interest costs, rather than government services or tax relief.

In light of these fiscal realities, if the Trudeau government wants to move anywhere close to a balanced budget in the foreseeable future, it must take meaningful steps in the upcoming fall fiscal update to restrain spending growth.

Unfortunately, this is unlikely to happen.

In a recent report, the Parliamentary Budget Officer (PBO) estimated that, due to spending increases, the federal government will run a deficit of $46.5 billion for 2023/24—$6.4 billion more than the government’s budget projections in March.

The government will also likely include new spending in the upcoming fiscal update meant to address housing and affordability. And will likely soon table legislation on national pharmacare, which the PBO estimates will cost $11.2 billion in 2024/25 alone.

Finally, not only does this unprecedented level of spending rack up mountains of debt, according to Bank of Canada Governor Tiff Macklem, “government spending is starting to get in the way of getting inflation back to target.” In other words, more spending by the federal government to address affordability concerns could actually worsen the problem by keeping inflation (and interest rates) higher than would otherwise be the case, eroding the purchasing power of Canadians.

While Ottawa’s fiscal situation demands a fiscally responsible fall fiscal update, it’s likely we’ll see much of the same next week from the Trudeau government—more spending and more borrowing.

Authors:

Jake Fuss

Director, Fiscal Studies, Fraser Institute

Grady Munro

Junior Policy Analyst, Fraser Institute

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Alberta

Alberta government can soften blow of Ottawa’s capital gains tax hike

Published on September 14, 2024

Todayville

From the Fraser Institute

By Tegan Hill

Several wealthy and successful industrialized countries (Switzerland, New Zealand, Singapore) and several U.S. states (including Texas, Alaska, South Dakota, Wyoming) impose no capital gains taxes. Of course, Alberta competes with these U.S. states for investment.

Earlier this year, the Trudeau government increased the inclusion rate on capital gains over $250,000 for individuals and on all capital gains realized by corporations and trusts. This tax hike will almost surely have a negative impact on investment and entrepreneurship, but the Smith government can lessen the blow in Alberta.

In simple terms, capital is money invested in an asset—e.g. a business, factory, intellectual property, stock or bond—to create economic benefit. A capital gain occurs when that investment is sold for more than its original purchase price.

Prior to the tax hike, half the value of a capital gain (50 per cent) was taxed by the government. Trudeau increased this “inclusion rate” to 66 per cent—and that has real economic consequences.

Why? Because capital gains taxes impose comparatively large costs on the economy by reducing the reward from productive activities such as savings, investment, risk-taking and entrepreneurship, which are essential for strong economic growth. Capital taxes are among the most economically damaging forms of taxation for this very reason—they reduce the incentive to innovate and invest.

Take an entrepreneur, for example, who’s deciding whether or not to risk their own capital to provide (and profit from) a new technology, product or service. The higher the capital gains tax, the lower the potential reward from this investment, which means they will be less inclined to make the investment or perhaps undertake the investment elsewhere (another country, for example) in a more tax-friendly environment. Less investment means less innovation, job creation, wage growth and ultimately lower living standards. In other words, Trudeau’s capital gains tax hike will not only hurt Canadians with capital gains but other Canadians who benefit from the knockoff effects of investment.

Largely due to this problem, several wealthy and successful industrialized countries (Switzerland, New Zealand, Singapore) and several U.S. states (including Texas, Alaska, South Dakota, Wyoming) impose no capital gains taxes. Of course, Alberta competes with these U.S. states for investment.

Previous federal governments also understood the disincentive that comes with capital gains taxes. In 2000, the Liberal government of Jean Chretien meaningfully reduced the tax rate applied to capital gains stating that we must “introduce tax measures that encourage entrepreneurship and risk taking.”

Today, fortunately, the Smith government can take action.

When governments tax your capital gain, they include a share of the gain in your personal income and it is taxed at your personal income tax rate. The Alberta government could simply add a step in the tax return process for Albertans to remove capital gains from the provincial income tax calculation. As a result, the capital gains tax would only apply to the federal portion of your income taxes.

The Alberta government doesn’t have to sit back and accept Trudeau’s capital gains tax hike. Eliminating capital gains taxes from the provincial income tax in Alberta would send a powerful message to potential entrepreneurs, investors and businessowners that the province is open for business—and that benefits all Albertans.

Author:

Tegan Hill

Director, Alberta Policy, Fraser Institute

National

Trudeau’s $9 Million Condo Scandal: Elites Party in New York While Canadians Struggle at Home

Published on September 13, 2024

Todayville

From The Opposition News Network

By Dan Knight

It’s no secret that Justin Trudeau and his Liberal cronies love to live large. But this latest scandal? It’s a new low, even for them. We’re talking about a $9 million luxury condo—yes, you heard that right—on Billionaire’s Row in New York City, bought for a Trudeau-appointed diplomat while millions of Canadians are barely scraping by.

What’s worse? Trudeau himself seems to be right at the heart of this.

Let’s break down the facts that emerged during Meeting No. 137 of the Standing Committee on Government Operations and Estimates (OGGO), and you’ll see exactly how Trudeau’s government, under the watchful eye of his loyal minister Mélanie Jolie, pulled this off.

The Timeline of Trudeau’s Elitist Condo Scheme:

1. February 2023: Tom Clark, a former journalist and long-time friend of the Liberal elites, is appointed by Trudeau’s government as Consul General in New York. A cozy appointment, no doubt, for someone with deep ties to the Liberal establishment.

2. April 27, 2023: The Prime Minister himself—yes, Justin Trudeau—drops by Clark’s old New York residence for a dinner. Imagine the wine flowing and the conversation going, all while the rest of Canada is dealing with a collapsing economy, skyrocketing inflation, and an ongoing housing crisis.

3. April 28, 2023: The very next day, Trudeau and Clark are seen together in a motorcade cruising the streets of New York City. What exactly were they discussing? A new condo perhaps? It’s hard to believe that this kind of luxury real estate plan wasn’t at least mentioned during their cozy ride.

4. Spring/Summer 2023: Global Affairs Canada—overseen by Trudeau’s trusted Minister Jolie—suddenly identifies problems with the old residence. That’s right, just a few months after Trudeau’s visit, the decision is made to start looking for a new, more luxurious residence. Coincidence? Hardly.

5. April 17, 2024: An email from Global Affairs states that Tom Clark was instrumental in giving the green light for the purchase of the $9 million condo. The deal is pushed through, and the taxpayer is stuck with the bill.

6. July 12, 2024: The media finally breaks the story about the purchase of the $9 million luxury condo on Billionaire’s Row, one of the most expensive neighborhoods in New York. Public outrage begins to grow as details about this opulent purchase come to light.

7. July 25, 2024: A bogus correction is issued by Global Affairs, claiming that Tom Clark was not involved in the purchase. Conveniently, this correction comes one day after this very committee ordered documents on Clark’s involvement. Sound fishy? It should.

Clark’s Cozy Deal and Trudeau’s Role

Here’s what we know: Trudeau’s government made a $9 million purchase for Tom Clark, a man with deep ties to the Liberals, shortly after Trudeau himself visited Clark’s old residence. Now, emails show Clark was directly involved in the decision to buy the new place, but when he appeared before the committee, he suddenly couldn’t remember any involvement. Instead, he passed the blame onto Global Affairs Canada.

Now, here’s where it gets worse. Documents show that Clark was instrumental in the decision to buy this opulent residence. Emails from within Minister Mélanie Joly’s own department reveal that Clark himself gave the “green light” on the purchase. But when Clark appeared before the committee, he suddenly had a case of selective amnesia, denying any involvement in the decision. According to him, it was all Global Affairs Canada’s doing. He claims he was just an innocent bystander, touring the property “out of curiosity.”

Are we really supposed to believe that? This is a man who, for decades, worked in media and is well-versed in how power operates. The idea that Clark wasn’t aware of the optics or didn’t say a word when shown this mansion is laughable. What’s even more convenient is that a “correction” from Global Affairs magically appeared one day after the committee requested documents about Clark’s involvement. They want us to believe that all of this is just a coincidence, a bureaucratic hiccup. Sure.

But let’s not forget who runs Global Affairs—none other than Minister Mélanie Jolie, one of Trudeau’s closest allies. Jolie has twice appointed Clark to key roles: once as head of an advisory committee recommending appointments to CBC, and then again as Consul General in New York. And it’s Jolie’s department that now seems to be covering for Clark in this scandal, issuing a correction that conveniently contradicts their own internal emails.

So, who’s responsible? The buck stops with Minister Jolie—and ultimately with Justin Trudeau.

The Real Problem: Trudeau’s Elitism and Out-of-Touch Government

While Tom Clark is now enjoying his luxurious $9 million condo—complete with swimming lanes, golf simulators, and some of the most expensive appliances money can buy—ordinary Canadians are lining up at food banks, barely making rent, and trying to survive in Trudeau’s broken economy.

Let’s break down just how absurd this situation is: for this $9 million palace, Clark pays a laughable $1,800 a month. Meanwhile, the actual cost of living in a place like that? Around $42,000 a month. The difference? You, the Canadian taxpayer, are picking up the tab for Clark’s personal playground while you struggle to pay your bills.

And let’s be clear: Clark wasn’t some innocent bystander in this. He toured the condo, saw the luxury, and didn’t once think to say, “Hey, maybe this is too much, especially when people back home can’t even afford to live.” Why? Because this is the Trudeau mindset. The elites deserve the best, and the rest of us? We can pay for it.

Why Jolie Must Testify

This scandal goes straight to the top. Mélanie Jolie must come before the committee and explain how her department managed to spend $9 million on a condo for one of Trudeau’s buddies. She needs to answer for the emails that say Clark was involved, even though they’re now trying to claim he wasn’t. And, most of all, she needs to explain why this government continues to indulge its inner circle while Canadians suffer.

It’s time for real accountability. Trudeau and his ministers cannot continue to dodge these scandals, pretending like they have no part in the decisions being made. Minister Jolie needs to testify, and the Canadian public deserves answers. After all, you’re the ones paying for it.

This isn’t just about one condo; it’s about a government that’s lost touch with reality, that believes it can spend your money however it likes, with no consequences. The Liberals claim to care about the middle class, but when it comes down to it, they’re more interested in living large—and making sure their friends do too.

Minister Jolie, it’s time to step up and explain why you let this happen. Canadians are watching.

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