Trudeauian economics: Rain or shine, it’s deficits all the time

If you are still holding out hope that the Trudeau government will present a plan to return to a balanced budget, this Fall Economic Statement will leave you sorely disappointed. Oh, there’s lots in there to be sure. Big tax write-offs for corporations, a $600 million bailout package for failing print media companies, and a social finance program, aimed at helping projects that are “not yet viable in the commercial market.”

New federal tax measures

The tax write-offs are aimed at increasing Canada’s business competitiveness with the U.S. in wake of the Trump tax cuts late last year. Previously, Canada’s marginal effective tax rate was approximately half that of the Americans: 17.5% compared to 35%. Now, thanks to U.S. decreases and Canadian increases, Canada’s corporate tax rate sits at 21%, slightly higher than the Americans 19%. While these measures may be of some use as far as increasing Canada’s economic competitiveness is concerned, in light of many major stakeholders calling for broad-based tax reform, these changes are simply not sufficient for Canada’s long-term competitiveness.

Market interference

The bailouts for failing Canadian media companies are even more concerning. Trudeau’s government is offering print media companies that have failed to adjust to the world of digital news, tax breaks and credits to keep them in business. This is nothing more than the government brazenly picking winners and losers in a sector tasked with keeping the government accountable. More needless market interference can be found in regards to the $755 million to be spent on social finance. Trudeau’s government sees a need for more government funding in this area because these projects have not been able to secure funding from private investors. Once again, the government is taking taxpayer cash and using it to prop up failed ideas and business models.

No balanced budget in sight

And what are Canadians getting in exchange for all of this new spending? Deficits for decades to come. Deficits are projected to continue within the $10-$20 billion dollar range for the next five years at least, Trudeau and his government have completely abandoned their promise to bring the budget back to balance by 2019.

The real cost of Canada's debt

Of course, though, I would be remiss if I did not mention Canada’s ever-growing debt and the service costs associated with it. In 2017-18, $21.9 billion dollars was spent on servicing our debt. That’s more money than the Yukon, the Northwest Territories, Nunavut, Newfoundland & Labrador, PEI, Nova Scotia, New Brunswick, Quebec, Manitoba, Saskatchewan and Alberta received in Canada Health Transfer payments last year. By 2023-24, public debt charges are projected to rise to $34.3 billion dollars annually. The government likes to minimize this number by referring to it as a percentage of GDP but let’s take a moment to consider how much money that actually is. That $34 billion, spent on nothing but covering the interest on our ever-growing debt, is akin to having the Federal government fund healthcare in two more provinces the size of Ontario!To look at it differently, the $34 billion in enough to build a new hospital in every province and territory in Canada!

Social programs at risk

Regardless of how this money could be spent, the bottom line is that it is doing nothing for Canadian taxpayers right now. If the federal government cannot rein in its wild spending habits, rising debt and interest rates will put many of our nation's beloved social programs at serious risk.