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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.

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Trump and fentanyl—what Canada should do next

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From the Fraser Institute

By Ross McKitrick

During the Superbowl, Doug Ford ran a campaign ad about fearlessly protecting Ontario workers against Trump. I suppose it’s effective as election theatre; it’s intended to make Ontarians feel lucky we’ve got a tough leader like Ford standing up to the Bad Orange Man. But my reaction was that Ford is lucky to have the Bad Orange Man creating a distraction so he doesn’t have to talk about Ontario’s high taxes, declining investment, stagnant real wages, lengthening health-care wait times and all the other problems that have gotten worse on his watch.

President Trump’s obnoxious and erratic rhetoric also seems to have put his own advisors on the defensive. Peter Navarro, Kevin Hassett and Howard Lutnick have taken pains to clarify that what we are dealing with is a “drug war not a trade war.” This is confusing since many sources say that Canada is responsible for less than one per cent of fentanyl entering the United States. But if we are going to de-escalate matters and resolve the dispute, we should start by trying to understand why they think we’re the problem.

Suppose in 2024 Trump and his team had asked for a Homeland Security briefing on fentanyl. What would they have learned? They already knew about Mexico. But they would also have learned that while Canada doesn’t rival Mexico for the volume of pills being sent into the U.S., we have become a transnational money laundering hub that keeps the Chinese and Mexican drug cartels in business. And we have ignored previous U.S. demands to deal with the problem.

Over a decade ago, Vancouver-based investigative journalist Sam Cooper unearthed shocking details of how Asian drug cartels backed by the Chinese Communist Party turned British Columbia’s casinos into billion-dollar money laundering operations, then scaled up from there through illicit real estate schemes in Vancouver and Toronto. This eventually triggered the 2022 Cullen Commission, which concluded, bluntly, that a massive amount of drug money was being laundered in B.C., that “the federal anti–money laundering [AML] regime is not effective,” that the RCMP had shut down what little AML capacity it had in 2012 just as the problem was exploding in scale, and that government officials have long known about the problem but ignored it.

In 2023 the Biden State Department under Anthony Blinken told Canada our fentanyl and money laundering control efforts were inadequate. Since then Canada’s border security forces have been shown to be so compromised and corrupt that U.S. intelligence agencies sidelined us and stopped sharing information. The corruption went to the top. A year ago Cameron Ortis, the former head of domestic intelligence at the RCMP, was sentenced to 14 years in prison after being convicted of selling top secret U.S. intelligence to money launderers tied to drugs and terrorism to help them avoid capture.

In September 2024 the Biden Justice Department hit the Toronto-Dominion Bank with a $3 billion fine for facilitating $670 million in money laundering for groups tied to transnational drug trafficking and terrorism. Then-attorney general Merrick Garland said “TD Bank created an environment that allowed financial crime to flourish. By making its services convenient for criminals, it became one.”

Imagine the outcry if Trump had called one of our chartered banks a criminal organization.

We are making some progress in cleaning up the mess, but in the process learning that we are now a major fentanyl manufacturer. In October the RCMP raided massive fentanyl factories in B.C. and Alberta. Unfortunately there remain many gaps in our enforcement capabilities. For instance, the RCMP, which is responsible for border patrols between ports of entry, has admitted it has no airborne surveillance operations after 4 p.m. on weekdays or on weekends.

The fact that the prime minister’s promise of a new $1.3-billion border security and anti-drug plan convinced Trump to suspend the tariff threat indicates that the fentanyl angle wasn’t entirely a pretext. And we should have done these things sooner, even if Trump hadn’t made it an issue. We can only hope Ottawa now follows through on its promises. I fear, though, that if Ford’s Captain Canada act proves a hit with voters, the Liberals may distract voters with a flag-waving campaign against the Bad Orange Man rather than confront the deep economic problems we have imposed on ourselves.

A trade dispute appears inevitable now that Trump has signaled the 25 percent tariffs are back on. The problem is knowing whom to listen to since Trump is openly contradicting his own economic team. Trump’s top trade advisor, Peter Navarro, has written that the U.S. needs to pursue “reciprocity,” which he defines as other countries not charging tariffs on U.S. imports any higher than the U.S. charges. In the Americans’ view, U.S. trade barriers are very low and everyone else’s should be, too—a stance completely at odds with Trump’s most recent moves.

Whichever way this plays out Canada has no choice but to go all-in on lowering the cost of doing business here, especially in trade-exposed sectors such as steel, autos, manufacturing and technology. That starts with cutting taxes including carbon-pricing and rolling back our costly net-zero anti-energy regulatory regime. In the coming election campaign, that’s the agenda we need to see spelled out.

How much easier it will be instead for Canadian politicians to play the populist hero with vague anti-Trump posturing. But that would be poor substitute for a long overdue pro-Canadian economic growth agenda.

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Trudeau billed taxpayers $81,000 for groceries in one year

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By Ryan Thorpe 

Prime Minister Justin Trudeau billed taxpayers for $157,642 in household food expenses over a two-year period, according to access-to-information records obtained by the Canadian Taxpayers Federation.

“The fact that Trudeau spent more on food than what the average Canadian worker makes in an entire year is outrageous,” said Franco Terrazzano, CTF Federal Director. “Here’s a crazy idea: how about the prime minister pays for their own groceries like everyone else.”

Trudeau billed taxpayers $81,428 in 2022-23 and $76,214 in 2021-22, the latest years for which records are available.

The CTF filed an access-to-information request seeking “records showing total spending on household groceries for Prime Minister Justin Trudeau.”

The Privy Council Office released records to the CTF showing Trudeau expensed $188,864 for “food and food preparation” during the 2021-22 and 2022-23 fiscal years.

Taxpayers were forced to pay $157,642 (or 83 per cent) of the total cost.

For the sake of comparison, the average Canadian family spent a combined $29,989 on groceries during the 2022 and 2023 calendar years, according to Canada’s Food Price Report.

That works out to an average grocery bill of $288 per week.

Meanwhile, Trudeau billed taxpayers for an average of $1,515 in household food expenses per week – five times more than what the average family spends.

“The prime minister reimburses amounts related to food based on Statistics Canada data on household spending, which is adjusted using the consumer price index to account for inflation,” according to the records.

In 2022-23, Trudeau racked up $97,645 in grocery expenses, with taxpayers forced to pay $81,428.

In 2021-22, Trudeau racked up $91,218 in grocery expenses, with taxpayers forced to pay $76,214.

“Expenditures include all food related expenses incurred by the Prime Minister’s Residence,” according to the records. “In addition to household groceries, it also includes food expenditures for events that are hosted at the residence.”

The records do not make clear how much was spent on personal groceries versus event-related expenditures.

“It’s one thing for the prime minister to bill taxpayers for government business, but taxpayers shouldn’t be on the hook for a single cent of the prime minister’s personal groceries,” Terrazzano said. “The current policy needs to change, the government needs to improve transparency on this spending and anyone who wants to be the next prime minister needs to commit to not billing taxpayers for their personal groceries.”

The prime minister’s annual salary is $406,200. The average Canadian worker’s annual salary is about $70,000, according to Statistics Canada data.

Taxpayers also paid for Trudeau’s personal chef. The prime minister’s personal chef took home an annual, taxpayer-funded salary between $68,468 and $79,234.

Between 2015 and 2022, taxpayers were on the hook for an average of $57,538 per year for Trudeau’s household groceries, according to previous reporting from the National Post.

The Official Residence for Canada’s prime minister is 24 Sussex. But Trudeau has lived at Rideau Cottage – a two-storey, 22-room mansion on the grounds of Rideau Hall – since becoming prime minister in 2015.

However, Trudeau’s meals have continued to be prepared at 24 Sussex, then shipped to Rideau Cottage via courier, according to the National Post.

“While Canadians have been tightening their belts during a cost-of-living crisis, Trudeau was sparing no expense,” Terrazzano said. “The prime minister’s salary is nearly six times more than the average Canadian’s and he lives in a taxpayer-funded mansion, so surely he doesn’t need to stick taxpayers with huge grocery bills.”

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