Skip to main content

“I am a Canadian, free to speak without fear, free to worship in my own way, free to stand for what I think right, free to oppose what I believe wrong, or free to choose those who shall govern my country. This heritage of freedom I pledge to uphold for myself and all mankind.” ~~ John G. Diefenbaker

FRASER INSTITUTE -- Excessively large government usually entails government becoming active in ways that are counterproductive to economic growth

After experimenting with hundreds of billions in new spending initiatives and an array of temporary programs in response to the pandemic, the federal government appears primed to further expand its involvement in the post-COVID economy to “build back better.” However, the size of government in Canada had been increasing well before the pandemic, and based on that experiences, this approach is unlikely to produce its desired results.


 

There are two primary measures to gauge the size of government. The first is per-person spending. In 2020/21, the federal government spent the largest amount of money per person (adjusted for inflation) in Canadian history by a wide margin. Indeed, per-person program spending will reach a projected $17,091 (in real 2021 dollars), which is approximately double the amount spent during the 2009 recession and at the peak of the Second World War.

 

But the rapid increase in spending began well before the pandemic. During Prime Minister Stephen Harper’s last year in office, program spending was budgeted to reach $263.2 billion. This meant per-person spending (again, after adjusting for inflation) would be $8,063 in 2015. However, Prime Minister Trudeau immediately increased spending after winning election in late-2015 and has continued this trend every year since.

 

By 2018, federal per-person spending had grown to $9,061, which was the highest amount in Canadian history up to that point. Per-person spending set a new record again the following year, rising to $9,500. This means the Trudeau government increased real per-person federal government spending by nearly 18 per cent during its first term in office, and before any recession.

 

Another way to measure the size of government is to compare government spending with the size of the Canadian economy. Research demonstrates that the size of government matters for economic growth. Recent data from Fraser Institute senior fellow Livio Di Matteo, for instance, concludes that economic growth is maximized when government spending is between 24 per cent and 32 per cent of the economy.

 

Between 2015 and 2019, the Trudeau government increased federal spending (as a share of the economy) from 14.5 per cent to 16.2 per cent. Once we include government spending by the provinces and local municipalities, the International Monetary Fund (IMF) estimates all government spending reached 41.2 per cent of the Canadian economy in 2019—well above the optimal level.

 

 

Excessively large government usually entails government becoming active in ways that are counterproductive to economic growth. For instance, by redistributing income from certain groups to others, and favouring certain industries and sectors of the economy through corporate welfare and protectionism, the government will likely help slow economic growth.

 

For these reasons, increasing the size of government between 2016 and 2019 did not produce better results for the Canadian economy. Instead, the Trudeau government oversaw weak performance for income growth, labour markets and business investment—which are all critical to economic growth and social progress.

 

Specifically, the average annual growth in GDP per capita (a broad measure of income) was just 0.8 per cent during 2016 to 2019 compared to the 3.7 per cent growth rate experienced during a comparable 1997 to 2000 period under the Chretien government. Moreover, total business investment declined (on average) by 0.2 per cent from 2016 to 2019.

 

Clearly, larger government is not always associated with improved outcomes. The Trudeau government must consider these negative economic consequences before it cultivates an even greater role for itself in coming years with new programs such as national daycare, national pharmacare and expanded infrastructure. 

 

Current projections (which do not include these potential new programs) already indicate federal program spending in 2021 will reach $11,370 per person—or 18.7 per cent of the economy—which is considerably higher than the size of government in 2019, the year before the pandemic.

 

Expanding federal government involvement in the economy post-COVID will impede prosperity for Canadians and their families and slow our economic growth at a time when growth is sorely needed. 

 

That’s not a recipe for success.

Comments

Popular posts from this blog

It seems the call for blood donors is being responded to, however ... “This effort is a marathon, not a sprint” says Canadian Blood Services

A week and a half ago I wrote the commentary ... “ While the national inventory is currently strong, an increase in blood donor cancellations is a warning sign of potential challenges to maintaining a health inventory of blood ” It was written as a result of talk about a potential blood shortage that would occur if people stopped donating due to the COVID-19 virus. It seems the call to Canadians was responded to, however, as I was told this afternoon ... “ T his effort is a marathon, not a sprint ”. As it now stands now, donors are able to attend clinics which are held in Vancouver (2), Victoria, Surrey, and in Kelowna, so I asked if there any plans to re-establish traveling clinics to others communities - for example in Kamloops, Prince George, Prince Rupert, Revelstoke or Cranbrook, and perhaps further north at perhaps Ft. St. John? According to Communications Lead Regional Public Affairs Specialist Marcelo Dominguez, Canadian Blood Services is still on

FEDLSTED -- Rules will have to relax-- the question is how and when

The media has created a fervour over the mathematical models that allegedly help governments predict the future of Coronavirus infections in the general population. Mathematical modelling has limited use and value. We need to understand is that the data available on Coronavirus (COVID-19) infections in Canada is far too small for statistical reliability. The data available for the whole world is useless due to variables in how nations responded to Coronavirus infections. There is no commonality in steps taken to combat virus spread and no similarity in the age demographics of world nations, so the numbers you see on the daily tracking of world infections are not useful in developing a model of infection rates that can be relied on. Mathematical models of the future spread of Coronavirus are better than nothing, but not a whole lot better.  Mathematical models must include assumptions on virus spreads, and various factors involved. As they are used in projections, a small erro

WUN FEATHER -- can we just put those two names to bed for a while? You can call me an ‘Indian’ and I won't mind. And let's not call the farmers and ranchers ‘Settlers’ anymore

Hey there # TeamCanada !   I can't take it any more! Well, I guess I can, but I don't want to. I want to talk about the names we call each other. My very best friends, and all my Elderly Aunts and Uncles call me an Indian. I have walked into the most magnificent dining hall at the Air Liquide Head office, Quai D'orsay in Paris, France, surrounded by the worlds top producing Cryogenics team, and Patrick Jozon, the President of Air Liquide, has seen me enter the room, and yelled: " Bonjour! There is Warren! He is my Indian friend from Canada! He and I chased Beavers together in Northern BC!" And over 400 people turned to look at me and then they all smiled, and nodded. To most European people, an Indian is an absolute ICON!   The ultimate symbol of North America. They love us. And then, one time I had just gotten married and took vacation days off to take my new wife to meet my Grandmother; I was so proud. But as soon a

Labels

Show more