The Niagara Independent, October 20, 2023 – In an open letter to Finance Minister Chrystia Freeland this week, the Business Council of Canada took the extraordinary step to make a public plea to the federal government to resist making any new spending promises or dole out additional funding in the fall economic update, which is expected in the coming weeks.

The Council also suggested that the finance minister takes the occasion of her fall statement to announce a fiscal anchor that would serve to manage the increases in interest payments required to service Canada’s bloated national debt.

Goldy Hyder, Council president and CEO wrote: “With long-term interest rates at the highest they have been in years, it is irresponsible to suggest that economic growth will be higher than interest rates for years to come. Governments can no longer run permanent large deficits without fear. The era of low interest is no longer with us, and that is a reality the government must address.”

The Council also offered its advice for formulating a responsible fiscal anchor tied to the country’s debt servicing costs. To instill confidence in the financial markets, the government should maintain a debt servicing ratio at 10 per cent or less of its revenue. This figure is perhaps a stretch for the government as the Parliamentary Budget Office (PBO) has recently reported the government’s debt service ratio will rise to 12 per cent this current 2023-24 fiscal year.

Hyder punctuated the Council’s letter to Freeland with this lucid observation: “More deficit-financed spending at higher interest rates will eventually and inevitably lead to levels of indebtedness that will force future governments to cut spending and raise taxes. It will lead to a weakened economy with considerable uncertainty for businesses looking to invest, hire and grow in Canada. It will also put in jeopardy the social programs Canadians value. This is precisely what we must avoid.”

On a related note, the PBO forecasts that, given the government’s current spending plans and taking into account the higher interest rates, this fiscal year’s federal deficit will balloon to over $46 billion, which is $6 billion more than Freeland’s stated in her 2023 budget. The PBO warns that the government’s spending, combined with high interest charges and a sluggish economy is fostering “uncertainty surrounding our economic and fiscal outlook.”

This warning echoes recent parliamentary committee testimony by former Bank of Canada governor David Dodge who was critical of the government’s spending sprees. Dodge said, “Politically difficult as it may be, over the next few years budgets are going to need to be roughly balanced… The burden of past debt will increase year after year. Governments cannot borrow their way out of these difficult choices.”

So, there is little to no room left for the government to spend more or increase deficit spending. Canada’s debt levels have risen to record highs through the pandemic years. Based on data from CEIC, the World Bank and this country’s banks, the household debt-to-GDP ratio stands at 102 per cent, which indicates that Canadians owe more than the country produces. Canada’s collective household debt as a percentage GDP is now about $116,000 for each working-age Canadian.

The debt sinkhole that Canadians now find themselves buried in will require us in the coming years to pay more in taxes and/or expect less government services and programs. Franco Terrazzano, Federal Director of the Canadian Taxpayers Federation, underscored this point in a recent media statement: “The Trudeau government continues to mismanage our finances and that means more money wasted on interest charges, higher cost of living and more debt that Canadians’ kids and grandkids will have to pay back.”

“Interest charges on the government’s credit card will cost taxpayers almost $4 billion every single month. That’s billions of dollars every month that can’t go to fixing potholes or lowering taxes because it’s going to the bond fund managers on Bay Street,” observes Terrazzano.

This is a distressing thought, especially when so many Canadians are feeling overwhelmed about their current financial situation.

A report released this week from MNP LTD reveals one in two Canadians (51 per cent) are $200 or less away from not being able to complete their financial obligations. Canadians are very pessimistic about their financial situation: 25 per cent indicated their finances are “much worse” than a year ago and 16 per cent of respondents expect their debt will further worsen in five years.

Grant Bazian, president of MNP LTD, commented, “There is no mystery as to what is causing Canadians’ bleak debt outlook: it’s getting increasingly difficult to make ends meet. Facing a combination of rising debt carrying costs, living expenses and concern over the potential for continued interest rate and price hikes, many Canadians are stretched uncomfortably close to broke.”

This bleak sentiment was validated with two separate reports on consumer spending released through the week. An RBC report shows spending on essential items climbed 10 per cent year-over-year, reflecting inflationary factors, while discretionary spending such as eating out is trending notably downward.

A Deloitte Canada survey found the average amount Canadians are planning to spend on gifts and festivities over the holidays this year has plummeted to $1,347. That figure is down 11 per cent over last year and 25 per cent less than Canadians forecasted they would spend in the pre-pandemic year of 2019. Roughly two-thirds of respondents to the Deloitte survey said they are concerned about a recession, and more than half are worrying about upcoming hikes to their rent or mortgage payments.

Which brings us back to the Business Council of Canada’s sage advice for the finance minister (to paraphrase): “please Chrystia Freeland do not spend any more, and come up with a plan to manage that debt of ours.”

One final thought relating to this scribe’s long held prediction. Consider this. Perhaps this fall financial statement will be Chrystia Freeland’s swan song as finance minister. If PM Justin Trudeau repeats his father’s walk in the snow on February 29th – as I believe he will – by the time the Liberals 2024 Budget is to be delivered, Freeland will be either the country’s interim PM or she will be in the race for the brass ring. (Either way, that is a taxing thought.)

Chris George is an Ottawa-based government affairs advisor and wordsmith, president of CG&A COMMUNICATIONS. Contact: ChrisG.George@gmail.com

LINK: https://niagaraindependent.ca/a-plea-to-a-debt-ladened-government-on-behalf-of-strained-canadians/

The Niagara Independent, September 1, 2023 – As Canadians enter the holiday weekend, many are financially stressed and worried about what the fall will bring for their household. To put the lot of a working Canadian into proper perspective, here is a Labour Day 2023 snapshot – statistics and facts about personal finances, presented without commentary.

Income 

Statistics Canada (StatsCan) reports the average income for working Canadians is $54,000 and the median income is $41,200 (in 2021, which is the latest statistics available). On average, working Canadians make $4,500 monthly.

One in ten Canadians (11 per cent) have an annual income of $100,000 or more. One in fourteen Canadians (7 per cent) live in poverty.

Debt 

Canadians’ consumer debt has risen to a record level, with an average consumer debt load of more than $21,000, excluding mortgages, according to consumer credit reporting company TransUnion of Canada. Consumer debt has risen 5.6 per cent in this past year. In the first quarter of 2023, the average credit card balance for Canadians (per card) was $3,909, which is up 22 per cent pre-pandemic.

The Organization for Economic Co-operation and Development (OECD) reports Canadians are the most indebted consumers of the G7 countries with a household debt of 187 per cent of disposable income (2022). This debt load has resulted in household disposable income dropping 4.8 per cent in the past year, when adjusted for inflation and population growth. 

Taxes 

The Fraser Institute calculates that, on average, Canadians pay 46.1 per cent of their income to taxes – income, payroll, health, sales, property, profit, sin, fuel, carbon taxes and more. In 2023, Tax Freedom Day was June 19 – the date in the calendar year when Canadians finished paying taxes to the government and began earning money for themselves. This is a full eight days later than the pre-pandemic 2019 Tax Freedom Day, when Canadians paid 43.9 per cent of income to taxes.

The Fraser Institute’s tax index reports Canadian tax bills were the fastest growing expenditures, surpassing the rising cost of housing, food and clothing. Today, taxes are the largest household expense for families. An average Canadian family will pay more in taxes (45 per cent) than on the necessities of life (36 per cent). To put this tax burden in perspective, in the 1960s, the average Canadian family paid 34 per cent in taxes and 57 per cent on basic necessities.

Carbon Tax 

The federal government’s carbon tax has Canadians paying 14 cents per litre extra at the pump and for home fuel. This tax will more than double, to reach 37 cents per litre by 2030. When the new Clean Fuel Standard carbon tax is added in, the total carbon tax per litre will amount to 54 cents. For a 60 litre tank of gas, that is a total of $32.40 of carbon taxes per fill up.

The carbon tax raises prices for Canadians not just on gas and home fuel, but on food, goods, services, travel – it raises prices on everything.

Mortgages 

Two of three Canadians (65 per cent) holding mortgages today are having difficulties paying them, that is according to the Financial Consumer Agency of Canada (FCAC). More than half of these struggling Canadians (55 per cent) are sinking into further debt by having to use their savings to meet their monthly payments.

There are presently 6.08 million homeowners with mortgages that must financially brace for Canada’s high interest rates of 4-5 per cent through next year and into 2025.

Rent 

Two in three Canadians who rent (67 per cent) are having difficulties paying their monthly rent, according to the FCAC. More than half of Canadian renters (59 per cent) are using their savings to pay their monthly rent.

The average rent for a one-bedroom apartment in Toronto is $2,572. To sign a rental agreement, a person must provide first and last month’s rent – often more than a person makes in one month. So, it is not surprising that the new company Nesturo has become a go-to popular service, providing short-term loans for rental deposits.

Food 

According to the Canada’s Food Price Report 2023, statistics published by researchers from universities across Canada, an adult man spends an average of $347 per month on food; an adult woman spends $311 per month; and a family of four spends $1,357 per month. In the last year, these food expenditures have increased more than 10 per cent, and this year food prices are expected to rise another 5 to 7 per cent.

According to another University of Toronto study, there are almost six million Canadians – 15.9 per cent of all households – experiencing food insecurity in the country.

Back-to-School Costs 

StatsCan reports back-to-school items have got more expensive in the last year: stationery supplies are up 12.9 per cent, textbooks and supplies up 2.8 per cent, and activities like music lessons or martial arts are up 5.6 per cent. A study by NerdWallet Canada revealed more than one in four Canadian parents (27 per cent) plan to purchase fewer back-to-school supplies than in previous years due to inflation.

StatsCan also reports increased costs for students’ lunch box staples. Breads and rolls are up 8.1 per cent in one year, apples are up 7.8 per cent, and cookies and crackers are up 12.4 per cent. The situation has become dire for the 1.8 million Canadian children who live in households that struggle to afford food.

A Labour Day Reflection  

Between maintaining a roof over their heads, food on their plates, and gas in their vehicles – and paying nearly half of what they earn to the government taxman, working Canadians have little to rejoice about the fruits of their labour this holiday weekend. According to the statistics, Canadians have become a nation of working stiffs challenged to make ends meet.

So, as we contemplate returning to work on Tuesday morning, the last word is given to the overnight sensation Oliver Anthony. This crooner’s primal cry of frustration has become the latest anthem of the working man: Rich Men North of Richmond. That feeling of hopelessness remains long after Anthony has belted out his chorus: “It’s a damn shame what the world’s gotten to / For people like me and people like you / Wish I could just wake up and it not be true / But it is, oh, it is”

May you have a wonderful long weekend with your family and friends. My best to you on Tuesday. 

Chris George is an Ottawa-based government affairs advisor and wordsmith, president of CG&A COMMUNICATIONS. Contact: ChrisG.George@gmail.com

LINK: https://niagaraindependent.ca/a-labour-day-2023-snapshot-of-the-working-canadian/

The Niagara Independent, December 2, 2022 –The enabling legislation for the government’s Fall Economic Statement was before the House of Commons Finance Committee this week. On Monday finance minister Chrystia Freeland waxed on about the government’s new programs and increased spending in support of Canadians. In spite of her enthusiasm for the tax and spend approach the Trudeau government is championing, many in Canada’s financial community are critical of where her fiscal plan will take the country.

In early November the finance minister delivered the government’s fiscal update to its spring budget. Freeland forewarned of tough economic times and a caring government introducing new measures to help Canadians cope. Highlights of the Fall Economic Statement include:

• doubling the GST tax credit for six months
• cancelling interest of federal student loans
• advance payments to the Canada Workers Benefit
• an investment tax credit for green technologies
• increased spending on job training, a skills strategy and youth employment

In total the finance minister outlined approximately $11.3 billion in new spending this fiscal year and next, adding to the $11.6 billion of new measures already announced for 2022-23 since her April budget address. That 2022 federal budget announced $31 billion of new government spending over the next five years.

In commenting on the government’s COVID spending and her post-pandemic fiscal plan, Freeland said, “The spending, it was the compassionate thing to do. It was also economically the smart thing to do, and the numbers show it. Once the main COVID emergency was behind us, we moved to a really responsible fiscal path.”

Canadians have accepted the extraordinary expenditures in COVID relief spending in 2020-21 and 2021-22. It is the tens of billions of dollars in new post-pandemic spending, at a time when most financiers are forecasting a downturn in the economy, that is drawing cautionary notes and criticism.

Yves Giroux, the federal parliamentary budget officer, told MPs on the finance committee that the government’s increased spending does not “spell fiscal restraint” nor “keeping one’s powder dry” for future tough times, as Freeland has repeatedly stated. By Giroux’s accounting, since April, the government has earmarked $52.2 billion in new spending in the coming years. Giroux made a special note of $14.2 billion of unspecified spending that is buried in the latest documents.

Giroux’s concern is echoed by others. Economists at the Royal Bank of Canada observed that “program spending in the current fiscal year is the highest in nearly three decades outside of the pandemic” and suggested any government revenue boost should be applied to its bottom line. BMO Capital Markets flagged in a note to its investors that the debt-to-GDP figure Freeland has stated is a guardrail for government is only marginally being reduced with her fiscal plan. Today the debt-to-GDP is 42.3 per cent, well above the pre-pandemic level of 31 per cent.

Conservative leader Pierre Poilievre’s main criticism of finance minister Freeland’s fiscal approach is that it fails to curtail government spending to pre-pandemic levels. Poilievre states: “We did not have to increase government spending by 30 per cent from pre-COVID to present, now, when all of the COVID programs are supposedly lapsed. We didn’t have to have a rate of permanent growth in spending, unrelated to COVID, that has left us in this precarious situation.”

Poilievre is often quoted slamming the Trudeau government’s fiscal approach: “We do not have a finance problem – we have a spending problem.”

Recent published statistics reveal some rather big numbers.

• Total federal spending in 2022 will be $493.3 billion – up from $296.4 billion when the Trudeau government was first elected in 2015.
• Total number of federal bureaucrats increased during the two years of COVID lockdowns by 35,000, a 12 per cent increase from pre-COVID times; today’s 335,957 federal public servants are the greatest number in Canadian history.
• The federal payroll will surpass $55 billion in 2022; federal contracts for outsourced services is $14.6 billion, an annual increase of 24 per cent, and up 74 per cent from 2015.
• Federal debt charges in 2022 will total $24.5 billion and are expected to more than double to $53 billion by 2024.
• In May 2021 Freeland requested MPs raise the federal government’s debt ceiling from $1.168 trillion to $1.831 trillion (a 57 per cent hike); today the national debt is approaching $1.6 trillion.

The Trudeau government’s continuous, unbridled spending is impacting taxes and the country’s inflation and interest rates. Regarding taxes, Canada has the dubious notoriety of being the only country in the world to have raised taxes during the pandemic. Research compiled by the Canadian Taxpayers Federation reveals that other countries cut consumption taxes, personal income taxes, business taxes, and/or fuel taxes. Meanwhile during the pandemic, the Trudeau government maintained its GST rate, provided no tax relief to individuals or businesses, and it has hiked its carbon tax on pump gas prices and home fuel – and will do so again in 2023.

On Canada’s rising interest rates, both the Bank of Canada Governor Tiff Macklem and Senior Deputy Governor Paul Beaudry have intimated in recent public statements that the federal government stimulus spending (and now its post-pandemic spending) has fueled the country’s inflation and prompted the necessary hike in interest rates. The Bank of Canada’s assessment is that Canadians feel the global inflationary pressures to a greater degree because of the government’s fiscal approach.

Economists John Cochrane and Jon Hartley of Stanford University make a similar observation when analyzing the country’s fiscal record: “The most important source of Canada’s inflation is simple: starting in 2020, the government borrowed more than $700-billion, and mostly handed it out. People spent it, driving up prices… Canada can borrow an immense amount without an impact on the price level if the government has a believable plan for repayment. But the government had gone too far in borrowing and spending, without such a plan.”

And international economist Daniel Lacalle has provided a succinct and sobering explanation of the inevitable outcome: “Every single unit of government spending is paid by you, with more taxes, more inflation, or both. All government excess makes you poorer. The government doesn’t give you free money – it gives you expensive destruction of your options for a better future.”

So, putting Finance Minister Chrystia Freeland’s enthusiasm aside, it is clear the Trudeau government’s fiscal approach is failing Canadians – and we will be sure to pay for this.

Chris George is an Ottawa-based government affairs advisor and wordsmith, president of CG&A COMMUNICATIONS. Contact: ChrisG.George@gmail.com

LINK: https://niagaraindependent.ca/trudeau-governments-fiscal-approach-is-failing-canadians/

The Niagara Independent, July 22, 2022 – There is a political meme circulating these days of PM Justin Trudeau and Deputy PM and Finance Minister Chrystia Freeland whispering to one another. Trudeau leans over to ask, “How did we destroy the economy so badly?” Freeland reminds her friend, “Well, you’re a drama teacher and I’m a journalist, so…”

The country’s financial community may have known for some time but now there is an increasing number of Canadians learning that this meme accurately sums up Ottawa’s fiscal mismanagement.

Again, this week the economic news is grim for Canadians.

The country’s inflation rate hit 8.1 per cent, and that was after the Bank of Canada shocked our financial markets with a full percentage point interest rate hike. The stubbornly high inflation rate spells more interest rate shock therapy in the near future, and inevitability that is sure to exacerbate the financial woes most Canadians are stressing over these days.

Statistics Canada factors the price of store-bought food in Ontario has risen by 10 per cent or more since last June (in April and May it was 9.7 per cent). Stats Can also reveals gas prices have risen more than 55 per cent compared to a year ago.

The rising cost of living is taking its toll on Canadians. A MNP survey reveals 59 per cent of Canadians are concerned about their financial situation, and 27 per cent are cutting back on food, utilities, and housing just to get by. The Toronto organization Stop Community Food Centre reports that there has been a 26 per cent increase in families with children accessing their food bank in 2022.

Many financial experts have assessed Canada’s current economic state and point to the federal government’s spending as the primary cause of pain that Canadians are only beginning to feel. In an informative National Post column, John Ivison interviews Philip Cross, former chief economic analyst at Statistics Canada. Cross provides this important background:

“Nearly two years ago, the OECD said that, as Canada’s GDP fell by 10 per cent in the second pandemic-hit quarter of 2020, household income grew by 11 per cent, thanks to generous government hand-outs. The same phenomenon did not happen in Germany, France, the U.K. or the U.S.”

Cross also provides key numbers required to begin to understand the country’s financial problems:

• Family median market income was $56,300 in 2015 and $55,700 in 2020 (all figures adjusted for inflation and expressed in constant 2020 dollars). In other words, employment income was practically unchanged.
• Family after-tax income rose to $66,800 in 2020, because government transfers increased to $16,400 from $6,900 in 2015.
• After-tax income for all Canadians rose by five per cent in 2020, even though employment income fell two per cent.

Cross states that the 2020 pandemic year was “the only recession in Canadian history where people were actually better off.” He says, “We just stuck a huge mixer in the economy and hit top speed. We are still trying to figure out what happened.”

John Ivison cleverly calls it “Trudeau’s helicopter money experiment.”

The Liberal government followed up its 2020 pandemic experiment with yet further spending. Finance Minister Freeland’s 2021 and 2022 budgets earmarked billions of dollars in new initiatives. With Trudeau and Freeland, there appears to be no forecasted balanced budgets.

A recent report by the Fraser Institute calculates that the federal debt per person has grown to a total of 35 per cent under Justin Trudeau since 2015, which includes an increase of more than 25 per cent from 2019 to 2022. Soaring annual deficits are sure to be the hallmark and the legacy of the Trudeau government.

Franco Terrazzano, Federal Director of the Canadian Taxpayers Federation, has described this government’s spending as being seriously out of control. After Freeland’s 2021 fiscal update, Terrazzano sounded the alarm bells: “The cost of living is soaring and Canadians should be worried about how the government is going to pay for its unprecedented spending and hundreds of billions of dollars in new debt. The feds need to stop dishing out cash we don’t have and pouring fuel on the inflation fire. Freeland needs to hit the brakes on this government’s runaway spending train.”

This week in a BNN Bloomberg News interview, former Bank of Canada Governor David Dodge echoed the concern that the federal government was adding “fuel to the fire.” Dodge called on Freeland to postpone the government’s 2022 budget expenditures to help get inflation back under control. His advice to Canadians was to contact MPs to “ask the [finance] minister why she’s not doing what she can from her side in order to help control the excess demand at the moment.”

Chrystia Freeland has heard the suggestion from the financial community a few times recently that she is not doing enough to combat inflation.

• Scotiabank Chief Economist Jean-Francois Perrault and Director of Forecasting Rene Lalonde were highly critical of the government’s elevated spending, stating the government was “doing nothing” and “shirking Canada’s inflation fight.”

• From his new Bay Street perch, former finance minister Bill Morneau criticized the federal government for its short-term, politically motivated thinking on fiscal policy and economic growth.
• In a Globe and Mail editorial the paper notes, “Economists worry that Ottawa’s fiscal plan is still pulling in the wrong direction on inflation”, concluding Liberals’ fiscal policy is more a part of the problem than the solution.

This repeated critical analysis of Freeland from the country’s leading financial minds has left Canadians shaken. Four of every five Canadians have lost faith in the Trudeau government to manage the country’s economy. According to a recent Maru Public Opinion poll, 55 per cent of Canadians do not believe Trudeau has a “solid plan” to battle inflation and weather the country through economic troubles. Another 25 per cent believe the PM is on the wrong track.

In the same poll, Canadians showed no more confidence in Chrystia Freeland: 55 per cent of Canadians believe that the finance minister has no plan to tackle inflation and 24 per cent believe Freeland has a specifically “bad plan.”

On one hand we have Justin Trudeau who frankly admitted that he does not think about monetary policy and, on the other hand, we have Chrystia Freeland who nonsensically lectures us that inflation is the reason we must double down on climate change.

There is no wonder how “we” got into this economic mess. That meme of the two of them would be funny if it were not so true.

Chris George is an Ottawa-based government affairs advisor and wordsmith, president of CG&A COMMUNICATIONS. Contact: ChrisG.George@gmail.com

LINK: https://niagaraindependent.ca/trudeaus-and-freelands-fiscal-management-is-no-laughing-matter/

Photo credit: The Canadian Press/Adrian Wyld

The Niagara Independent, October 23, 2020  – Though no date has been announced, Finance Minister Chrystia Freeland is to provide Canadians with a fall economic update in the coming weeks. Don Drummond, Senior Fellow at C.D. Howe Institute and former chief economist for TD Bank, is hoping that Freeland’s financial statement will prompt a national debate over the country’s economic and fiscal future.

Drummond believes the pandemic, and government response to the crises, have amplified the economic, social, and health vulnerability of many Canadians. He observes, “We are now at a crossroads… We have been locked into a path of mediocre productivity and real income gains for far too long.” Drummond warns Canadians that it is time to take stock.

Recent economic data suggests the Trudeau Government has stumbled badly through the pandemic: Canada today has the biggest deficit amongst the G20 countries and the highest unemployment in the G7. At 19.9 per cent of GDP, Canada has the largest deficit among all countries and the federal Parliamentary Budget Office estimates the federal debt at more than $1.45 trillion by the year’s end and $1.6 trillion by 2021. The international forum, Organization for Economic Co-operation and Development, announced that Canada’s August unemployment rate of 10.2 per cent is the worst in the G7, well above the OECD 7.7 per cent average.

In the past few weeks there has been a constant trickle of embarrassing news stories concerning federal government spending.

• The federal Infrastructure Bank, which was created in 2017, has managed $35 billion of government grants to fund private investment in public works. In three years the bank has zero projects to show for its spending — a fact revealed when PM Trudeau announced the Infrastructure Bank will pursue a new “growth plan” to spend $10-billion on greening infrastructure projects.
• More than $20 billion spent on 20,000 infrastructure projects remain unaccounted for by Infrastructure Minister Catherine McKenna. There is no documentation for these projects. And a new federal audit of the infrastructure program reveals the federal department has “serious control failures” and its funding process lacks “due diligence.”
• The Liberals refuse to provide details to Parliament of the contracts awarded to 41 undisclosed companies as part of the government’s $5.8 billion pandemic response to supply masks, gloves and testing equipment. MPs have uncovered that more than 60% of this money has gone to foreign-owned companies offshore.
• The Parliamentary Budget Officer Yves Giroux stated in a Hill Times interview this week that he’s found it “much more difficult to get information out of the minister’s office” since Chrystia Freeland assumed responsibility for the nation’s finances. Giroux is troubled that there is no transparency about government expenditures and spending plans.

Lorrie Goldstein of Sun Media had the most colourful description of the Government’s economic performance through 2020, “Canadians shaking hands with Prime Minister Justin Trudeau or any Liberal MP these days would be wise to count their fingers afterward. At this point, they have the collective credibility of carnival barkers.”

Don Drummond, on the other hand, provides a humourless assessment that Canada’s fiscal future is “foggy.” In a recently released C.D. Howe report, Drummond presents four unattractive scenarios for the country to manage its fiscal deficit spending and mounting debt load.

Scenario one has the Trudeau Government continuing with its habitual spending ways and deferring all pandemic spending costs to a future generation.

Scenario two has the government commit to a lower annual deficit of $25 billion – a move that would have Trudeau curtail his spending promises for Canada to “build back better.”

The third scenario is to place a higher ceiling on the government’s annual deficits (i.e. $50 billion) to provide more room for program spending, which would place a greater burden on future taxpayers.

The fourth scenario is to peg the annual deficits even higher – at $100 billion – and have the government find innovative ways to manage the growing debt burden.

In the C.D. Howe report, Drummond makes the point that the Trudeau Government’s deficit spending since 2015 has limited its ability to introduce massive government spending programs while effectively managing the country’s fiscal record.

John Robson, political columnist for the National Post, responded to this report with a siren cry: “Canadians need to wake up to the financial mess we’re in.” Robson sees that Canadians are sleep walking through the country’s fiscal nightmare. He presents five fundamental fiscal objectives that could be a starting point to get the country’s economic house in order. His objectives are:

Wealth must be created before it can be distributed;
Money is not wealth;
Borrowing has costs;
Who does not work shall not eat; and
Stealing from your kids is wrong.

Robson quotes American economist Thomas Sowell when lamenting that Canadians are being willfully ignorant about the consequences of overspending and incurring larger amounts of debt. Sowell wrote: “Too many people have always believed we can have whatever we can imagine, provided our sunny ways turn to a vicious snarl if anyone tries to disturb our pipe dreams of world peace, free love or free money with practical difficulties and past experience.”

Robson forewarns Canadians: “The day the county hauls our belongings away ’cuz we’re busted, dumping us unceremoniously on the bare floor, we will wonder how we could have been so stupored.”

As both Don Drummond and John Robson suggest, Canadians need to pay attention to the government’s economic and fiscal plan. For not to be fully engaged in the discussions of Finance Minister Freeland’s financial statement this Fall may cost us dearly.

Chris George is an Ottawa-based government affairs advisor and wordsmith, president of CG&A COMMUNICATIONS. Contact: ChrisG.George@gmail.com

LINK:  https://niagaraindependent.ca/it-is-time-for-canadians-to-take-stock-of-the-countrys-fiscal-mess/

The Niagara Independent, August 7, 2020 – If rumours come to be true, federal Finance Minister Bill Morneau will soon fall on his sword as the fall-guy for the Prime Minister and his Liberal insiders who are all caught up with the government’s WE ethics scandal.

Bill Morneau’s departure from the Ottawa scene is being forecasted throughout media, including many Liberal-friendly news agencies. The Toronto Star suggested that the Finance Minister is “blinded by his own privilege” and that he is “painfully out of touch with Canadians.” The National Post tagged Morneau as enjoying “a privileged life” having inherited a hugely profitable family business. CBC News did an investigative “gotcha” report that dissed him: “WE employees say they were told to attend 2018 holiday party in Bill Morneau’s riding.”  The Toronto Sun had a lead editorial that critically assessed the Finance Minister: “Morneau’s integrity appears to be kept in his cheque book.”

It appears inevitable that when the PM gets around to sharing his cabinet shuffle plans, Morneau’s cue will be “exit stage left.”  His leaving will lead to reviews of his record at the helm of Canada’s finances. Here is an overview of that record.

Recall that when newly elected Justin Trudeau unwrapped his first Liberal cabinet in Fall 2015 it was no surprise that he appointed a Toronto financial services businessman to manage the Liberal Government’s fiscal plan. Bill Morneau has always been the Trudeau Liberal’s finance backstop. In his first federal budget address, Morneau indicated there would be a new direction in fiscal policy, a “fundamental change” that would include substantial “investments by government.”

Despite the 2016 Budget projections, which stated the Liberal Government would balance the books in five years, the Trudeau Government ran $89.1 billion in accumulated deficits over the five years of their first mandate under Morneau’s stewardship. In those five years, spending on federal government programs increased every year and, in total, by nearly $70 billion or at a striking 27.2 per cent rate. In fact, the Trudeau Government has the dubious record of three of the highest levels of per-person program spending per year in Canadian history – and that is before the COVID-19-impacted recession.

Fast forward to the 2019 Liberal campaign platform and it is obvious that Bill Morneau and PM Trudeau had rejected the need to balance the country’s ledger. The Liberals’ second mandate was to feature a projected four years of $20 billion-plus deficits and an additional number of huge, uncosted spending items including pharmacare.

Morneau’s pre-COVID-19 fiscal management has proven costly. As a result of tax changes in the federal budgets through 2019, a vast majority (80 per cent) of middle-income Canadians have experienced increases to their personal income tax. Also, the mountain of new debt will prove an even greater burden on future generations of taxpayers. Former NDP Leader Thomas Mulcair wrote in a Sun Media editorial earlier this year: “Trudeau will have created $10,000 of new debt for every man, woman and child in Canada during his time in office. The sums are staggering…. Once again, this generation of leaders is putting everything on the maxed-out credit card of our grandchildren.”

The Trudeau Government’s pre-COVID-19 fiscal record has been brought under greater scrutiny with the pandemic pressures now bearing down on Canada’s economy. In the “fiscal snapshot” last month, Bill Morneau revealed the deficit for 2020-21 is expected to rise to $343.2 billion. This is greater than in any single year deficit during the Great Depression; ten times the projected $34.4 billion deficit before the pandemic hit!  Due to $212 billion in direct support to individuals and businesses, the federal debt-to-GDP ratio is expected to rise to 49 per cent this fiscal year, up from 31 per cent in 2019-20. (This is alarming given the 49 per cent rate is far above what the International Monetary research tells us is the optimal 26-30 per cent of GDP.)

To put all these numbers in context, this is by far the worst financial statement in Canada’s history. The federal Liberals, under the watch of Bill Morneau, are outspending all past federal governments, including those governments that had to respond to world wars and global recessions. And despite the unbridled government spending and persistent year-over-year deficits, the Finance Minister has offered no plan to reach a balanced budget. Yet, in his silence, the federal department of finance has come forward to estimate that with the current fiscal planning, deficits will last until at least 2040 (note that this estimate pre-dates COVID-19).

The Morneau fiscal plan is failing Canadians according to Fraser Institute economists who opined that “The Liberal mix of higher taxes, more government spending and deeper indebtedness did not result in a robust economy as promised…. GDP and income growth have slowed and business investment has collapsed. And that all happened before anyone had heard of COVID-19.”

If Pierre Trudeau and John Turner go down in Canadian history as “the fathers” of our national debt and the fiscal innovators who introduced the notion of “deficit financing,” then Justin Trudeau and Bill Morneau will be notorious for their seemingly unrestricted spending and being responsible for amassing the country’s burdensome $1 trillion-plus national debt.

Conservative finance critic MP Pierre Poilievre recently provided this analogy in an editorial: “The economy is like a horse carrying big bags of debt on his back up a hill. There is just one horse who must carry not only federal government debt, but also all the provincial, municipal, household and corporate debt. As of 2018 (BEFORE COVID-19!), total public and private debt equaled about 356 percent of GDP. So, the horse carried more than three and a half times his weight that year…. [Now] total private and public debt could reach 400 percent of GDP by the end of this fiscal year…. these debts will break the horse’s back. Whispering in his ear about imaginary “balance sheets” will not stop him from collapsing. He is a horse after all. Not a unicorn.”

This dark assessment of Canada’s financial situation is a marked difference from the Liberals’ sunny-days prediction that “a budget will balance itself.” If one is to accept ministerial responsibility, the dismal reality of today’s numbers must be attributed to the fiscal stewardship of Minister Morneau. And it is for his record as finance minister that Bill Morneau should be removed from his cabinet post, and not because of some PM power play to save face in the aftermath of the WE scandal.

Chris George is an Ottawa-based government affairs advisor and wordsmith, president of CG&A COMMUNICATIONS. Contact: ChrisG.George@gmail.com

LINK: https://niagaraindependent.ca/morneau-will-leave-an-unenviable-record-as-finance-minister/

Finance Minister Bill Morneau will provide an “economic update” July 8.

The Niagara Independent, July 3, 2020 – It has been referred to as Canadians’ “second war” – what will be our collective efforts to survive the ensuing national economic crisis brought about by government’s response to the coronavirus pandemic. The federal and provincial governments have been spending seemingly limitless amounts of money to support individuals and businesses through a staged shutdown of the economy. Today, as the shutters are being removed across the country, Canadians are left to assess the costs.

One variable is Canada’s lost economic activity. The International Monetary Fund (IMF) has calculated losses incurred by Canadian businesses and projected estimates for the coming years. The IMF projects Canada’s GDP this year will be 6.5 percent below that of 2019, which was pegged at $1.7 trillion. Therefore, the value of reduced output in 2020 is $113 billion. By the time we account for all economic losses through the duration of the multi-year pandemic, economists are expecting costs for Canada to be at least double this amount — $226 billion lost to our economy.

While the Canadian business community will carry forward its diminished financial standing, governments will be managing their unwieldy deficits and weighty debt loads. Consider the challenging fiscal situation Canada was in before the coronavirus scare. Last year total federal government spending was $346 billion and revenues were $332 billion, leaving an operational deficit of $14 billion. Provincial and territorial spending totalled $449 billion and revenues $440 billion, leaving an operational deficit of $9 billion. Total federal and provincial government net debt totalled $1.4 trillion – a sum that was 61 per cent of GDP. And when one factors in promised pension and health liabilities over the next 30 years for all levels of government, the debt is projected to be $2.3 trillion or 104 per cent of the country’s GDP.

Now, consider the federal government’s unprecedented spending spree which will result in Canada’s federal debt reaching an astonishing $1 trillion. Canada’s Parliamentary Budget Office (PBO) Yves Giroux recently estimated this year’s federal deficit to reach $256 billion and he parsed numbers relating to the government’s pandemic spending for Members of Parliament. In part, the PBO reported:

• the government is spending a total of $169 billion on income support programs with statistics indicating that, by the end of April, three million Canadians had loss their job with the closure of non-essential businesses;
• Canada Emergency Response Benefit (CERB) is providing $2,000 monthly to more than 8.4 million Canadians and will cost a total of $71.3 billion – more than the allotted $60 billion budget;
• extending the CERB by an additional eight weeks through the summer (as the government just did ) will cost $17.9 billion; and,
• the federal wage subsidy program is currently being underused by businesses – originally provided with a $45 billion budget, as of June 15 the government has approved only $13.28 billion in payroll to 223,918 companies.

These numbers indicate businesses are simply closing rather than attempting to manage through the shutdown period; millions of Canadians will not have their pre-pandemic job to go back to in the weeks ahead.

Buckling to the pressure applied by Opposition MPs and business groups, the federal government will provide a fiscal “snapshot” of our country’s finances to be delivered by Finance Minister Bill Morneau July 8.  PM Justin Trudeau explains, “This will give Canadians a picture of where our economy is right now, how our response compares to that of other countries, and what we can expect for the months to come.”  PM Trudeau stated his Government could not provide any more than a snapshot at this time. “I’ve consistently said that an economic and fiscal update would be unrealistic right now because it automatically includes projections for a year, three years, five years ahead of time, which quite frankly we simply couldn’t make any responsible predictions about.”

Though the PM does not wish to share his Government’s current thinking on the country’s fiscal course, there are certain realities that foreshadow what the “second war” will mean for Canadians. The increased debt must be financed and this signals the need to raise taxes – either immediately or for future generations (or both). Former NDP Leader Thomas Mulcair states the Trudeau Government has created $10,000 of new debt for every man, woman and child. “This generation of leaders is putting everything on the maxed-out credit card of our grandchildren. One of the greatest inequalities in our society is that which exists between generations and it’s getting more and more unfair.”

Paying for this mountain of new debt has the potential to sink Canadians’ fortunes. It is also expected to burden the next generation of taxpayers through the whole of their working lives (hence the defining term “Generation Screwed”). Today, one and two Canadians are within $200 of insolvency at the end of each month. Before the pandemic, Canadian households owed $176 for every $100 of disposable income – and now this situation has worsened. If the government attempts to spare today’s overburdened Canadian household, the debt does not go away and will still need to be paid. In a National Post column reporting the prognosis of various financial analysts, John Ivison concludes: “Ottawa’s COVID-19 debt binge runs the very real risk of ruining the next generation.”

Professor Don Savoie, Canada Research Chair in public administration and governance at the Université de Moncton, in an interview with the Hill Times this week, commented: “…there’s going to have to be some realignment between revenues and spending and that’s going to require an incredible amount of political will. It doesn’t require much political will when you’re spending every day. It requires political will, when you deal with the hangover and that hangover is going to be very, very, very difficult to manage… It takes an incredible jolt at the wheel to turn off spending. So when people get accustomed to receiving benefits from the government, it’s very difficult to cut it back…”

When the Prime Minister announced the July 8 fiscal snapshot, the Bloc Québécois Leader Yves-François Blanchet quipped, “I fear that the government will try to make it happen in the middle of summer in order to have people not watch it, while they will be having a beer around the barbecue.” Yet, considering what is at stake for Canadians and their pocketbooks, it is best if Canadians put down the beer, put off mealtime, and pay attention to what is said about this country’s economic predicament.

Chris George is an Ottawa-based government affairs advisor and wordsmith, president of CG&A COMMUNICATIONS. Contact: ChrisG.George@gmail.com

LINK: https://niagaraindependent.ca/the-staggering-costs-of-the-governments-response-to-the-pandemic/

The International Monetary Fund recently reported that Canada’s federal government spending is now at the highest level in Canadian history.

The Niagara Independent, January 24, 2020 — Delivering continuous deficit budgets is like spinning your wheels in mud; it’s inevitable that you will eventually get stuck. That common sense is beginning to creep into the conversations about the federal Liberal deficit spending as more Canadians are starting to appreciate what it means to be sinking in a quagmire of debt.

The Federal Finance Minister Bill Morneau recently provided an update of Canada’s finances in which he reported the government’s projected deficit is $26.6 billion for this 2019-20 fiscal year – a total of almost $7 billion more than originally planned for in his budget of last March.  Finance Minister Morneau went on to project next year’s deficit would be even higher. He pegged a budget deficit of $28.1 billion for 2020-21, but that is not accounting for several costly campaign promises – and the spending orgy the Liberals are expected to make in advance of the next election.

In his fiscal update, the Finance Minister matter-of-factly stated that the Liberal Government is planning five more years of double-digit deficits. He told Canadians the federal debt should reach $713 billion at the end of the current fiscal year and grow to $810 billion by 2024-2025. He made no mention of a balanced budget in the Liberals’ future fiscal plan.

This is noteworthy given the International Monetary Fund (IMF) recently reported that Canada’s federal government spending is now at the highest level in Canadian history. The federal Liberals, under the watch of Bill Morneau, are outspending all past federal governments, including those governments that had to respond to world wars and global recession crises. According to the IMF, spending by all levels of government in Canada accounts for more than 40 per cent of the country’s economy. This rate is well above what research indicates is the optimal size of government at 26-30 per cent of GDP. If unbridled, this government spending will jeopardize both Canada’s economic growth and our social wellbeing.

The Fraser Institute is an organization that has been consistent in its message stating that continuous deficit spending by our governments is unsustainable. In a number of fiscal reports through this past year, the Institute demonstrates that budget deficits and increasing debt have become serious fiscal challenges – if not the greatest challenge – facing the federal and many provincial governments today. Today, combined federal and provincial net debt is expected to equal 64.3% of the Canadian economy or $39,483 for every Canadian. The growing concern is the interest payments that must be paid on this debt. Money spent on interest means there will be less money available for government programs such as health care, education, and social services.

The HEC Montreal’s Centre for Productivity and Prosperity issued a report underlining that recurring federal deficits could be risky for future generations of Canadians. This policy institute warns posting continuous deficits with no deadline to balanced budgets is a risky fiscal strategy for the federal government that may just “indebt itself indefinitely.” It underscores its potentially dire outlook for intergenerational equity is its conclusion, stating: “In addition to passing part of today’s bills on to future taxpayers, Ottawa is unduly increasing their risk exposure by accumulating deficits, to the point where tomorrow’s taxpayers might be unable to enjoy the same services if interest rates were to increase significantly or if the Canadian economy experienced a serious economic crisis.”

In the next decade the Federal Government will also be pressed to meet the financial commitments to seniors. By 2030, one in four Canadians will be aged 65 and older. Today, seniors account for 17 per cent of the country’s population and the $56 billion the federal government spends on seniors’ benefits make up the single largest expense of the federal government’s budget. That line item will rise to $99 billion as “the grey tsunami” washes over Canada. In a recent report, Royal Bank of Canada warns of the consequences related to the rising costs for elderly benefits over the next ten years: “The financial demands of an older population will make it harder for governments to fund key growth priorities like education and skills development, let alone the vote-getting niche initiatives they often advance at election time.”

In a rather bleak end-of-year assessment of the country’s fiscal state of affairs, Financial Post columnist Diane Francis asks, “Who’s going to look after Canada’s economic wellbeing for the next five years?” Francis sees a troubling horizon, “Canada slips and there’s nobody to catch it, not Parliament or other levels of government. The Liberals spent five years variously pandering to environmental, regional or anti-capitalist interests… The country’s governance, like a 100-car pile-up, is a tangled mess that is transiting out of the free enterprise system every year.”

Still, when presenting his fiscal update last month, Finance Minister Bill Morneau expressed no concern in forecasting continuous and indefinite deficit budgets. No concern for the growing debt. No concern for the future generations of Canadians, nor aging seniors. And yet, for many Canadians it is now clearer that the Liberals’ cavalier approach to government deficit financing has become of great concern.

Chris George is an Ottawa-based government affairs advisor and wordsmith, president of CG&A COMMUNICATIONS. Contact: ChrisG.George@gmail.com

LINK: https://niagaraindependent.ca/canadians-sinking-in-a-quagmire-of-debt/

The Niagara Independent, October 11, 2019 — It remains to be seen whether the country’s economy and pocketbook issues will be the determining ballot box question this election. Judging from the little attention the mainstream media (and the Party Leaders) have paid to the country’s economy, it is unlikely voters will consider Canada’s economic future when casting their vote. That being said, what happens Oct. 21 could determine the economic fate of the country for decades to come.

So, what of Canada’s economic future? Here are three factors requiring a greater discussion before the vote: the country’s fiscal plan, taxes, and growing the economy.

Canada’s fiscal plan: In past federal elections, the front running parties would announce fully costed platforms that would inevitably reference a target date for balancing the country’s books. Not in 2019. This election is hijacked by the Liberal’s gambit that Canadians no longer care for the country’s balance sheet. Justin Trudeau and his Finance Minister Bill Morneau unveiled a platform that will run deficits of more than $20 billion for each of the next four years. The Liberals propose tens of billions in new spending (with promises like their new pharmacare plan not costed) and there is no mention to balance the budget. After the 2019 Morneau Budget the Parliamentary Budget Office issued a projection that the Liberals would not be balancing the country’s annual books until 2040 – and now with their election promises, this will not even be possible.

As hefty the spending promises made by the Liberals, both the NDP and the Green Party have promised more. The Conservatives have indicated they intend to balance the books in five years, but have not produced a costed platform.

The underlying problem with this lack of concern for Canada’s fiscal situation is that the mounting debt forces mounting interest payments and this takes directly from the government’s ability to provide future programs and services. Consider these facts: In the last fiscal year 2018-19 we paid $23.3 billion in interest payments on a national debt that has climbed to $685 billion. Runaway spending and continual deficits as promised by the Liberals, NDP and Greens will cause future distress for Canadian taxpayers.

Taxes: Middle-income individuals today pay higher personal income taxes than they did in 2015. The Fraser Institute reports that with the Liberal Government’s tax policies more than 80 per cent of middle class families (households earning between $77,000 and $108,000) now pay an average of $840 more in personal taxes annually. Lower-middle-class families (household incomes between $52,000 and $77,000) pay nearly 70 percent more in personal income tax.

The current tax burden cannot be worse given many Canadians are struggling with living costs. Accounting firm BDO Canada Ltd recently released statistics that suggest more than half of Canadians live paycheque to paycheque and more than a third have no retirement savings. A majority of Canadians (53 percent) had little disposable income and about one-third of Canadians are carrying credit card balances they cannot pay off.

Both the Liberals and Conservatives are promising relief for the indebted middleclass with income tax reduction plans. The difference between the two parties is the fate of the carbon tax. The Conservatives promise to eliminate this tax, which impacts gas pump prices, home fuel and all goods and services that require transport. On the other hand, the Liberals will maintain the tax and Justin Trudeau has repeatedly remarked there is a plan to adjust the tax so that Canada can meet its 2030 carbon emission targets. This will likely mean, if re-elected, the Liberals will need to raise its carbon tax five times its current level to $300 per tonne, which will hike pump prices to well over $2.00 per litre and add to the cost of everything that moves. The carbon tax will be a considerable burden for all Canadians.

Economic Growth: Aside from the all-party debate on the fate of future pipelines, there has been little sparring over trade and commerce issues. International economic data shows that the country’s economy is waning. The Canadian Chamber of Commerce issued a statement on the release of this week’s World Economic Forum report on global competitiveness: “Today, the world’s leading competitiveness index shows that Canada has dropped in the rankings for the second year in a row…. (It’s) proving what Canada’s business leaders have expressed over and over and over again — that this country’s business and investment environment is weakening. And it is inconceivable that Canada’s competitiveness is not a central issue in this election.”

Up until 2015, Canada’s real GDP per capita growth tracked closely with the U.S. After 2015 real GDP per capita increased only 2.7 percent in Canada, compared with 6.3 percent south of the border. For the North American business community the difference was the Liberals regulatory and fiscal policies undermining business confidence. And, it appears that the promised Liberal platform presents more of the same. (Unfortunately, Canada will not “grow the economy from the heart out” as Trudeau had predicted in the 2015 campaign.)

The single big-ticket, economy-related promise that has been presented to Canadians this election is the Conservative plan to create a national energy corridor. Andrew Scheer has committed to building a cross-Canada corridor to carry oil, gas, hydroelectricity and telecommunications. He has stated the Conservative corridor plan will increase certainty for investors, help get critical projects built, and provide greater economic and social benefits for all Canadians. Scheer also expects this corridor plan will minimize environmental impacts. For the Conservatives, this plan is much more than a debate over future pipelines; it is Canada’s future economic generator.

The political parties all have different approaches to the critical economic issues we face as a country. The Oct. 21 vote matters a great deal when considering Canada’s fiscal plan and national debt, our current and future taxes, and the country’s economic growth.

Chris George is an Ottawa-based government affairs advisor and wordsmith, president of CG&A COMMUNICATIONS. Contact: ChrisG.George@gmail.com

LINK: https://niagaraindependent.ca/what-of-canadas-economic-future/

The Niagara Independent, April 26, 2019 — It is a group that politicians like to promote as the focus of their attention, the targeted benefactors of their support initiatives. Yet, Canada’s middle class is not only decreasing in numbers, it is managing worse than past generations. This reality may cause trouble for any political Party posturing as “champions of the middle class” in the coming election campaign.

The Organization for Economic Co-operation and Development (OECD) has published an analysis that reveals the middle class is shrinking – squeezed primarily by high housing and education costs, and displaced by automation. The report defines middle class as 75-to-200 per cent of the median income in each nation. For Canada, that means a person living alone would have an income of about $29,432 to $78,485. In the 36 OECD countries, the portion of citizens considered middle class fell in the last 30 years to 61 per cent from 64 per cent. In Canada, middle-class shrinkage was sharper than the OECD average.

A key OECD finding about our country was that just 59 per cent of Canadian millennials were found to have attained middle class status by their 20s, compared to 67 per cent of their parents.

The report cites one of the greatest factors in this decline is housing costs, which have risen at twice the rate of inflation. Realizing the dream of middle-class home ownership is getting much tougher — “Housing costs are squeezing the middle class the hardest and these costs now consumes a third of disposable income for middle-class households, up from a quarter in the 1990s.”

The report also attributes Canadians’ middle class slippage to the rise of automation, estimating that one in five middle-class workers is at risk of losing their job to a machine. The report states that “while having high-level skills is not as much of a guarantee of financial success as it once was, being in a high-skill job still greatly increases the chances of making more money.”

The OECD’s underlying conclusion is worrisome for Canadians. It states: “The middle class used to be an aspiration. For many generations it meant the assurance of living in a comfortable house and affording a rewarding lifestyle. However, there are now signs that this bedrock of our democracies and economic growth is not as stable as in the past.”

Gabriela Ramos, the international organization’s chief of staff, commented in the preface of the report, “A strong and prosperous middle class is crucial for any successful economy and cohesive society. Societies with a strong middle class have lower crime rates, they enjoy higher levels of trust and life satisfaction, as well as greater political stability and good performance.”

Canadians attitudes about themselves seem to reflect this OECD report. A 2018 Ekos Research poll for The Canadian Press suggests fewer than half of all Canadians now identify as members of the middle class. This is a steep drop from nearly 70 per cent in 2002.  The poll results show the main contributing factors to this shift in Canadians’ attitude is perceived higher income inequality and slower economic growth in the country.

Ekos president Frank Graves states, “The whole notion of a middle-class dream — ‘I work hard, build a better mousetrap, do better than my parents, my kids do better than me, I get a house, a car, retire in comfort’ — that has all been shattered. A lot of people are stagnating or falling behind and they’re not happy.”

A recent Ipsos poll conducted on behalf of insolvency firm MNP Ltd. reports a quarter of Canadians say they struggle to pay bills by month-end. More Canadians are a thin line away from bankruptcy with 48 per cent admitting they are $200 or less each month away from financial insolvency. One in four (26 per cent) state they have no wiggle room at month-end — they are not making enough to cover their bills and debt payments.

Those surveyed also say they have been squeezed tighter with the rise in interest rates that began last year. Nearly half (47 per cent) think they may get into financial trouble if interest rates go up further, and 35 per cent believe rate increases will push them towards bankruptcy.

These are stark realities for Canada’s middle class – realities that cannot be addressed with political posturing and electioneering rhetoric.

Chris George is an Ottawa-based government affairs advisor and wordsmith, president of CG&A COMMUNICATIONS. Contact: ChrisG.George@gmail.com

LINK: https://niagaraindependent.ca/whither-the-canadian-middle-class/

The Niagara Independent, March 22, 2019 — It was described in many different ways. The Liberals characterized their fourth federal budget delivered this past Tuesday as a “pre-election budget designed to ease Canadians’ anxieties.” Political commentators, however, upon learning of its contents, described it as “the predicted pre-election spendathon”; “a testament to the pleasures of endless growth”; and, “a blunt political statement and a dare to their Conservative opponents to cut Liberal spending on social programs.”

The 460-page budget tome is entitled Investing in the Middle Class, but it could be more properly named, “Spending for the Middle Class.” Finance Minister Bill Morneau’s 2019 budget includes $22.8 billion in new spending divided into more than 100 new measures to be spent over the next 5 years. There is new spending to support first time home buyers, the purchase of electric cars, and broadband services to rural Canada. We have new tax credits for further education and skills training and more money for new indigenous programs. The Liberals are also hiring more bureaucrats and establishing an office to look at a new national prescription drug plan – a promise they will elaborate on, on the campaign hustings.

With this plethora of spending initiatives, what Canadians were not given is a date to balance the budget. In fact, this budget document projects deficit spending of $20 billion for this upcoming year, $15 billion for the following two years, and then $10 billion for the year 2023-24. In total, this budget adds a staggering total of $127 billion in new debt by 2024.

It has become increasingly clear from fiscal performance of this Liberal Government over the past four years that the budget is not going to balance itself, as the PM suggested in the 2015 election campaign. In fact, in the economic update document released by the Department of Finance in late 2018 there was the forecast that, with the current government’s accounting, the budget would not be balanced until (earliest) 2040.

To put this overspending spree into perspective: twenty-one years from now, when the babies born today will be graduating from post-secondary institutions, there will be a new generation of Canadians starting their working careers, paying taxes on a national debt in the neighbourhood of one trillion dollars — $ 1,000,000,000,000. Today, the federal government spends approximately $2 billion dollars a month in interest payments, which could be three- to four-times that amount in 2040 depending on interest rates.

In the post-budget address scrums, condemnation of the Liberal government’s spending plans was quick from former Saskatchewan finance minister Janice MacKinnon who said, “I think this one is going to go beyond the numbers to a trust issue. It was a fundamental promise of this government to handle finances carefully, limit deficits and balance the budget. They’ve broken other promises, (like) electoral reform, but at least they tried… There was never, in the term so far of this government, an attempt to restrain spending.”

Jack Mintz, of the School of Public Policy at the University of Calgary, was critical of the seemingly unfocused spending spree: “None of the big issues facing Canada — lagging productivity, fiscal imbalances and the urgent need for competitive tax reform — got a lick of attention.”

Andrew Coyne, National Post political pundit, contends that the “quantity of spending isn’t so much the issue as the quality.” He wrote: “…in the rush to get all that spending out the door, little thought appears to have been given to whether the money is being spent in the best way, or whether it should be spent at all.”

The last word goes to Coyne’s fellow columnist Kelly McParland, who perhaps had the most poignant observation when he factored that the federal government has handed millennials a debt approaching $700 billion (for stuff they didn’t order). McParland wrote: “Somewhere down the road, when Trudeau has finished apologizing to everyone else, he should consider offering an apology to young Canadians for decades of prime ministers leaving them in the lurch.”

Chris George is an Ottawa-based government affairs advisor and wordsmith, president of CG&A COMMUNICATIONS. Contact: ChrisG.George@gmail.com

LINK: https://niagaraindependent.ca/the-federal-budget-has-not-balanced-itself/

The Bank of Canada has indicated they are about to become more aggressive in 2019 and 2020 with increasing interest rates.

The Niagara Independent, November 2, 2018 – Interest rates are rising and many Canadians will begin to feel the pain. Last week the Bank of Canada hiked its key lending rate and major lending institutions followed suit, raising prime interest rates. This is the fifth time since the summer of 2017 that rates have risen and the Bank of Canada has indicated they are about to become more aggressive in 2019 and 2020. Some financial analysts point to recent comments made by Bank of Canada Governor Stephen Poloz to forecast the rate could climb as high as 3.5 percent.

What does that mean for an average household? Over the past 15 months, the Bank of Canada’s interest rate hikes have added an average of $2,500 in costs for Canadian households. Should the rate go as high as 3.5 percent, the costs would double again. If this were to occur, financial surveys indicate that one in two Canadians’ ability to service their existing debts will be directly affected. Half of Canadian households.

The “average middle class Canadian” is anxious about what might be coming in the months ahead. The latest Consumer Debt Index by insolvency practice MNP LTD., found that approximately 40 percent of Canadians are concerned about their existing debt loads, and 43 percent regret the amount of debt that they have incurred in their lives. The index reported that one in three Canadians are concerned that rising rates could push them towards bankruptcy.

The challenge with household debt and interest rates is compounded with the increasing amounts of taxes Canadians must pay. The Fraser Institute has documented the government’s take from Canadians’ earnings through the years. The average Canadian family now spends more of its income on taxes (43.1 percent) than it does on basic necessities such as food, shelter, and clothing combined (35.6 percent). In 2017, the average Canadian family earned an income of $85,883 and paid total taxes equaling $37,058 (43.1 percent). By comparison, in 1961, the average family had an income of $5,000 and paid a total tax bill of $1,675 (33.5 percent).

Taxes have grown much more rapidly than any other single expenditure for the average Canadian family – food, shelter, clothing, transportation, health and personal care, education, and other items. (And should the new carbon tax be imposed as designed by the federal Liberal Government, this tax burden will become heavier to bear for the average Canadian household.)

In a CBC News special series entitled “Debt Nation – looking at the state of consumer debt in Canada,” Theresa Tedesco pinpoints the foreboding issue:  Canada is now a country of borrowers and accumulating high levels of household debt has become a necessity for a modern life. It is an alarming fact that Canadians owe $1.69 for every dollar of after-tax, earned, annual income – which is substantially higher than $1.00 from 20 years ago.

Again, it is the “average middle class Canadian” that has the most to worry about. Statistics Canada figures tell us that 71 per cent of all Canadian families carried some form of debt and 35 per cent of Canadian families were carrying debt worth at least two times the value of their after-tax annual income. According to the Bank of Canada, about eight per cent of indebted households owe a staggering 350 per cent or more of their gross income.

CBC’s Theresa Tedesco also makes the point that debt has lost its stigma and has become culturally more acceptable in Canada. She surmises: “Canadians are socialized into debt at an earlier age as younger people are developing an awareness of it by necessity and appear to be living with it longer. Our parents and grandparents borrowed to buy houses and cars with the intention of paying it back. We don’t think like that anymore.”

Indeed. The latest numbers from the Bank of Canada tell us that individual Canadians are swimming in more than $2 trillion of debt today. The worry is, in the months and years to come, they just may not be able to tread water given the rising interest rates and increasing tax burden.

Next week: a look at our governments’ debt levels and what that means for Canada’s future.

Chris George is an Ottawa-based government affairs advisor and wordsmith, president of CG&A COMMUNICATIONS.  Contact: ChrisG.George@gmail.com

LINK:  https://niagaraindependent.ca/serious-challenges-as-canadians-are-adrift-on-a-sea-of-debt-part-1-of-2/