Federal government cranked up spending up but Canadians are worse off

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Appeared in the Ottawa Sun, January 17, 2024
Federal government cranked up spending up but Canadians are worse off

“If spending money like water was the answer to our country’s problems,” Margaret Thatcher said in 1980, less than two years after the United Kingdom’s Winter of Discontent, “we would have no problems now. If ever a nation has spent, spent, spent, and spent again, ours has.” That a government cannot spend away the country’s problems is a clear lesson of history. The Trudeau government evidently has not learned this—it has spent, spent and spent more, and the country’s problems have gotten worse.

In 2014-15, before the Liberals took office, federal program spending was 12.8 per cent of GDP (the value of final goods and services produced in Canada). In 2023-24, it’s projected at 15.7 per cent. And relative to 2014-15, annual program spending is $89 billion higher than if it had tracked with overall economic growth.

As Thatcher would have predicted, this extra spending has not solved most problems. Consider health care. The Fraser Institute’s survey of health-care specialists found a median wait time of 27.7 weeks between referral from a general practitioner and receipt of treatment in 2023—a 51 per cent increase versus the 18.3 weeks in 2015. Relative to peer countries, Canada is a big health-care spender but with poor results, and is far below average on key metrics such as physicians and hospital beds per capita.

Another big spending area is climate change. The Liberals boast of pouring more than $120 billion into climate programs, but even with an annually increasing carbon tax and onerous regulation on top of that spending, the government is on track to miss its 2030 climate targets. Given the high cost of its climate policies relative to environmental benefits, that’s not a bad thing. Ottawa’s climate targets are wildly unrealistic, and achieving them would mean devastating the economy further.

Speaking of devasting the economy, when the Trudeau government spends, it claims it will support economic growth, increase affordability or otherwise deliver financial benefits. Eight years in, these benefits have not materialized. As of the third quarter of 2023, after five consecutive quarters of declining real GDP per capita, Canada’s cumulative growth in the past eight years is a paltry 1.6 per cent versus 14.7 per cent in the United States. One way to think about this gap: if Canada’s real GDP per-capita growth tracked with the U.S. since the Liberals took office, Canadian living standards would be about 12.8 per cent higher than they are today.

Finally, the Trudeau government has significantly ramped up child-care spending, but the effect of the national child-care program has been to severely distort and in many cases destroy the child-care sector by applying a discriminatory funding model that pushes child-care entrepreneurs out of the market and discourages private investment. The federal program is composed of separate agreements with the provinces, but with the child-care sector suffering crisis and widespread shortages from coast to coast, it’s reasonable to conclude Ottawa’s plan is fatally flawed.

Wherever you look, the pattern is the same—federal spending is up, but outcomes are worse. The government creates problems and does not solve them when it spends money like water. Margaret Thatcher well understood this fact. Justin Trudeau, unfortunately, evidently does not.

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