Swelling bureaucracy and complex tax system are additional obstacles to success
Some financial experts say we’re headed towards a recession, while others maintain that we’re already in one. What no one would argue with, however, is the fact that our economy is slowing to a crawl.
Recessions come and go. Some are deeper and longer lasting than others, but the one thing they have in common is they always inflict pain and leave behind financial wreckage.
Hundreds of thousands of jobs in the auto industry were incinerated almost overnight. Magna, through absolutely no fault of our own, had to lay off a number of employees as a result of the economic collapse brought about by Wall Street’s casino capitalism. It wasn’t fair — but that’s the sort of damage economic downturns always cause.
In terms of where we’re at today, the question isn’t whether or not we’re heading into a recession. The real question is: why?
Why now, at a time when the government is pumping unprecedented billions of financial stimulus into our economy? Shouldn’t the economy be booming?
Here is my view: until we address several core underlying fundamentals, the economy will not only remain anemic, but will deteriorate even further. Three key factors are having a devastating and long-term impact on the Canadian economy.
The first of these is debt. The fall economic statement tabled a few weeks ago was packed with bad news, including the fact that debt service charges are going through the roof. Interest on the debt currently eats up $46.5 billion in government spending — more than double what we paid only three years ago. What’s worse, it’s projected to soar to $60 billion by 2028.
The second factor hollowing out our economy is the dramatic growth and expansion of government overhead and spending. We’ve got close to 400,000 federal bureaucrats working for the federal government today — and that’s on top of those at the provincial and municipal levels. That expanding bureaucracy is hamstringing business with more red tape.
In the late 1950s — around the time I opened my own small tool-and-die business — government spending as a percentage of national GDP was around 16 per cent. Our economy was flourishing. Living standards were rising. Now fast forward to today: government spending as a percentage of national GDP is approximately 44 per cent, living standards are falling, our economy is stagnant and our middle class is shrinking.
Worst of all, the tax system is a drag on productivity because it requires a large bureaucracy to administer the convoluted tax code. The number of employees working at the Canada Revenue Agency continues to grow year after year — from around 41,000 in 2013 to just over 59,000 in 2023 — a 44 per cent increase. But, if our tax system was straightforward and black-and-white, we’d only need a fraction of those employees.
An economic charter of rights and responsibilities — something I’ve been advocating for several months now — would help us address these three structural problems holding our economy back.
The charter would require government to reduce our national debt by five per cent per year for 20 years, making Canada debt-free within two decades. It would also compel government to curtail our ballooning bureaucracy by cutting overhead by five per cent per year for the next 10 years. And lastly, the economic charter would require government to simplify our tax system by making it easy to understand, clear-cut and fair, with no loopholes and deductions for the rich and special interests.
If we did that, our economy would become one of the fastest-growing economies in the world.
VICTORIA – British Columbia is forecasting a record budget deficit and a rising debt of almost $129 billion less than two weeks before the start of a provincial election campaign where economic stability and future progress are expected to be major issues.
Finance Minister Katrine Conroy, who has announced her retirement and will not seek re-election in the Oct. 19 vote, said Tuesday her final budget update as minister predicts a deficit of $8.9 billion, up $1.1 billion from a forecast she made earlier this year.
Conroy said she acknowledges “challenges” facing B.C., including three consecutive deficit budgets, but expected improved economic growth where the province will start to “turn a corner.”
The $8.9 billion deficit forecast for 2024-2025 is followed by annual deficit projections of $6.7 billion and $6.1 billion in 2026-2027, Conroy said at a news conference outlining the government’s first quarterly financial update.
Conroy said lower corporate income tax and natural resource revenues and the increased cost of fighting wildfires have had some of the largest impacts on the budget.
“I want to acknowledge the economic uncertainties,” she said. “While global inflation is showing signs of easing and we’ve seen cuts to the Bank of Canada interest rates, we know that the challenges are not over.”
Conroy said wildfire response costs are expected to total $886 million this year, more than $650 million higher than originally forecast.
Corporate income tax revenue is forecast to be $638 million lower as a result of federal government updates and natural resource revenues are down $299 million due to lower prices for natural gas, lumber and electricity, she said.
Debt-servicing costs are also forecast to be $344 million higher due to the larger debt balance, the current interest rate and accelerated borrowing to ensure services and capital projects are maintained through the province’s election period, said Conroy.
B.C.’s economic growth is expected to strengthen over the next three years, but the timing of a return to a balanced budget will fall to another minister, said Conroy, who was addressing what likely would be her last news conference as Minister of Finance.
The election is expected to be called on Sept. 21, with the vote set for Oct. 19.
“While we are a strong province, people are facing challenges,” she said. “We have never shied away from taking those challenges head on, because we want to keep British Columbians secure and help them build good lives now and for the long term. With the investments we’re making and the actions we’re taking to support people and build a stronger economy, we’ve started to turn a corner.”
Premier David Eby said before the fiscal forecast was released Tuesday that the New Democrat government remains committed to providing services and supports for people in British Columbia and cuts are not on his agenda.
Eby said people have been hurt by high interest costs and the province is facing budget pressures connected to low resource prices, high wildfire costs and struggling global economies.
The premier said that now is not the time to reduce supports and services for people.
Last month’s year-end report for the 2023-2024 budget saw the province post a budget deficit of $5.035 billion, down from the previous forecast of $5.9 billion.
Eby said he expects government financial priorities to become a major issue during the upcoming election, with the NDP pledging to continue to fund services and the B.C. Conservatives looking to make cuts.
This report by The Canadian Press was first published Sept. 10, 2024.
Note to readers: This is a corrected story. A previous version said the debt would be going up to more than $129 billion. In fact, it will be almost $129 billion.
The Canadian Press. All rights reserved.
NANAIMO, B.C. – Former Bank of Canada governor Mark Carney says he’ll be advising the Liberal party to flip some the challenges posed by an increasingly divided and dangerous world into an economic opportunity for Canada.
But he won’t say what his specific advice will be on economic issues that are politically divisive in Canada, like the carbon tax.
He presented his vision for the Liberals’ economic policy at the party’s caucus retreat in Nanaimo, B.C. today, after he agreed to help the party prepare for the next election as chair of a Liberal task force on economic growth.
Carney has been touted as a possible leadership contender to replace Justin Trudeau, who has said he has tried to coax Carney into politics for years.
Carney says if the prime minister asks him to do something he will do it to the best of his ability, but won’t elaborate on whether the new adviser role could lead to him adding his name to a ballot in the next election.
Finance Minister Chrystia Freeland says she has been taking advice from Carney for years, and that his new position won’t infringe on her role.
This report by The Canadian Press was first published Sept. 10, 2024.
The Canadian Press. All rights reserved.
HALIFAX – The Nova Scotia government has introduced a bill that would kick-start the province’s offshore wind industry without federal approval.
Natural Resources Minister Tory Rushton says amendments within a new omnibus bill introduced today will help ensure Nova Scotia meets its goal of launching a first call for offshore wind bids next year.
The province wants to offer project licences by 2030 to develop a total of five gigawatts of power from offshore wind.
Rushton says normally the province would wait for the federal government to adopt legislation establishing a wind industry off Canada’s East Coast, but that process has been “progressing slowly.”
Federal legislation that would enable the development of offshore wind farms in Nova Scotia and Newfoundland and Labrador has passed through the first and second reading in the Senate, and is currently under consideration in committee.
Rushton says the Nova Scotia bill mirrors the federal legislation and would prevent the province’s offshore wind industry from being held up in Ottawa.
This report by The Canadian Press was first published Sept. 10, 2024.
The Canadian Press. All rights reserved.
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