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Forget identity politics — growth and investment must be Canada’s top priorities: Jack Mintz

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From the MacDonald Laurier Institute

Canadians’ real per capita incomes have stalled in the past five years, but that hasn’t been the case in other rich countries

By Jack Mintz

Last week, I wrote about Canada’s poor economic performance over the past five years compared to the United States and other industrialized countries. To recap, Canada’s standard of living has been becalmed, “as a painted ship upon a paint ocean.” Sure, we went through a bad year with the pandemic in 2020. So did other countries. Yet, we fell behind. Over the last five years, as our growth stalled, U.S. per capita GDP grew 9.3 per cent, the OECD average 5.6 per cent, resource-rich Australia 4.8 per cent and Ireland an astonishing 31 per cent.

According to IMF statistics, our share of world GDP (in purchasing-power-parity dollars), has fallen six per cent, from 1.44 per cent in 2018 to 1.36 per cent in 2023. We shouldn’t even be a G7 country anymore: in PPP dollars our economy is only the world’s 16th biggest, right behind Spain.

But that’s the past. What about the future? In 2021, the OECD projected that our economy would perform worse this decade than all other member countries, with per capita real GDP  growing only 0.7 per cent annually — though at least that would be an improvement over the past five years. The big question is why Canada is at the bottom of the heap. There are several reasons:

• The demographic time bomb: Economic growth will be more challenging this decade as many boomers retire and begin supporting their consumption by cashing in pension and other assets. Many other high-income countries, no different than Canada, are also aging rapidly, with retirees rising from roughly 25 per cent of the working population in 2020 to 40 per cent in 2035. With fewer people working and saving, GDP per capita will naturally decline (even if GDP per worker rises). Canada traditionally has been able to attract younger immigrants to make up for the output loss but international markets for skilled labour are increasingly competitive as workers, including ones born in Canada, pick and choose the country they feel offers them the best opportunities.

• Indebtedness: With interest rates higher than they have been, indebtedness also hurts economic growth. To cope with higher payments on mortgages and consumer debt, households, corporations and governments will deleverage by consuming fewer goods and services. Canada’s governments may be carrying less debt than their U.S. and G7 counterparts, but Canadian households and corporations are carrying more — fully 216 per cent of GDP in 2022, compared to 186 in Japan, 153 in the U.S., 150 in the U.K., 127 in German and just 110 per cent in Italy.  Only France, with private debts equal to 228 per cent of its GDP, will experience a greater debt drag on growth than we will.

• Shrinking world trade: Growing protectionism will especially hurt countries that rely, as we do, on trade as a source of economic growth. We currently export 33 per cent of GDP, primarily to the U.S. Geo-political tensions and decoupling from China will hit us harder than other places, like the U.S., where trade matters less.

• A costly energy transition: The extraordinary cost of building new transportation, heating and industrial energy systems over the next few years won’t realize benefits for decades, if at all.  The highest value-added per working hour in 2022 was earned in non-conventional oil extraction at $997 — more than 16 times the average of all industries ($61) and almost five times more than in mining ($205). Shifting labour out of an activity where value-added is that high means GDP will surely fall.

Energy is our largest source of export earnings so any reduction in exports will push the Canadian dollar down. With the federal government hell-bent on stopping new fossil-fuel development, especially of liquified natural gas, we will spend the next couple of decades throwing away wealth that could provide income to Canadians and taxes for governments. Our ideologically driven energy transition will cause us to lag countries like the U.S., Norway and Australia, which continue to develop and export energy while also working on clean technologies.

New technologies: The coming decade does offer the growth-friendly promise of new technologies. AI, continuing digitization and any number of innovations we can’t anticipate will allow us to produce more with the resources we have. On the other hand, adopting new technologies requires investing in new capital. And this is where Canada is weak. Since 2018 Canadian corporate investment has been about 10 per cent of GDP — almost a fifth below the United States and the OECD in general. The OECD says our poor investment performance will cost us 0.4 percentage points in per capita GDP growth every year this decade, more than in any other OECD country.

Why is our standard of living slipping compared to other industrialized economies? Demographics aside, we impose higher barriers to economic growth than our major trading partners do, especially the U.S. Innovation continues to generate great opportunities for us but if business investment remains moribund, we will miss out on many of them. Forget identity politics — growth and investment are now our top priorities.

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Alberta

Alberta fiscal update: second quarter is outstanding, challenges ahead

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Alberta maintains a balanced budget while ensuring pressures from population growth are being addressed.

Alberta faces rising risks, including ongoing resource volatility, geopolitical instability and rising pressures at home. With more than 450,000 people moving to Alberta in the last three years, the province has allocated hundreds of millions of dollars to address these pressures and ensure Albertans continue to be supported. Alberta’s government is determined to make every dollar go further with targeted and responsible spending on the priorities of Albertans.

The province is forecasting a $4.6 billion surplus at the end of 2024-25, up from the $2.9 billion first quarter forecast and $355 million from budget, due mainly to higher revenue from personal income taxes and non-renewable resources.

Given the current significant uncertainty in global geopolitics and energy markets, Alberta’s government must continue to make prudent choices to meet its responsibilities, including ongoing bargaining for thousands of public sector workers, fast-tracking school construction, cutting personal income taxes and ensuring Alberta’s surging population has access to high-quality health care, education and other public services.

“These are challenging times, but I believe Alberta is up to the challenge. By being intentional with every dollar, we can boost our prosperity and quality of life now and in the future.”

Nate Horner, President of Treasury Board and Minister of Finance

Midway through 2024-25, the province has stepped up to boost support to Albertans this fiscal year through key investments, including:

  • $716 million to Health for physician compensation incentives and to help Alberta Health Services provide services to a growing and aging population.
  • $125 million to address enrollment growth pressures in Alberta schools.
  • $847 million for disaster and emergency assistance, including:
    • $647 million to fight the Jasper wildfires
    • $163 million for the Wildfire Disaster Recovery Program
    • $5 million to support the municipality of Jasper (half to help with tourism recovery)
    • $12 million to match donations to the Canadian Red Cross
    • $20 million for emergency evacuation payments to evacuees in communities impacted by wildfires
  • $240 million more for Seniors, Community and Social Services to support social support programs.

Looking forward, the province has adjusted its forecast for the price of oil to US$74 per barrel of West Texas Intermediate. It expects to earn more for its crude oil, with a narrowing of the light-heavy differential around US$14 per barrel, higher demand for heavier crude grades and a growing export capacity through the Trans Mountain pipeline. Despite these changes, Alberta still risks running a deficit in the coming fiscal year should oil prices continue to drop below $70 per barrel.

After a 4.4 per cent surge in the 2024 census year, Alberta’s population growth is expected to slow to 2.5 per cent in 2025, lower than the first quarter forecast of 3.2 per cent growth because of reduced immigration and non-permanent residents targets by the federal government.

Revenue

Revenue for 2024-25 is forecast at $77.9 billion, an increase of $4.4 billion from Budget 2024, including:

  • $16.6 billion forecast from personal income taxes, up from $15.6 billion at budget.
  • $20.3 billion forecast from non-renewable resource revenue, up from $17.3 billion at budget.

Expense

Expense for 2024-25 is forecast at $73.3 billion, an increase of $143 million from Budget 2024.

Surplus cash

After calculations and adjustments, $2.9 billion in surplus cash is forecast.

  • $1.4 billion or half will pay debt coming due.
  • The other half, or $1.4 billion, will be put into the Alberta Fund, which can be spent on further debt repayment, deposited into the Alberta Heritage Savings Trust Fund and/or spent on one-time initiatives.

Contingency

Of the $2 billion contingency included in Budget 2024, a preliminary allocation of $1.7 billion is forecast.

Alberta Heritage Savings Trust Fund

The Alberta Heritage Savings Trust Fund grew in the second quarter to a market value of $24.3 billion as of Sept. 30, 2024, up from $23.4 billion at the end of the first quarter.

  • The fund earned a 3.7 per cent return from July to September with a net investment income of $616 million, up from the 2.1 per cent return during the first quarter.

Debt

Taxpayer-supported debt is forecast at $84 billion as of March 31, 2025, $3.8 billion less than estimated in the budget because the higher surplus has lowered borrowing requirements.

  • Debt servicing costs are forecast at $3.2 billion, down $216 million from budget.

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Business

Trump’s government efficiency department plans to cut $500 Billion in unauthorized expenditures, including funding for Planned Parenthood

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From LifeSiteNews

By Emily Mangiaracina

Elon Musk and Vivek Ramaswamy shared their plans to ‘take aim’ at ‘500 billion plus’ in federal expenses, including ‘nearly $300 million’ to ‘progressive groups like Planned Parenthood.’

Elon Musk and Vivek Ramaswamy are planning to ax taxpayer funding for Planned Parenthood as part of their forthcoming work for the next Trump administration, they revealed in a Wednesday op-ed in The Wall Street Journal. 

The businessmen have been appointed by President Donald Trump to lead a new Department of Government Efficiency (DOGE), which will work from outside the official government structure to cut wasteful government spending and excess regulations, as well as “restructure federal agencies,” as Trump announced last week on Truth Social.

Musk and Ramaswamy shared Wednesday that as part of their work at DOGE to downsize government spending, they will be “taking aim at the $500 billion plus in annual federal expenditures that are unauthorized by Congress or being used in ways that Congress never intended,” thereby “delivering cost savings for taxpayers.”

They specifically called out Planned Parenthood as one institution that will lose taxpayer funding once DOGE kicks into gear. In their op-ed, the duo said the federal expenditures they plan on cutting includes the “nearly $300 million” dedicated “to progressive groups like Planned Parenthood.”

Musk and Ramaswamy also reportedly will take aim at the “$535 million a year to the Corporation for Public Broadcasting and $1.5 billion for grants to international organizations,” according to Catholic Vote, although they have not shared all of the federal spending they plan to cut or reduce.

“With a decisive electoral mandate and a 6-3 conservative majority on the Supreme Court, DOGE has a historic opportunity for structural reductions in the federal government,” the business duo wrote. “We are prepared for the onslaught from entrenched interests in Washington. We expect to prevail.”

Mogul and X owner Musk, who was outspoken before his DOGE appointment about the big problem of waste, noted last week that if the government is not made efficient, the country will go “bankrupt.”

He reposted a clip from a recent talk he gave in which he explained that not only is our defense budget “pretty gigantic” — a trillion dollars —but the interest the U.S. now owes on its debt is higher than this.

“This is not sustainable. That’s why we need the Department of Government Efficiency,” Musk said.

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