Is the Government Ignoring Canadian Economic Realty?

by Maj (ret'd) CORNELIU. CHISU, CD, PMSC, FEC, CET, P. Eng. Former Member of Parliament Pickering-Scarborough East Let’s face the crude reality. It is not just that people do not feel good about the economy; the economic wellbeing of Canadians has been declining for years. Although it is true that the overall economy is growing slowly and inflation has been brought back down to the Bank of Canada’s 2 per cent target, these struggling positive indicators do not necessarily mean that Canadians are better off. From the middle of 2019 to the end of 2023, Canada experienced one of the worst declines in inflation-adjusted GDP per person in the last 40 years. According to new data from Statistics Canada, this decline in living standards has continued for most of 2024, and as of September 2024, GDP per person ($58,601) was 2.2 per cent lower than it had been in June 2019 ($59,905). Simply put, Canadians have suffered a marked decline in living standards over the last five years. Moreover, Canada’s private-sector employment has stagnated. From 2019 to 2023 (the latest year of available data), employment in the private sector (including self-employment) grew by 3.6 per cent compared to 13.0 per cent in the government sector. This is a major problem that seems to be ignored by both the government and the opposition. The private sector pays for the government sector, primarily through taxes. While a growing private sector helps drive wealth-creation in the economy, a growing government sector extracts that wealth and redistributes it elsewhere or even inhibits that wealth-creation in the first place. Despite data showing that private-sector employment and living standards have stagnated and/or declined for years, the Trudeau government insists that everything is fine and Canadians just “feel” worse off. On top of this discouraging news, we have the saga of the recently released fall economic statement. In it, the federal government broke its key fiscal guardrail and posted a deficit of $61.9 billion for the 2023-2024 fiscal year, blowing past the $40.1 billion level at which it promised to keep the deficit. The Liberal government is further projected to go beyond the $40.1-billion guardrail for the next two fiscal years, with a deficit projection of $48.3 billion in 2024-2025 and $42.2 billion in 2025-2026. Not only is this higher than what was forecast in the budget last spring, but based on past performance, would it surprise anyone if they continue to exceed their projections in the future? Department of Finance officials claim that the deficit was $21.8 billion higher than expected for 2023-2024 due to exceptional factors. Those included future payments to compensate First Nations children and families who faced discrimination under the First Nations Child and Family Services program and under Jordan’s principle. The government previously set aside nearly $23.3 billion for compensation. The second factor is money that has not been recovered under the Covid-19 pandemic support programs. The higher-than-anticipated provision for these two categories accounted for $21.1 billion in accounting charges. Why is nobody talking about the more than 12 billion dollars forked out by the government on foreign projects with no accountability? Even the loyal opposition is totally silent on this issue. Why, instead, are they continuing to harp on the obsolete “gas tax”, like a dog barking in the desert? The statement projects that the economy will grow by 1.3 per cent in 2024 and 1.7 per cent in 2025. Tax revenues for 2023-2024 are expected to be $5.5 billion below the spring budget’s projection, due to lower tax revenue consistent with a softening economy. The most significant investments introduced in the fall economic statement include renewing the Accelerated Investment Incentive, to make Canada’s corporate tax system more competitive. First introduced by former finance minister Bill Morneau in 2018, the incentive was intended to address competitiveness concerns after Donald Trump was first elected U.S. president. The revival of these incentives will cost the federal government an estimated $17.4 billion over the next six years. They will slowly be phased out starting in 2030 to 2033. The government has also announced $1.1 billion in new spending to boost the Scientific Research and Experimental Development tax incentive program. An additional $1.6 billion was allocated for the government’s GST holiday, which gives a break from the goods and services tax on a number of goods between Dec. 14 and Feb. 15. The government has also committed $1.3 billion over six years for strengthening the border, a contentious issue with the incoming Trump administration that the federal government hopes to solve. On top of this evident government crisis, the sudden resignation of Crystia Freeland as Finance Minister just hours before the fall economic statement was to be tabled in Parliament, is also noted. The government house leader Karina Gould tabled the statement in her absence. In a letter addressed to Prime Minister Justin Trudeau, Crystia Freeland said she had been at odds with the Prime minister for weeks over “the best path forward for Canada.” So, on top of an economic crisis we are inching towards a political one too? Clearly, this government is out of touch with Canadians.