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Spending restraint: Roadmap to a balanced budget

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From the Fraser Institute

A Case for Spending Restraint: How the Federal Government Can Balance the Budget

By Grady Munro and Jake Fuss

Since 2015, there has been a deterioration in the federal government’s fiscal situation. Annual
nominal program spending has increased an estimated $193.6 billion since 2014/15; adjusted for
inflation and population growth this represents an extra $2,330 per person. Prior to the COVID
pandemic, spending increased faster than population, inflation, and other relevant economic
indicators. These spending increases have resulted in a string of large budgetary deficits that have
contributed to an estimated $941.9 billion increase in gross federal debt from 2014/15 to 2023/24.
This accumulation of debt, along with recent hikes in interest rates, has raised the cost of interest
on the federal debt to one of the largest budget expense items.

Moving forward, the federal government plans to slow nominal spending growth, which will keep inflation-adjusted, per-person spending relatively constant to 2026/27. Despite this, the federal government will continue running budget deficits and accumulating debt. It is also uncertain whether the federal government’s current estimates are truly reliable as the estimates do not incorporate expected spending on pharmacare or the level of defence spending to meet Canada’s NATO commitment. Moreover, the federal government’s track record of exceeding previous spending commitments calls into question the reliability of the current spending targets. Therefore, it is clear the federal government is not implementing the level of spending restraint necessary to reverse course towards a stable fiscal situation.

An approach to federal finances that continues to run budget deficits and accumulate debt is economically harmful to both current and future generations of Canadians. Research shows that significant increases in debt-financed spending harm economic growth by reducing capital accumulation and labour productivity.

Furthermore, accumulating debt today increases the tax burden on future generations of Canadians, as they will be responsible for paying off this debt. Despite these effects, the federal government plans to continue running deficits and accumulating debt for the foreseeable future.

This need not be the case. The federal government can undertake decisive spending reform starting in 2024— similar to the reform by the Chrétien government in the 1990s—that balances the budget within a year or two. The federal government could balance the budget in 2026/27 by limiting annual growth in nominal program spending to 0.3% for two years. This would result in a 5.9% reduction in real per-person spending. Alternatively, the budget could be balanced in 2025/26 if the federal government reduces spending 4.3% for one year; the next year, 2026/27, would see a budgetary surplus. In this scenario, inflation-adjusted per-person spending would decline by 7.5%. Key trade-offs between the two approaches include the extent of the spending reform and the speed of the return to balanced budgets. Balancing the budget in one year, as opposed to two years, would
result in $30.0 billion less debt accumulated by 2026/27.

Though it is beyond the scope of this study to discuss how such spending reforms should be implemented, there are three areas that might be considered for reform. Business subsidies are a significant expense, yet research suggests they have little if any economic benefit, and may actually harm economic growth when governments pick winners and losers in a free market. Reviewing business subsidies might provide opportunities to find savings. Aligning government-sector wages
with those in the private sector would also provide savings, as government workers in Canada currently enjoy an 8.5% wage premium (on average) relative to comparable private-sector workers. Finally, studies show that government fiscal waste can be significant. From 1988 to 2013, more than 600 government failures cost the federal government between $158.3 billion and $197.1 billion. Moreover, more than 25% of all federal COVID spending was wasteful. Addressing inefficiencies within government might also reveal savings.

  • Canada has seen a deterioration in the federal government’s fiscal situation since 2015. A distinct lack of spending restraint has resulted in a string of large budget deficits, which have contributed to rising government debt and debt interest costs.
  • Despite current fiscal plans promising more of the same, the federal government could implement decisive spending reform starting in 2024/25, similar to reforms implemented in the 1990s, and balance the budget within one or two years.
  • To balance the budget by 2026/27, the federal government would need to limit growth in annual nominal program spending to 0.3 percent for two years. This would translate to a 5.9 percent reduction in inflation-adjusted, per-person spending.
  • Alternatively, the federal government could balance the budget in one year, by 2025/26, by reducing nominal program spending by 4.3 percent. Adjusted for inflation and population, this would be a 7.5 percent decrease. In 2026/27, the federal government could then record a $8.2 billion surplus even while increasing spending from the previous year.
  • While this study does not provide an in-depth analysis of where potential savings should be found, research highlights three potential areas that could be targeted for spending reform: corporate welfare, aligning government-sector wages with those in the private sector, or eliminating government fiscal waste.

A Case for Spending Restraint in Canada: How the Federal Government Can Balance the Budget

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Virtue-signalling devotion to reconciliation will not end well

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From the Fraser Institute

By Bruce Pardy

In September, the British Columbia Supreme Court threw private property into turmoil. Aboriginal title in Richmond, a suburb of Vancouver, is “prior and senior” to fee simple interests, the court said. That means it trumps the property you have in your house, farm or factory. If the decision holds up on appeal, it would mean private property is not secure anywhere a claim for Aboriginal title is made out.

If you thought things couldn’t get worse, you thought wrong. On Dec. 5, the B.C. Court of Appeal delivered a different kind of upheaval. Gitxaala and Ehattesaht First Nations claimed that B.C.’s mining regime was unlawful because it allowed miners to register claims on Crown land without consulting with them. In a 2-to-1 split decision, the court agreed. The mining permitting regime is inconsistent with the United Nations Declaration on the Rights of Indigenous People (UNDRIP). And B.C. legislation, the court said, has made UNDRIP the law of B.C.

UNDRIP is a declaration of the United Nations General Assembly. It consists of pages and pages of Indigenous rights and entitlements. If UNDRIP is the law in B.C., then Indigenous peoples are entitled to everything—and to have other people pay for it. If you suspect that is an exaggeration, take a spin through UNDRIP for yourself.

Indigenous peoples, it says, “have the right to the lands, territories and resources which they have traditionally owned, occupied or otherwise used or acquired… to own, use, develop and control, as well as the right to “redress” for these lands, through either “restitution” or “just, fair and equitable compensation.” It says that states “shall consult and cooperate in good faith” in order to “obtain free and informed consent prior to the approval of any project affecting their lands or territories and other resources,” and that they have the right to “autonomy or self-government in matters relating to their internal and local affairs, as well as ways and means for financing their autonomous functions.”

The General Assembly adopted UNDRIP in 2007. At the time, Canada sensibly voted “no,” along with New Zealand, the United States and Australia. Eleven countries abstained. But in 2016, the newly elected Trudeau government reversed Canada’s objection.

UN General Assembly resolutions are not binding in international law. Nor are they enforceable in Canadian courts. But in 2019, NDP Premier John Horgan and his Attorney General David Eby, now the Premier, introduced Bill 41, the Declaration on the Rights of Indigenous Peoples Act (DRIPA). DRIPA proposed to require the B.C. government to “take all measures necessary to ensure the laws of British Columbia are consistent with the Declaration.” The B.C. Legislature unanimously passed the bill. (The Canadian Parliament passed a similar bill in 2021.)

Two years later, the legislature passed an amendment to the B.C. Interpretation Act. Eby, still B.C.’s Attorney General, sponsored the bill. The amendment read, “Every Act and regulation must be construed as being consistent with the Declaration.”

Eby has expressed dismay about the Court of Appeal decision. It “invites further and endless litigation,” he said. “It looked at the clear statements of intent in the legislature and the law, and yet reached dramatically different conclusions about what legislators did when we voted unanimously across party lines” to pass DRIPA. He has promised to amend the legislation.

These are crocodile tears. The majority judgment from the Court of Appeal is not a rogue decision from activist judges making things up and ignoring the law. Not this time, anyway. The court said that B.C. law must be construed as being consistent with UNDRIP—which is what Eby’s 2021 amendment to the Interpretation Act says.

In fact, Eby’s government has been doing everything in its power to champion Aboriginal interests. DRIPA is its mandate. It’s been making covert agreements with specific Aboriginal groups over specific territories. These agreements promise Aboriginal title and/or grant Aboriginal management rights over land use. In April 2024, an agreement with the Haida Council recognized Haida title and jurisdiction over Haida Gwaii, an archipelago off the B.C. coast formerly known as the Queen Charlotte Islands. Eby has said that the agreement is a template for what’s possible “in other places in British Columbia, and also in Canada.” He is putting title and control of B.C. into Aboriginal hands.

But it’s not just David Eby. The Richmond decision from the B.C. Supreme Court had nothing to do with B.C. legislation. It was a predictable result of years of Supreme Court of Canada (SCC) jurisprudence under Section 35 of the Constitution. That section guarantees “existing” Aboriginal and treaty rights as of 1982. But the SCC has since championed, evolved and enlarged those rights. Legislatures can fix their own statutes, but they cannot amend Section 35 or override judicial interpretation, even using the “notwithstanding clause.”

Meanwhile, on yet another track, Aboriginal rights are expanding under the Charter of Rights and Freedoms. On the same day as the B.C. Court of Appeal decision on UNDRIP, the Federal Court released two judgments. The federal government has an actionable duty to Aboriginal groups to provide housing and drinking water, the court declared. Taxpayer funded, of course.

One week later, at the other end of the country, the New Brunswick Court of Appeal weighed in. In a claim made by Wolastoqey First Nation for the western half of the province, the court said that Aboriginal title should not displace fee simple title of private owners. Yet it confirmed that a successful claim would require compensation in lieu of land. Private property owners or taxpayers, take your pick.

Like the proverb says, make yourself into a doormat and someone will walk all over you. Obsequious devotion to reconciliation has become a pathology of Canadian character. It won’t end well.

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Vacant Somali Daycares In Viral Videos Are Also Linked To $300 Million ‘Feeding Our Future’ Fraud

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From the Daily Caller News Foundation

By Melissa O’Rourke

Multiple Somali daycare centers highlighted in a viral YouTube exposé on alleged fraud in Minnesota have direct ties to a nonprofit at the center of a $300 million scam, the Minnesota Star Tribune reported Thursday.

The now-infamous videos from YouTube influencer Nick Shirley, posted Dec. 26, showed several purported Somali-run daycare centers receiving millions in taxpayer funds despite little evidence that children were actually present at the facilities. Now it turns out that five of the 10 daycare centers Shirley visited operated as meal sites for Feeding Our Future, the Minnesota-based nonprofit implicated in a massive fraud scheme that has already produced dozens of convictions, the outlet reported.

Between 2018 and 2021, those five businesses received nearly $5 million from Feeding Our Future, the outlet reported. While none of the centers in Shirley’s video have been legally accused of wrongdoing, the revelations underscore the sprawling web of fraud engulfing the state. (RELATED: Somalis Reportedly Filled Ohio Strip Mall With Potential Fraudulent Childcare Centers)

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Federal prosecutors have charged over 70 individuals — mostly from the Somali community — with stealing more than $300 million from the Federal Child Nutrition Program through Feeding Our Future. During the COVID-19 pandemic, the program funded sites across Minnesota to provide meals to children. Prosecutors say leaders of Feeding Our Future, along with dozens of associates who ran sponsored “meal sites,” submitted false or inflated meal counts to claim reimbursements.

One facility featured in Shirley’s video, the Minnesota Best Childcare Center, received $1.5 million from Feeding Our Future, according to the Minnesota Star Tribune.

Minnesota Best Childcare Center, which has been licensed by the state since 2013, did not respond to the Daily Caller News Foundation’s request for comment.

Other daycares featured in Shirley’s video have been cited dozens of times for rule violations while continuing to receive millions in state funding. The now-infamous Quality “Learing” Center was cited for 121 violations in the past three years, including for failing to report a “death, serious injury, fire or emergency as required,” according to the Star-Tribune.

The paper’s investigation found that six of the facilities featured by Shirley were either closed or employees did not open their doors.

Following that exposé, which has accumulated more than 135 million views on X, the Trump administration announced it would freeze all childcare disbursements to Minnesota while federal officials review how taxpayer dollars have flowed to licensed providers.

The fraud allegations extend beyond childcare, with prosecutors claiming millions in taxpayer funds were also stolen from Minnesota’s Housing Stabilization Services and autism treatment programs. Federal prosecutors also estimate that as much as half of the roughly $18 billion Minnesota has spent since 2018 on 14 Medicaid programs may have been siphoned off by fraudsters.

Even the state’s assisted living program has come under scrutiny, with Republican state Rep. Kristin Robbins warning that individuals connected to the Feeding Our Future scheme continue to receive millions in taxpayer funds.

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