The Era of Big Government Must End

There’s an old saying: The bigger the government, the smaller the citizen. This has never been more apparent in Canada.

Over the past 20 years, the federal and provincial governments have been vastly increasing in size and scope, soaking up more and more taxes, running larger and larger deficits, and interfering in our lives like never before.

The economic indicators all tell the same story; Canada is becoming less competitive and productivity levels are falling. As Globe and Mail columnist Andrew Coyne pointed out last week, Canadian productivity is in free fall, with declines in 10 of the last 11 quarters, now lower than any time since 2017.

To put that into context, back in the year 2000 the Canadian workforce was 82% as productive as the U.S. By 2020, that percentage had dropped to 77%, making us less productive than the U.S., France, Germany, United Kingdom, most of Europe, Australia, and Italy.

While most of the industrialized world is advancing, Canada is going the wrong way. As a result, the OECD projects that Canada will be the worst performing economy out of 38 advanced countries over the next forty years (2020-2060).

But what does that mean for you and your family? Productivity directly impacts your wage and your standard of living. This link isn’t theoretical. From 1961 to 2019, a one per cent point increase in productivity resulted in a 0.5 per cent growth rate in wages.

Most economists agree pathway to increased productivity is through business investment. If we’re going to succeed we need to produce more of our resources more efficiently, while modernizing our manufacturing. The equipment and technology to do so isn’t cheap. To do it, we need to convince everyone from small businesses owners to publicly traded corporations to bet on Canada.

So, what can government do to make the Canadian economy more competitive?

Here are three ways to do it:

1 - Help Canadian businesses compete in the global economy. The current reality is the US remains Canada’s largest trading partner, accounting for about 75 per cent of exports and 60 per cent of imports. US-based companies pay less for heat, electricity, labour, and taxes. Not only did Canada fail to keep pace with recent American business tax cuts, but our governments are also actively widening the gap with carbon taxes the drive up the costs of operating in Canada.

At the same time, Canada should be seeking to diversify its customer base, particularly in Asia. These markets generally have substantial labour and technology advantages over Canada. All of the trade delegations and agreements in the world won’t provide significant benefits for us until we are better able to compete.

2. Reduce debt. If you’re a global company looking to invest, you’re going to put your money in the jurisdiction that has the best long-term outlook. Right now, that isn’t Canada, where rising debt levels are a drag on our long-term outlook.

According to a recent report, federal and provincial government debt has nearly doubled from $1.1 trillion in 2007/08 to $2.1 trillion in 2022/23. These governments will collectively spend about $69 billion on annual debt interest payments this year, up $19 billion from two years ago.

To restore confidence among global investors, this trend must be immediately reversed. Spending must be significantly reduced, and the best place to start is by axing wasteful corporate welfare programs. From 2007 to 2019, all three levels of government spent a combined $352.1 billion on direct subsidies to corporations. This total doesn’t even include the loan guarantees or direct investments often used to dictate winners and losers in the market.

At the same time, household debt in Canada is now the highest in the G7, at 107 per cent of the nation’s GDP. About three-quarters of that debt comes from mortgages. The only proven way to drive down housing costs in the long term is to increase supply. This will require governments at all levels - particularly municipalities - to back off on regulatory overreach, which delays development and drives up the cost of new houses, condominiums and apartments.

3 - Level the playing field between small business and big business. In Canada there are too many bureaucratic regulations, and too much red tape associated with operating a small business.

The cost of regulation from all three levels of government to Canadian businesses totaled $38.8 billion in 2020, and it required 731 million hours to comply with it. That’s the equivalent of nearly 375,000 full-time jobs.

With dedicated employment and human resources departments, big businesses are better equipped to navigate ever-changing minefield of redundant and arbitrary rules imposed by governments. The smallest businesses pay $7,023 per employee annually to comply with government regulation, while larger businesses pay $1,237. Yet we also know that small business owners are the most likely to invest in our communities, hire young people, and donate or volunteer for local causes.

If we want a strong economy to grow from the bottom up we need to make it easier to start family-owned, Main Street enterprises, and allow them a level playing field to compete.

At the end of the day, a more competitive economy offers lower consumer prices for every family. Meanwhile, higher productivity results in higher wages. The key to both is getting government out of the way and letting folks do what they do best.

If we’re going to build an economy where the little guy can get ahead, where the middle class can thrive, and where wages rise for everyone, action is needed immediately.

The era of big government must end.