When measured against history, Prime Minister Trudeau’s spending near peak levels
Much has been made of the current federal government’s ramp up in spending, particularly its multi-billion dollar infrastructure initiative, and the corresponding deficits and debt being accumulated. What has been largely ignored is the historical context of such spending—an analysis made all the more timely by this year’s 150th anniversary of Confederation.
Our recent study calculated per person spending by the federal government (excluding interest costs on the national debt) since 1870, adjusted for inflation, allowing us to directly compare the spending of different governments and prime ministers over time. Some of the results may be surprising to Canadians and informative about the current state of federal spending.
Prime Minister Justin Trudeau began to increase per person spending immediately after his election in October 2015. The Harper Conservatives originally planned for per person spending to reach $7,342 in 2015 but the Trudeau Liberals cranked up spending to $7,557. Put differently, the Trudeau Liberals increased per person spending in 2015 by almost 3 per cent more than the previous Harper government had planned.
Spending was further increased in 2016 and the federal government plans to spend $8,337 in the current fiscal year (2017-18). This is only $38 shy of the all-time high level of per person spending recorded in 2009-10 by the Harper Conservative government ($8,375). The peak spending under the Harper government, however, was done during a marked global recession.
Conversely, the near-peak spending planned by the Trudeau government is done without any recession or large-scale military conflict, which are the two main characteristics of almost every other previous spike in federal spending.
For context, the current level of per person spending (adjusted for inflation) is 22.1 per cent higher than the peak spending incurred during the depths of the Second World War in 1943 under Canada’s longest serving Prime Minister William Lyon Mackenzie King.
It’s also 14.4 per cent higher than the peak of federal per person spending reached under Prime Minister Pierre Trudeau.
Unlike his father’s record of spending, Prime Minister Trudeau’s current plan is to actually start reducing per person spending next year—the federal government’s most recent budget called for a 1.1 per cent reduction in per person spending by 2019-20. This stands in stark contrast to the prime minister’s father who along with his predecessor Prime Minister Lester Pearson ramped up federal per person spending (adjusted for inflation) from $2,837 in 1962 to a peak of $7,288 in 1982, an increase of 156.9 per cent.
Whether the federal government will follow through on its plan to reduce federal spending in the two years prior to the next federal election is a legitimate question, but it’s nonetheless the current plan. That said, even with the planned 1.1 per cent reduction in federal per person spending, the federal government still expects a $23.4 billion deficit in 2019-20. To reach a balanced budget by 2019-20, which was the Liberal Party’s original campaign commitment, the government would have to reduce per person spending by 6.4 per cent over the next two years.
There’s no question that the current government has decidedly increased spending at the expense of further deficits and mounting debt. It’s questionable whether it will be able to return to balance in the foreseeable future, and the degree to which Canadians benefit from this added spending remains unclear. Consider for instance that the main rationale for the additional spending was to “stimulate” additional economic growth. The problem for the government is that economic growth, and prospects for future growth, have steadily declined since 2015.
It’s been 150 years since Confederation. During that time, only one other federal government has spent more on a per person basis than the current Trudeau government. And crucially, unlike previous marked increases in federal spending, there is no recession or large-scale military conflict to explain the increased largesse. Rather the government has voluntarily decided to increase spending, but to-date, has little to show for it except the accordant deficits and debt.
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