Federal government’s ‘consultation’ thinly-veiled prescription for more spending

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Appeared in the Ottawa Sun, January 18, 2023
Federal government’s ‘consultation’ thinly-veiled prescription for more spending

The Trudeau government is consulting Canadians about what they want to see in this spring’s budget, but like in a rigged trial with a crooked judge, the verdict is already in—the government has already decided Canadians want more government spending. The entire proceeding is therefore just for show so the government can, upon delivering a spring budget, which again increases spending, point to the consultation as evidence that it’s what everyone wanted.

Consider question one of the consultation: “What investments do you think would best strengthen Canada’s economy, create good jobs, and help Canadians succeed?” It’s taken as given that Ottawa should spend more (and spending is a more accurate term than “investments” for what the government proposes). Respondents select up to three answers from a spending list: post-secondary education, skills training, business subsidies [a.k.a. corporate welfare], climate change, public transit and so on.

The pattern continues in question two: “How do you think the government can best support Canadian innovation that will create new jobs and grow our economy?” Here there are more suggestions for spending on clean energy, health care, more corporate welfare, renewable energy subsidies, environmental technology and more. The list, mercifully, also includes one exception from this central planning bonanza: increasing immigration targets to allow more skilled workers (this is a good idea).

For the third question, survey respondents can select up to five “important ways the Government of Canada can help build an economy that works for everyone.” The choices are—surprise!—more government “help” or “support” for the homeless, university graduates, the unemployed, visible minorities, the disabled, the 2SLGBTQI+ community, women and others. There are, in addition, vague proposals to advance reconciliation with the Indigenous population and reduce systemic racism.

Of course, the government does not consider the possibility that Canada might experience widespread economic growth by reducing government spending and regulatory initiatives. Yet as another Liberal government showed a generation ago, cutting spending and taxes is a proven formula for improving economic growth.

Specifically, beginning in 1995 the Liberals under Jean Chrétien cut program spending in two consecutive years, then limited spending growth until the end of the decade, so that by 1999-00 real program spending per capita was 15.5 per cent lower than in 1993-94. Provincial governments around the country, notably the NDP in Saskatchewan and Progressive Conservatives in Alberta, also implemented deep spending cuts. In addition to cutting spending, the federal and provincial governments also cut taxes including corporate taxes.

As a result, from 1997 to 2007, Canada led the G7 countries in GDP growth and real business investment growth. Annual employment growth over this period was 2.0 per cent in Canada, much higher than most other industrialized countries including the United States (1.3 per cent). And from 1996 to 2004, the poverty rate in Canada fell from 7.8 per cent to 4.9 per cent. In other words, government spending cuts and tax reductions delivered all the things today’s Liberal government wants to achieve with the opposite policies.

Canada’s experience in the 1990s was no anomaly. The preponderance of evidence from developed economies shows spending restraint and tax cuts are the best way to increase economic growth. Thus as a dutiful citizen, while filling in the federal government’s budget survey, I checked the “other” box on each multiple choice question and wrote in: “Reduce government spending.” The evidence is clear—you can’t centrally plan your way to economic growth.

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