“New normal” federal program spending has reached unprecedented levels in Canada, with per-person spending in 2021 expected to exceed $13,000—a 34.8 percent surge from pre-COVID levels in 2019, according to a new report.
The report, published by the think tank Fraser Institute, notes that the federal government’s spending, adjusted for inflation, would have hit a minimum of $12,695 per person before the 2021 election was called. If the Liberals carry through with the promises they made to increase spending while on the campaign trail, the per person spending would go up to $13,032 in 2021-22. If the NDP’s “even higher spending” proposal is included, it would result in the per-person spending reaching $13,735.
“These levels of per-person spending are unprecedented in Canadian history even when compared to recessions and wartime, excluding the recent COVID crisis,” said Jake Fuss, senior economist at the Fraser Institute and co-author of the report, in an Oct. 14 press release.
The report, “Prime Ministers and Government Spending,” analyzed spending trends since 1870 and found that proposed spending would represent the second-highest level in the country’s history since per-person spending of $17,121 during the height of the COVID-19 pandemic.
From a global perspective, this would mean a 42.4 percent to 50 percent higher level of spending than during the 2009 global recession. It is also projected to be 64.8 percent to 73.7 percent higher than during the peak of the Second World War at $7,909 per person in 1943.
The report’s authors argue that since the program spending estimates were calculated based on the numbers contained in the Liberal and NDP platforms in the recent federal election, they would serve as a fairly good guide.
“Given the strong likelihood that these two parties will work in tandem in the minority government, their respective platforms are a good barometer for where spending is headed in the near future,” the report said.
“We used the Liberal party’s estimates from their platform as the lower bound for 2021-22 and 2022-23, while the NDP’s estimates act as the upper bound.”
The report noted that the Liberal party is expected to spend an additional $13 billion in 2021-22 and another $17.7 billion in 2022-23 on top of the program spending levels spelled out in the 2021 federal budget.
“This translates into an additional $338 in per-person spending in 2021 and $446 in 2022-23,” the report read. “If they carry through with those plans, the total expected level of per-person spending would subsequently rise to $13,032 in 2021-22.”
The NDP’s platform called for even higher spending amounting to 40 billion in 2021-22 and $41.4 billion in 2022-23, which the authors calculate that the per-person spending under the NDP plan would reach $13,735 in 2021-22 and $11,446 in 2022-23.
The authors argue that even though the 2022-23 per-person spending is expected to decrease slightly between $10,846 and $11,446, it is still projected to be 12.2 percent to 18.4 percent higher than the level recorded before the pandemic in 2019-20.
“By all indications, the new normal level of federal program spending is substantially higher than even the record-high levels of spending we saw pre-COVID,” Fuss said.
“This high level of deficit-financed spending will have to be repaid eventually, and that will have implications for future taxpayers who will face tax hikes to pay for today’s spending.”
October 20, 2021 12:41 am