Over the past 11 months, ever since I introduced my 20th Theorem of Government, I’ve reviewed fiscal data for five countries (China, Greece, France, Brazil, Colombia) and two states (Maryland, Washington).
Of those seven examples, only Greece was moving in the right direction, albeit only over the past six years.
Today, we’re going to look at Canada. And I’ll eliminate all suspense by stating that the numbers are not good.
Here’s a chart, based on IMF data, showing what has happened to government spending over the past 11 years.
There are a couple of points that deserve elaboration.
First, Canada’s fiscal performance has been bad rather than terrible. As shown in the chart, politicians have been violating my Golden Rule, but not by huge amounts.
But the second part of the 20th Theorem states that “Whenever there is fiscal deterioration, excess spending growth is the cause.” So Canada definitely qualifies.
Moreover, bad fiscal policy over a decade adds up. Government is now consuming 44.24 percent of GDP compared to 38.37 percent of economic output in 2014.
Do the same thing for the next 10 years and Canada will be like France or Italy.
Second, bad fiscal policy leads to bad economic outcomes.
In an article for the Daily Economy, John Phelan shared some depressing charts, including this comparison of per-capita GDP growth in G-7 nations.
Why has Canada done poorly?
Because it is a laggard on productivity, as shown by another chart from John’s article.
To be sure, fiscal policy is not the only reason for Canada’s sluggish economy.
It might not even be the most important reason (Canada is copying Europe’s punitive Green New Deal policies, and that may be even more damaging).
Let’s close by assigning blame. The former Prime Minister, Justin Trudeau, was a disaster for Canada. Not only did he spend too much, but he also saddled his country with bad tax policy, inflation, and financial repression.
And the current Prime Minister, Mark Carney, is staying on the same destructive course.
P.S. Nobody should be surprised to learn that the IMF has been pushing for bad policy in Canada.
P.P.S. Canada is infamous for bizarre government policies.
P.P.P.S. To be fair, Canada does have a few good policies, such as privatized air traffic control and school choice (ranking 25th in the world).
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Image credit: ElasticComputeFarm | Pixabay License.
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Author: Dan Mitchell
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