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Prime minister rejects ‘austerity’ despite massive debt and dismal economic growth

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From the Fraser Institute

By Grady Munro and Jake Fuss

Adjusting for population growth and inflation, the Trudeau government has recorded the five-highest years (2018-2022) of per-person spending in Canadian history, and is on track to record a sixth.

This week, at the Liberal cabinet retreat in Montreal, Prime Minister Justin Trudeau told reporters he’s against “austerity and cuts” and believes his government must “invest” to “create greater growth” in the economy, thus dashing hopes for any meaningful spending restraint in the upcoming federal budget.

But evidence shows the government’s current plan has not helped the economy despite the prime minister’s claims. Rather than double-down on a failed strategy of higher spending, taxes and borrowing, the Trudeau government should change direction immediately.

Let’s look at the evidence.

According to its latest fiscal projections, the federal government will spend $449.8 billion on programs and services in 2023/24—up 75.5 per cent (nominally) from 2014/15 when program spending was $256.2 billion. Adjusting for population growth and inflation, the Trudeau government has recorded the five-highest years (2018-2022) of per-person spending in Canadian history, and is on track to record a sixth. But have we seen a corresponding increase in economic growth?

No, in fact Canada has experienced an economic growth crisis for the last decade.

One of the best ways to measure economic growth is to use inflation-adjusted per-person gross domestic product (GDP), which provides the broadest measure of living standards for Canadians. According to a recent study by Philip Cross, former chief economic analyst at Statistics Canada, between 2013 and 2022 Canada’s per-person GDP (inflation-adjusted) grew at its slowest pace since the 1930s. Moreover, economic growth in Canada has fallen well behind growth in the United States, showing that Canada’s stagnation was not inevitable.

And there’s little room for optimism. According to OECD estimates, Canada will have the slowest growth in per-person GDP among advanced economies from 2020 to 2030 and 2030 to 2060.

Simply put, the data show that increased government spending has not produced greater prosperity for Canadians.

Indeed, rather than “invest” in Canadians, the Trudeau government has burdened Canadians with mountains of debt. The Trudeau government has yet to balance the budget, despite campaign promises, and this year will likely run its ninth consecutive deficit. Nearly a decade of uninterrupted deficits has increased the federal debt by $941.9 billion. This not only imposes costs on Canadians today—primarily through higher debt interest costs—but also increases the tax burden on future generations who are ultimately responsible for paying off today’s debt.

If the Trudeau government needs a blueprint for reform, it can find it within its own party, which has a history of spending reductions and strong economic growth.

During the mid-1990s, the Chrétien Liberal government introduced meaningful spending reductions that ultimately balanced the federal budget in 1997, marking the first federal budget surplus in nearly 30 years. In addition to spending reductions, the Chrétien government also introduced tax relief and other growth-enhancing policies. And the results were immediate.

Between 1997 and 2007, Canada’s average annual increase in per-person GDP (inflation-adjusted) was 2.2 per cent, which was higher than the OECD average. During the same time period, Canada’s average rate of employment growth was nearly double the average in the OECD and the United States. And the national poverty rate fell from 7.8 per cent in 1996 to 4.9 per cent in 2004. Overall, the Canadian economy outperformed many other industrialized economies during this time and living standards improved for Canadians—despite reductions in government spending.

Despite claims by Prime Minister Trudeau, less government spending (not more) is necessary to help reverse the trend of stagnant economic growth. The Trudeau government should recognize that the current plan isn’t working and change course in its upcoming budget.

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Zelenskyy Says He Still Wants To Sign Mineral Deal With US After Oval Office Spat With Trump

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From the Daily Caller News Foundation

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Ukrainian President Volodymyr Zelenskyy said Friday on Fox News that he still wants to sign the mineral deal with the United States despite his public blowup at the Oval Office.

During a gathering in the Oval Office on Friday with President Donald Trump, Vice President JD Vance, and other officials to discuss the U.S. deal with Ukraine over its minerals, Trump and Vance called out Zelenskyy’s behavior after he publicly criticized the U.S. for not attempting to halt Russia. Following the heated discussion, Zelenskyy appeared on “Special Report with Bret Baier” and told the host that he still believes the deal should be signed, adding he wanted to understand the security guarantees the U.S. would provide.

“United States wanted this deal very much, and we’ve been not against this deal, but we wanted to understand what parts in security guarantees will take this deal and what next steps. Just again, to understand for our people, during the war, what you don’t like, even sometimes hate? Surprises,” Zelenskyy said.

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“It’s understandable. Many terrible things this war brought to us. So we don’t, we don’t want any surprises. Yes, that’s why we want to be very fair with our partners. I think this deal was prepared by teams. It was not simple during [the] weeks, and now it’s ready. I think that they have to sign. The countries have to sign. The ministers have to sign. That’s it. I don’t know when they will do it. It depends on the American side.”

Multiple sources on Tuesday said that the U.S. had struck a deal with Ukraine to jointly develop mineral extraction projects within the nation.

WATCH:

By Thursday, Trump’s Treasury Secretary Scott Bessent told Fox News that “the deal is done,” adding it was a “win-win” for all parties and would be signed by Friday at the White House. However, following Zelenskyy’s clash with the president and vice president, the White House told Daily Caller White House correspondent Reagan Reese that “nothing will be signed.”

Baier went on to ask Zelenskyy if the deal did not include security provisions, to which the Ukrainian president said that it was part of the “infrastructure.” Zelenskyy further said that Trump had said Russian President Vladimir Putin would not be able to enter certain mineral production territories. However, the Ukrainian president disagreed with the decision, saying he had told Trump not to “trust Putin.”

“I said to him that we had more than two, more than 20 companies, American companies, big companies on the territory of Ukraine. We had offices, even on temporarily occupied territories. For Putin, it doesn’t matter,” Zelenskyy said. “It’s a European company or Ukraine. It doesn’t matter. He just came and occupied it.”

“That’s what I said. I think this is a great idea [on] how to strengthen Ukraine and how to make business between two countries, how to make additional jobs for two countries. But it’s not just this will not save us,” Zelenskyy said.

After Zelenskyy left the White House, Trump took to Truth Social, posting that he had determined Zelenskyy is “not ready for Peace if America is involved, because he feels our involvement gives him a big advantage in negotiations.”

“I don’t want advantage, I want PEACE. He disrespected the United States of America in its cherished Oval Office. He can come back when he is ready for Peace,” Trump wrote.

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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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