Poor policies responsible for stagnant economy and deteriorating federal finances

The Trudeau government was elected in 2015 based in part on a new approach to government policy, promising greater prosperity for Canadians through short-term deficit spending, lower taxes for most Canadians, and a more direct and active role for government in economic development. However, the result has been economic stagnation and a marked deterioration in the country’s finances. If Canada is to restore its economic and fiscal health, Ottawa must enact fundamental policy reform.

The Trudeau government has significantly increased spending from $256.2 billion in 2014-15 to a projected $449.8 billion in 2023-24 (excluding debt interest costs) to expand existing programs and create new programs.

In 2016, the government increased the top personal income tax rate on entrepreneurs, professionals and businessowners from 29 per cent to 33 per cent. Consequently, the combined top personal income tax rate (federal and provincial) now exceeds 50 per cent in eight provinces and the country’s average top combined rate in 2022 ranked fifth-highest among 38 OECD countries. This represents a serious competitive challenge for Canada to attract and retain entrepreneurs, investors and skilled professionals (e.g. doctors) we badly need.

And while the Trudeau government reduced the middle personal income tax rate, it also eliminated several tax credits. Due to the combination of these two policy changes, 86 per cent of middle-income families now pay higher personal income taxes.

The Trudeau government also borrowed to help finance new spending, triggering a string of budget deficits. As a result, federal gross debt has ballooned to $1.9 trillion (2022-23) and will reach a projected $2.4 trillion by 2027-28, fueling a marked growth in interest costs, which now consume substantial levels of revenue unavailable for government services or tax reduction.

Simply put, the Trudeau government has produced large increases in government spending, taxes and borrowing, which have not translated into a more robust and vibrant economy.

For example, from 2013 to 2022, growth in per-person GDP, the broadest measure of living standards, was the weakest on record since the 1930s. Prospects for the future, given current policies, are not encouraging. According to the OECD, Canada will record the lowest rate of per-person GDP growth among 32 advanced economies during the periods 2020 to 2030 and 2030 to 2060. Countries such as Estonia, South Korea and New Zealand are expected to vault past Canada and achieve higher living standards by 2060.

Canada’s economic growth crisis is due in part to the decline in business investment, which is critical to increasing living standards because it equips workers with tools and technologies to produce more and provide higher-quality goods and services. The Trudeau government has dampened investment by increasing regulatory barriers, particularly in the energy and mining sectors, and running deficits, which imply tax increases in the future.

Business investment (inflation-adjusted, excluding residential construction) has declined by 1.8 per cent annually, on average, since 2014. Between 2014 and 2021, business investment per worker (inflation-adjusted, excluding residential construction) decreased by $3,676 in Canada compared to growth of $3,418 in the United States.

There’s reason for optimism, however, since many of Canada’s challenges are of Ottawa’s own making. The Chrétien Liberals in the 1990s faced many of the same challenges we do today. By shifting the focus to more prudent government spending, balanced budgets, debt reduction and competitive tax rates, the Chrétien Liberals—followed in large measure by the Harper Tories—paved the way for two decades of prosperity. To help foster greater prosperity for Canadians today and tomorrow, the federal government should learn from the Chrétien Liberals and Harper Tories and enact fundamental policy reform.

Authors:

Jake Fuss

Director, Fiscal Studies, Fraser Institute

Jason Clemens

Executive Vice President, Fraser Institute

Related Topics:#FraserInstitute #GDP #JakeFuss #JasonClemens #TrudeauGovernment

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Worst kept secret—red tape strangling Canada’s economy

Published on February 22, 2025

Todayville

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

Business

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

Published on February 22, 2025

Todayville

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.