Trudeau government keeps ‘imagining’ while Canadians suffer the economic consequences
Back in 2015, Justin Trudeau was elected prime minister in part because of his different disposition compared to then-prime minister Stephen Harper. It was not Trudeau’s experience in government, which was limited, nor his experience in business, which was non-existent. But rather his exuding optimism that differentiated him from the other party leaders and led the Liberals to victory.
Unfortunately, that optimism and policy by imagination has not been tempered over the last five years by the reality of government. In reality, governments of all political stripes face unique incentives and constraints that limit their ability to create, manage and reform programs and services.
For instance, the Liberal 2015 economic plan included a substantial increase in federal infrastructure spending to “turn our economy around and get it growing again.” The plan included $17 billion in new infrastructure spending over the first four years. Put differently, the Liberals imagined they could easily introduce additional infrastructure spending quickly and effectively.
A number of studies have highlighted the delays in federal infrastructure spending. The Trudeau Liberals seemingly ignored the practicality and time required to identify projects, negotiate agreements with other governments, secure contractors and permits, and so on. Indeed, a 2020 report by the Parliamentary Budget Officer (PBO) found that federal spending continues to lag behind schedule—and there’s limited evidence federal infrastructure resulted in additional provincial spending. In 2018-19, federal infrastructure spending increased by $1 billion but provincial spending declined by $733 million, offsetting almost three-quarters of the federal increase.
Next, consider the Trudeau government’s much touted innovation agenda, which promised to create five super-clusters that would leverage private-sector money. In 2017, then-finance minister Bill Morneau heralded the ability of his government to allocate investment capital, saying “we’re investing in sectors where we know we can beat the world… we’re definitely choosing places where we can win globally” and “we’re making investments to grow our economy.”
But a 2020 PBO study of the innovation initiative found pretty dismal results. Only 29 per cent of the original budget had been spent by 2019-20 and 59 per cent of that spending was on administration and operating costs rather than actual investments. Moreover, for the 45 research projects approved, almost $100 million had been committed but not necessarily spent. The PBO concluded by saying it was skeptical the program would meet its stated objectives, particularly in terms of improving the economy.
Or take the more mundane task of paying employees. A 2018 report by the auditor general found that the federal payroll system remained plagued by problems, with errors in 2018 reaching $615 million, affecting more than 150,000 federal employees.
That may seem like old news. But contrast the government’s inability to complete the simple task of paying its employees against its imagined capabilities. In its upcoming spring budget, the Trudeau government will likely announce major new initiatives. Its recent throne speech referenced a new national pharmacare program, a new federal daycare program, investments in clean technology and more COVID/recession recovery plans, not to mention a potential remaking of the Canadian economy.
And this is all taking place during a time of deteriorating economic performance. Consider that per-person economic growth (inflation-adjusted) in Canada, between 2016 and 2019 (before COVID and the recession), averaged 0.8 per cent annually—compared to 1.5 per cent during the comparable pre-recession period under Harper (2011-14) and 3.7 per cent under Jean Chrétien (1997-00).
Moreover, private business investment has collapsed. On average, business investment (inflation-adjusted) declined by 0.2 per cent annually (on average) between 2016 and 2019 while it grew by 5.1 per cent between 2011 and 2014 and by 7.5 per cent between 1997 and 2000. And despite misperceptions, it’s not just happening in the energy sector; a 2019 study found that roughly two-thirds of Canada’s industrial sectors experienced declines.
So long as Trudeau government policies are guided by imagination rather than practical reality, it will continue to overpromise and underdeliver while Canadians endure slower economic growth and a less prosperous economy.