Government spending must be a federal election issue

Sound fiscal policy can come from any party. Canadians need facts, not fiction and rhetoric

By Jake Fuss,
Tegan Hill

and Jason Clemens
The Fraser Institute

As the fall federal election approaches, political commentators will bombard Canadians with sometimes misleading rhetoric. But Canadians need facts, not fiction, to make well-informed decisions.

Jake Fuss
Jake Fuss

Such rhetoric undermines the public’s understanding of good policy and on one key issue, creates confusion around the size and role of Canada’s federal government in recent history.

Appropriate size of government is critical, as it shares a close relationship with economic growth.

Two measures can properly determine the size of the federal government: spending (as a share of the economy) or per person spending (adjusted for inflation).

Immediately after taking office, Prime Minister Justin Trudeau increased program spending. As a share of the economy, federal program spending increased from 13 per cent in 2014 to 13.9 per cent in 2015.

At the end of this government’s term in October, this year’s federal budget projects program expenses will reach 14.3 per cent of gross domestic product. So the share of government spending has increased (relative to economic growth) since the last federal election.

Jason Clemens
Jason
Clemens

Similarly, per-person spending (inflation adjusted) immediately jumped from $7,740 in 2014 to $8,282 by the end of 2015. In 2018, per-person program spending (inflation adjusted) reached $8,869, the highest point in Canadian history, including the Great Depression, the 2009 recession and both world wars.

Clearly, under the Trudeau Liberals, the size of the federal government has increased.

Yet the size of government can’t be branded by political party.

Prime Minister Stephen Harper also increased the size of the government. According to data from the federal Department of Finance, the Harper Conservatives increased per-person spending (inflation adjusted) from $6,992 in 2005 to $7,740 in 2014 – an increase of 10.7 per cent.

Prior to Harper taking office in 2006, federal government spending as a share of the economy was 12.5 per cent. By the end of his tenure, Harper had increased spending (as a share of GDP) to 13.0 per cent. No matter how you slice it, the Harper Tories increased the size of the federal government.

The expansion of government under both Harper and Trudeau stands in stark contrast to the reform period led by Liberal Jean Chretien.

By the end of his tenure as prime minster, Chretien had reduced the size of government (as a share of GDP) from 17.1 per cent in 1992-93 to 12.5 per cent in 2003. Moreover, in 1999-00 and 2000-01, federal program spending as a share of the economy was reduced to 11.8 per cent – a level not seen in decades.

Per-person spending tells a similar story.

Before Chretien took office in 1993, per-person program spending was $6,995. At its lowest point, Chretien reduced this number to $5,806. Although per-person spending inched up to $6,670 near the end of his tenure, the amount was still lower than when he took office.

Some political commentators may suggest a Liberal government means more spending and larger government, but that’s not necessarily the case. Chretien reduced the size of government during his time in office.

As Canadians prepare to vote in the fall, it’s crucial to remember both the importance of sound fiscal policies – balanced budgets, smart and prioritized government spending, and competitive taxes – and the history of previous governments.

The resounding economic success of the Chretien government can serve as an ideal model for future governments, regardless of the party.

Jason Clemens, Jake Fuss and Tegan Hill are analysts with the Fraser Institute.

© Troy Media


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