“Do we want to live in a country where we choose to pass a blooming debt to our children? … It would be irresponsible and unfair to pass on more debt to the next generation.”
— Chrystia Freeland, Deputy Prime Minister and Minister of Finance
Right.
Now let’s look at the Federal Budget that Ms. Freeland tabled last Tuesday; an increase in spending of $52.9 billion and a projected deficit for this fiscal year alone of at least $40 billion.
All of this on top of an existing national debt of $1.25 trillion. Yes, that’s TRILLION. How many of us can even contemplate how much that really is? Interest alone on this debt is costing Canadians between $46.5 billion and $54.1 billion a year, depending on who you are listening to.
Over the past eight years there have been no balanced budgets and there are no reasonable plans in place to prevent future deficits. In fact, it is estimated to grow to an annual deficit of 64.8 billion by 2028/29.
During that same eight years, the national debt has doubled, rents have doubled, and the cost of mortgages have sharply increased. Not perhaps all of this government’s fault, but certainly all of it under their watch.
Chrystia Freeland has said that an improving economy, higher revenues, and tax changes will help offset the $52.9 billion in new spending. That is wishful thinking at best, and at worst, it reflects her belief that potential new revenue should be used for more spending rather than dealing with a national debt that is rapidly becoming uncontrollable.
Prime Minister Justin Trudeau said about this Budget, “Canadians need responsible leadership right now. Let’s build a country that is stronger, more prosperous, and fair to every generation.”
Right again.
But does this budget accomplish this or even carve a path to that objective? I think not. Indeed, I think it does the opposite.
In my view, this Budget is one more reason why the Canadian dream is out of reach for many Canadians today and for the vast majority in our future. For the Prime Minister and his Finance Minister to say that this budget is fair to every generation, including the current one, and one that will build prosperity and prevent passing a blooming debt to our children is simply inconsistent with reality.
It is clear that this Budget has been crafted to appeal to younger voters. This demographic has traditionally leaned toward the Liberals. But that is changing as many of them are now realizing that extensive new spending, on top of a massive federal debt, with no real plan to deal with it, will eventually come back to bite them and their children seriously.
There are two aspects related to this budget that particularly concern me. The first is the increase in the Capital Gains tax to 67 per cent after certain deductions. Chrystia Freeland has implied that this only applies to the “super-rich.”
I disagree with that, and so does former Liberal Minister of Finance Bill Morneau, who said this about the proposed Capital Gains tax this government intends to impose. “This is not about the 1% or the super-wealthy. It is anyone who has made investments over their lifetime to try and have a retirement (income).”
Moreau has also warned that increased corporate taxes will make multinational corporations think twice about investing in Canada.
As for the capital gains tax increase, many Canadians at all levels of our social structure invest in financial markets to help with their future economic stability. Unions make huge investments for their members, and millions of individuals invest directly in the markets for financial stability. The Government is fooling itself if it really believes this negative tax only affects the “super-rich.”
When it comes to taxes, it might be wise to heed the words of Winston Churchill who said, “We contend that for a nation to tax itself into prosperity, is like a man standing in a bucket and trying to lift himself up by the handle.”
My second serious concern related to the Federal Budget is less obvious but nevertheless important. The Government is dedicating $8.5 billion to build new housing in Canada with a goal of four million new homes by 2031.
That by itself is good news. Whether it actually happens with the usual bureaucratic posturing and delays, on top of questions and challenges related to jurisdiction, is another matter.
There is no question, however, that housing is a serious problem in Canada. This problem has two parts: affordability under current economic circumstances and new people arriving in Canada as part of the Federal Government’s Immigration policies.
The more housing that can be built across Canada over the next decade, the better. But how and under what conditions it can be done requires cooperation and collaboration between the provinces and the federal government. A dictatorial approach by the federal government will not work.
In response to a question in a media scrum about whether Justin Trudeau will work with the provinces on federal conditions related to funds for new housing or deal directly with the municipalities, Trudeau said, “I’d always rather work with the provinces, but if we have to, I will go around them.”
The problem is that he can’t. Section 92 (F) of the Canadian Constitution says so. That section gives the provinces jurisdiction over municipalities and the rules that govern them. Any breach of this could well result in a serious constitutional battle that would make it even harder to get houses built.
It would also mean (and this is a major part of my concern) that if the Constitution of Canada can be ignored for this issue, what precedent does that set for overriding other constitutional requirements that could affect the fabric of our already fragile Canadian federation?
In recent weeks, provincial premiers have written to the Prime Minister twice, once asking for a First Minister’s Meeting related to the carbon tax and once cautioning him about stepping on provincial jurisdiction. He has shrugged both of them off.
An end-run around the premiers is not acceptable. Prime Minister Trudeau should meet with the provinces and territories expeditiously. His statement that he doesn’t need to since he met with them in 2016 holds no water.
The Canadian federation is a partnership, and the Prime Minister needs to work with the provinces to find mutually agreeable solutions to many of the difficult problems that now face us. Neither should step on the other’s jurisdiction without agreement and cooperation.
In summary, this federal budget and its possible consequences create or perpetuate a number of serious problems.
Finance Minister Chrystia Freeland shows little real concern over the generational effect of Canada’s debt. Instead, she has said that people who question her budget are economically illiterate. Really?
She is also saying that her Budget is making life cost less and more affordable.
I wonder how many people believe that. I guess we will soon find out.
Hugh Mackenzie
Hugh Mackenzie has held elected office as a trustee on the Muskoka Board of Education, a Huntsville councillor, a District councillor, and mayor of Huntsville. He has also served as chairman of the District of Muskoka and as chief of staff to former premier of Ontario, Frank Miller.
Hugh has also served on a number of provincial, federal and local boards, including chair of the Ontario Health Disciplines Board, vice-chair of the Ontario Family Health Network, vice-chair of the Ontario Election Finance Commission, and board member of Roy Thomson Hall, the National Theatre School of Canada, and the Anglican Church of Canada. Locally, he has served as president of the Huntsville Rotary Club, chair of Huntsville District Memorial Hospital, chair of the Huntsville Hospital Foundation, president of Huntsville Festival of the Arts, and board member of Community Living Huntsville.
In business, Hugh Mackenzie has a background in radio and newspaper publishing. He was also a founding partner and CEO of Enterprise Canada, a national public affairs and strategic communications firm established in 1986.
Currently, Hugh is president of C3 Digital Media Inc., the parent company of Doppler Online, and he enjoys writing commentary for Huntsville Doppler.
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You sum things up pretty well Hugh. Freeland calling anyone financially illiterate is laughable considering her highest level of education is a degree in Russian literature…never mind the prime minister who dropped out of university in year 2. Having people like this managing an annually increasing share of our hard earned dollars should scare everyone.
The best line I’ve heard regarding this farce of a budget though was from Tom Mulclair of all people. He said the GST should be renamed the DST…debt service tax…because the Liberals now need to use the entirety of the sales tax collected to pay interest on the debt. Let that sink in.
Every political party tries to buy our votes with our own money. Mr. Trudeau however took this to a new level when he handed out money during the pandemic and then called an election. It was an election that changed nothing. Supporting people financially during the pandemic was needed. Calling an election was STUPID.
Mr. Singh should pull his support from the liberals and force an election over this budget. Let the electorate decide if this is a good budget.
I can’t believe anyone would want to defend this wretched government.
Economy: we are in a much worse situation than pre-Trudeau, and it’s not simply COVID or international events. Per capita GDP has declined despite government spending reaching record levels. Economic growth is stagnant and only occurring in aggregate, not per capita, due to massive population increase. Investment is low, and only going to get worse by driving away investment with the new increase in capital gains. We now spend more paying interest on debt than Federal health transfers. Housing polices have all been demand-side, injecting cash into the economy without increasing supply of homes, leading to massive price inflation (and general inflation). Simply irresponsible.
Social policy: immigration policy completely out of touch with reality; admitting 500,000 immigrants per year has exacerbated problems like doctor shortages, and severely increased demand for housing in an already inflated market (also contributing to general inflation). Attacks on our Constitutional Monarchy. A draconian “online harms bill” which massively curbs freedom of expression and increases the power of the already over-reaching CRTC. Shovelling tax money into the legacy media. Massively expanding the scope of Marxist DEI programs in government.
Federal-provincial relations: intrusions into the jurisdictions of provinces is continual, program spending for provincial matters is only provided with DEI strings.
Energy: the disastrous and regressive carbon tax, which is exacerbating an already dismal economic situation by increasing inflation and raising the price of everything. Green energy can be incentive in ways which are not fuelling cost of living crises. Refusal to increase oil exports meaning other countries just by it from dictatorships.
Military: politicizing the military justice system and the rank system, destroying the independence of the military, an important principle for an effective fighting force. Under funding, freeloading on our allies, cancelling F-35 and then buying it again, wasting billions.
Justice: implementing soft on crime polices like unlimited bail and activist judges, leading to a surge in crime.
Who would’ve thought the son of a terrible Prime Minister would be an even more terrible Prime Minister? Fool me once.
Canada is facing tough times. Not only is Federal debt & interest costs rising, as Hugh points out well, it’s risen faster than in most OECD countries. At the same time, productivity improvement has been badly lagging. Per capita, Canadians are now worse off than when Trudeau became PM.
The Federal budget is a ‘Hail Mary’ play to win back younger voters that have abandoned the Liberal’s in droves. The $8.5 billion targeting the housing crisis comes despite Trudeau claiming last year that housing was a provincial responsibility and problem. But with little planning and preparation, the rapid population expansion made the housing crisis much worse. Most impacted, the GTA has seen home prices double since 2015.
The CMHC pegs the housing shortfall at 3.5 million units by 2030 and with the average national home price hovering around $700k, $8.5 billion amounts to less than 0.4% per new dwelling. For context, residential building annual inflation recently was 6%. This new federal money is for show, it will have no impact on housing affordability.
The capital gains tax hike (to help pay for all the spending) on the “ultra rich 0.1%,”, or roughly 40,000, is not just wrong, it’s insulting. It will negatively impact roughly 5 million Canadian cottage/multiple property owners, as well as about 1.3 million small business owners, including doctors. It will also further discourage already lagging innovation and business investment.
Most voters will come to understand this, and the Liberal’s support will likely continue to slide.
Hugh, the high school kids that work for me are tired of me saying that “if most people had better math skills the world would be a better place”. I tell them to listen to their teachers and parents, pay attention and stop telling me you will never use what you are being taught. Math is necessary to get a job (every trade uses math), understand tax’s, economic & political policy, housing, mortgage rates, car loans, savings, retirement plans and I could go on and on. I am not saying you have to be a genius but you need to understand the basics well enough to work, ask questions and plan your future.
That said… Companies build factories where there is labor to support them and taxes are reasonable. Canada’s GDP per capita ratio is falling and our taxes are increasing. The wealthiest people and companies pay the majority of the tax in Canada (top 20% pay over 60% of the total income tax in our country). This causes people and companies to relocate to a friendlier tax country or state which they do everyday. As these people leave our taxes and debt rise even more because they no longer contribute to the tax base so the shortfall in tax revenue is left for the rest of us to cover. Now we are worse off than ever before.
The simple math is Canada has to be more productive and efficient. Every necessary or silly government program is not free. It comes off your pay cheque every week.
Without meaning to sound cold hearted all I hear is the poor illegal immigrant. The refugee family, the Trudeaus immigrants he is flooding Canada with. Housing for them! Health care for them. What about Canadians? What about people born in Canada, Don’t they count? It’s time for a badly needed pause on immigration as our government seems to have absolutely no control over immigration of any kind.
I will do anything to help my neighbor, but my family comes first. Mr. Trudeau has no concern about his major family “Canadians” It’s flood Canada with immigrants, to hell with the out come. I lived through PET
and his failures. Like father like son! Canada never learns from it’s mistakes. Too busy buying votes with human lives. Without Prejudice!
Let’s be fair. When it comes to budgets, we are all experts about other people’s ideas. But all that and $2.50 will get you a coffee at Tim Horton’s. Let’s look at a few specifics the current budget tries to address.
International events – Events beyond control of national governments have had a major impact on our finances. Covid 19, Climate Change, several foreign conflicts demanding contributions from Canada, and the resulting cost of oil ad gas around the world affects the budget of every country. Canada has managed those impacts as well as most, including the USA.
Growing financial inequity – Statistics Canada reports that financial inequality is deepening in Canada. The wealthiest Canadian households are fast pulling ahead of the poorest. The wealthiest 20 per cent of the country possess more than two-thirds of Canadians’ net worth. The bottom 40 per cent hold just 2.8 per cent. 40% is a big and dangerous number. Several countries manage this better. Helping a bit more will have zero impact on the lifestyle of the wealthiest, but potentially a big impact on the poorest.
Immigration – It’s easy for opposition parties to criticize the government for moving too slowly to accommodate desperate refugees and aspiring workers and students from Syria, Afghanistan, Ukraine. etc., and then criticize again for moving too fast.
Housing – The provinces claim housing as strictly provincial territory and then blame the Feds when things go wrong. We forget that housing costs went up 60% under Harper and 54% under Trudeau.
Superpower influence – Living under the shadow of the USA has both positive and negative impacts. When a Canadian start-up reaches the point of needing capital to grow, US capital markets have 10 times the capacity to supply that capital. They can easily buy ownership and add those companies to their score card. But would we rather live in the USA? Those dynamics are entirely different among the 27 countries of the EU. How is it that Sweden is home to a major car and truck and heavy equipment company, and little Denmark is a major ship builder?
As I was listening to a radio talk show the other day, I heard a discussion on building homes in Canada where on the average it takes 2 to 3 years to receive the permitting to build vs 4 weeks in Miami! The question was asked, why? Miami is more builder friendly was his answer.
Whether this is true in all cases, it does highlight the problem of bureaucratic red tape we live with.
Under our current system, building homes to meet and house the target the Liberals have set out for the thousands of immigrants coming to this country each year appears impossible. Unless there is a pause on immigration and catch up on available homes, the situation will continue to escalate.
I feel for the immigrants that were promised the Canadian dream only to find they can’t afford it or there’s no where to live. We are currently working with a refugee family and see the problems not only with homes but other services as well like health care.
Unfortunately, our Liberal friends just don’t get it!
Like father like son. I published a small town newspaper in Churchill Manitoba from 1971 to 74. I watched PET (Trudeau senior) spend our country almost into oblivion. I was paying close attention to the Feds during that time. The general consensus of those I followed was we were right at the edge where interest payments on our debt would be at the point where they were impossible to pay. PET damn near bankrupted our country, his son (under Freeland’s tutelage) is doing the same. Is it intentional? Seems that way. A good read https://www.fraserinstitute.org/article/like-father-like-son-and-canadians-will-pay-the-price
Hugh,
With all of your experience in municipal government, how much housing did you get built during that time. Housing is a municipal/provincial responsibility and for the past 30-35 years, nothing of rental accommodation has been built. So, who hasn’t been doing their job protecting housing for the same people who are working those jobs that drive the economy? Since late 70’s labour has been under attack, keeping wages below the cost of living. Which government body has been protecting the “regular working people?”
As for investing in real estate for retirement, that only contributes to the housing crisis. Housing is a need, not an investment. Most boomers invested in RRSP’s for their retirement. I have no sympathy for the people who invested in real estate, then complain about the increased capital gains tax.
As for debt, isn’t that argument getting old and stale? Every government operates with debt…..I’ve heard it my whole life, all around the world!