Business
Growing the government won’t help Canada’s economy
From the Fraser Institute
By Jake Fuss and Grady Munro and Alex Whalen
Empirical research suggests that economic growth is maximized when the size of government falls between 24 and 32 per cent of GDP. In other words, when governments spend in excess of this range, the economy will not grow as much as it would if government operated within that threshold
Canada is suffering from an economic growth crisis, and governments across the country should reassess their policies. Governments (particularly the federal government) have recently taken a more active role in the economy through increased spending and bureaucracy. However, policymakers must take a step back and recognize that growing government doesn’t lead to growth in the economy.
Canada’s economy has been stagnant for the last decade. From 2013 to 2022, per-person GDP (a broad measure of living standards) grew at its slowest pace since the 1930s, after accounting for inflation. And more recent data shows that in the fourth quarter of 2023, per-person GDP (inflation-adjusted) stood at $58,111—which is $51 per person lower than it was at the end of 2014. Simply put, Canadians have experienced a decade of dismal growth, and are now actually worse off than they were a decade ago.
During this time, many governments in Canada have adopted an approach of greater involvement in the economy and significantly higher spending. Take the federal government, for example.
Since 2014/15, the government has increased annual program spending (total spending minus debt interest) by roughly 75 per cent, from $256.3 billion to $448.2 billion in 2022/23. Moreover, the Trudeau government has recorded the five-highest years of federal spending in Canadian history, after accounting for population growth and inflation. Much of this spending has gone towards expanding Ottawa’s role in the economy through increased transfers, business subsidies or new programs such as $10-a-day daycare and national dental care.
Provincial governments in Quebec, Nova Scotia and British Columbia (to name a few) have also recently reached historical highs in per-person program spending (even after excluding COVID-related spending). Simply put, governments across the country have been increasing spending and becoming more involved in the economy.
One way to measure the size of government, that allows for the comparison of jurisdictions over time, is known as total consolidated government spending as a share of GDP. This measure includes all spending at the local, provincial and federal levels in a jurisdiction and compares that level to the size of the economy.
According to a recent study, in 2022 (the latest year of available data) the size of government in Canada was 40.5 per cent of GDP compared to 38.2 per cent in 2014.
Among the provinces, total government spending ranged from 26.8 per cent of GDP in Alberta to 63.0 per cent of GDP in Nova Scotia. Compared to 2014, the size of government grew in eight of 10 provinces—only Prince Edward Island and B.C. experienced declines in government spending as a share of the economy. It’s also important to note that this is simply government spending. The true size of government, when accounting for things like regulation, is even larger.
Growing government matters because it influences economic growth. When the size of government is below a certain level, it lacks the resources to deliver services such as policing, courts or national defence—which are essential to a functioning economy. On the other hand, when government is too big it engages in activities best left to the free market and effectively crowds-out private-sector activity that contributes to economic growth. Therefore, when a government is too small or too big, economic growth (and consequently living standards) suffer.
Empirical research suggests that economic growth is maximized when the size of government falls between 24 and 32 per cent of GDP. In other words, when governments spend in excess of this range, the economy will not grow as much as it would if government operated within that threshold—all else equal. Based on the numbers presented above, it’s clear the vast majority of governments in Canada are too big. For nine of 10 provinces and the federal government, their spending exceeded 32 per cent of GDP in 2022.
As Canadians look for solutions to address a stagnating economy and falling living standards, governments should recognize that taking a more active role in the economy won’t solve the problem—and will likely make it worse.
Authors:
Business
DOGE already on the job: How Elon Musk and Vivek Ramaswamy caused the looming government shutdown
Legislators had 24 hours to read through 1,547 pages. Ramaswamy read them. Musk presented an alternative. The process collapsed.
Elon Musk and Vivek Ramaswamy are flexing their muscles even before President Elect Donald Trump’s inauguration, spiking a bipartisan spending bill. The bill was introduced on Tuesday with voting scheduled for Wednesday. Legislators were under massive pressure to approve of the spending bill or risk a government shut down. Problem is, the bill was over 1,500 pages long!
Chances are, the bill would have passed and in the ensuing weeks as details became known the public would have been outraged by all the extra plans to spend / waste taxpayer dollars. Legislators would have apologized by saying they simply had no time to read everything and they were desperate to avoid a shut down.
That’s where the new DOGE comes in. First Ramaswamy somehow read the bill and posted a video to TikTok and X to inform voters what they were going to be paying for in this new bill.
@vivekramaswamy Congress wants to waste your money without telling you, make sure that doesn’t happen
From MXMNews
The newly formed Department of Government Efficiency (DOGE), led by Elon Musk and Vivek Ramaswamy, successfully campaigned to halt the bipartisan continuing resolution (CR) in Congress. Musk and Ramaswamy took to X, rallying conservatives against the 1,547-page stopgap funding measure they argue is riddled with wasteful spending and unnecessary policy provisions.
Musk, a billionaire entrepreneur and vocal advocate for government reform, characterized the bill as a “pork-barrel” monstrosity. “Unless @DOGE ends the careers of deceitful, pork-barrel politicians, the waste and corruption will never stop,” Musk posted on X, adding that lawmakers who support the bill should be “voted out in two years.”
Meanwhile, Ramaswamy, a former Republican presidential candidate and DOGE co-chair, proposed an alternative to the bulky spending bill. Sharing a draft of his one-page resolution, he described it as a minimalist approach that avoids exacerbating historical spending excesses. “This is what a clean CR looks like,” he wrote, emphasizing the need for fiscal restraint.
Musk and Ramaswamy posted this to X.
Shorter = better. This bill is only 116 pages, instead of 1,500+ pages. Took a LOT less time to read. Glad to see the following garbage from yesterday’s bill removed in the current version: – Congressional pay raise/health benefits – 17 miscellaneous commerce bills – Random new pandemic policies, like funding for “biocontainment research laboratories” – Renewal of the “Global Engagement Center,” a key player in the federal censorship state
In record time, the public was informed, politicians were influenced by outraged taxpayers, and politicians blamed each other for a faulty bill and were forced to go back to the drawing board.
It’s all explained very well in this video presentation from Kaizen Asiedu, a Harvard graduate in philosophy who makes videos informing Americans about complicated political matters.
Friday’s deadline to avoid a government shutdown looms. Musk posted on X that a shutdown would be “infinitely better than passing a horrible bill.” His DOGE partner Vivek Ramaswamy urged Americans to contact their representatives to “stop the steal of your tax dollars.”
And President-elect Donald Trump posted this: “If Democrats threaten to shut down the government unless we give them everything they want, then CALL THEIR BLUFF,”.
Should the spending bill fail, it will mark a significant victory for DOGE and a potential turning point in efforts to reform Washington’s spending habits.
From the Daily Caller News Foundation
By Harold Hutchison
Republican Sen. Joni Ernst of Iowa introduced legislation Thursday that would send nearly a third of the federal employees out of the Washington, D.C. metropolitan area.
The bill, known as the ‘Decentralizing and Reorganizing Agency Infrastructure Nation-wide To Harness Efficient Services, Workforce Administration, and Management Practices (DRAIN THE SWAMP) Act, is far more sweeping than the “Returning SBA to Main Street Act,” legislation introduced by Ernst Dec. 12 that focused on the Small Business Administration (SBA). Ernst told the Daily Caller News Foundation that the move would improve services for Americans while saving billions of taxpayer dollars.
“Federal employees don’t want to work in Washington, so why should taxpayers be footing the bill? By relocating at least 30% of the federal workforce, we will save billions and improve service for veterans, small businesses, and all Americans. The bureaucrat laptop class has been out of the office for far too long, and it is time to get them back to work for the American people,” Ernst told the Daily Caller News Foundation.
The legislation requires most government agencies to “promote geographic diversity, including consideration of rural markets” when relocating employees from the D.C. area and to “ensure adequate staffing throughout the regions of the Administration, to promote in-person customer service.” Exceptions are made for fewer than 10 agencies, most involved in national security, like the Department of Defense, Central Intelligence Agency, the Department of Homeland Security, and the Department of Energy.
The legislation also requires most federal agencies to reduce the total office space in their Washington, D.C., headquarters by at least 30% in a two-year timeframe following the bill’s enactment.
Ernst issued a 60-page report Dec. 5 that covered findings from Ernst’s investigations into telework since she sent an August 2023 letter to 24 government agencies requesting a review of the issues involved with telecommuting.
Previous investigations by Ernst into telecommuting by federal employees detailed the issues that telework created involving locality pay, an adjustment to the basic pay of civilian employees in the federal government intended to make sure that federal employees have comparable compensation to private-sector counterparts in a given area of the country. In the August 2023 letter sent to 24 government agencies requesting a review of the issues involved with telecommuting, Ernst cited a media account of a VA employee who attended a staff meeting while taking a bubble bath.
Ernst issued a 60-page report Dec. 5 that covered findings from her investigations into the issues involved with telecommuting by federal employees. Those findings detailed issues that telework created involving locality pay, an adjustment to the basic pay of civilian employees in the federal government intended to make sure that federal employees have comparable compensation to private-sector counterparts in a given area of the country.
In one case cited by the senator on multiple occasions, a United States Agency for International Development (USAID) employee received locality pay for the Washington, D.C., area despite living full-time in Florida. The employee in question retired before the conclusion of the probe, according to a summary posted on the USAID inspector general’s site April 30.
Ernst’s legislation mandates that affected federal agencies “ensure that the rate of pay of the employee is calculated based on the pay locality for the permanent duty station of the employee.”
The Office of Management and Budget did not immediately respond to a request for comment from the DCNF.
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