Freeland doubles down despite dismal pre-COVID economic numbers
In a recent interview, federal Finance Minister Chrystia Freeland explained the need to focus on economic growth to deal with many of Canada’s fiscal issues including our high debt levels. Minister Freeland is correct that higher rates of economic growth would solve many of the country’s issues. Unfortunately, her policy prescription for higher growth is more of the same—more debt-financed government spending and new and higher taxes—which has delivered lower, not higher, economic growth since the Trudeau government came to power.
A recent study compared the economic performance for the four-year periods preceding the last five recessions (or economic slowdowns)—specifically, the economic performance of 2016-19 (Trudeau), 2011-14 (Harper), 2005-08 (Martin-Harper), 1997-2000 (Chrétien) and 1986-89 (Mulroney).
The results were clear, both in terms of overall economic growth (GDP) and growth in per-person GDP. The Trudeau government experienced the weakest economic growth compared to the previous four governments. For per-person GDP growth, the results weren’t even close. Trudeau recorded average growth of 0.8 per cent, which was 50 per cent lower than the next lowest performer (1.2 per cent during the Martin-Harper period of 2005-08).
Detailed data are now available for narrower measures of income at the household and individual level, which unfortunately tell the same story. Market income—basically wages and salaries, self-employment income and investment income—for households (excluding single individuals not part of households), grew by 0.9 per cent (on average) during the Trudeau period of 2016 to 2019. This is by far the lowest growth rate of any previous pre-recessionary period including Harper (1.9 per cent), Martin-Harper (2.0 per cent), Chrétien (3.8 per cent) and Mulroney (2.2 per cent).
The Trudeau government ranks last again on growth of average total household income, which includes both earnings (discussed above) and government transfers, at only 1.0 per cent compared to 1.6 per cent for Harper, 2.0 per cent for Martin-Harper, 3.0 per cent for Chrétien and 2.1 per cent for Mulroney.
Finally, the Trudeau government records the lowest average growth in total household income adjusted for income taxes with an average growth rate of 1.0 per cent compared to Harper (1.4 percent), Martin-Harper (2.4 per cent), Chrétien (3.1 per cent) and Mulroney (1.2 per cent).
We find similar general results for growth in income for individuals rather than households. But remember, the Trudeau government made it a priority to focus on middle-income households and those Canadians wishing to join the middle class.
And it’s important to remember that these economic growth rates were all pre-COVID.
And again, rather than recognize the economic weakness that’s accompanied the Trudeau government’s policies of higher debt-financed spending and taxes, Minister Freeland has doubled-down on more of the same—more government spending financed by borrowing and the likelihood of higher taxes.
The literary definition of insanity is continuing to do the same thing but expecting different results. If the finance minister is truly interested in achieving higher rates of economic growth, then the government requires a complete 180-degree turn in policy—specifically, a short-term plan to balance the budget based on spending reductions coupled with a clear commitment to no new taxes or increases in existing taxes. Otherwise Canadians will continue to hear the rhetoric about improved economic growth while suffering from slower growth.