Nostalgic Canadians, especially baby boomer journalist types, had such fond memories of Pierre Trudeau and his time in office. With rose coloured glasses, they talked about how he put Canada on the map completely forgetting our key contribution to WWII and the building of the post-war international order.
For nostalgic types, it was all sunshine and lollipops with Trudeau in power and would be again once Pierre’s son took his rightful place on the throne. He’d restore Canada from that ghastly mean Stephen Harper who isolated us on the world stage, they said, completely ignoring that Harper and his crew were leaders of the combined global response to the 2008 financial crisis.
It was Harper, his then finance minister the late Jim Flaherty and Bank of Canada governor Mark Carney that were steering many of the international committees that tried to quell the chaos caused by bank collapses in the United States and Europe.
But like father, like son - the two Trudeau’s and their legions of admirers don’t care about facts as they march down amnesia lane to revel in how great the last Trudeau era was. They care about feelings.
How about this for a feeling - Canadian government debt so high, spending so out of control, inflation through the roof with a recession in Canada far worse than elsewhere and mortgage rates so high people literally walk away from their homes, handing the keys back to the bank. How would that feel? Because those are the facts of the early 1980s and the impact the last Trudeau administration had, and they could be returning.
A new report from the Fraser Institute warns that Trudeau Jr. is taking us down the same high spending, out of control deficit ways his father did.
Remember that report from the finance department released just before Christmas talking about deficits until 2055? It’s real.
In their new report by Livio di Matteo, the Fraser Institute looks at Canada’s budget balance from confederation until now including the changes in taxation - from mostly tariffs to income taxes. The report sings the praises of the Liberal governments of Jean Chretien and Paul Martin - as well as Conservative Stephen Harper - for getting spending and deficits under control.
But they take a harsh look at what Trudeau senior did and what his son is setting us up for now.
In 1973 Pierre Trudeau’s Liberals tabled a budget deficit of $2.2B after promising small deficits for a few years to boost the economy. Sound familiar?
By 1992 the deficit hit a peak of $39B, the GST was introduced to bring in more revenue for the government so they could slay the deficits. But that small deficit Trudeau started us with in 1973 ballooned to $39B. His small deficits to boost the economy, his expansion of government spending got out of control, as di Matteo says in the report.
“Moreover, the deficits were particularly problematic because, aside from recession years, they were largely the result of the non-cyclical effects of the structural nature of federal deficits in the 1973-to-1996 era.”
Translation, we were paying for day to day government expenses through deficit spending. A bit like buying groceries on the credit card and never paying the bill. It is just going to grow.
And now warns the report, after years of cleaning up the last mess from Trudeau Senior we may be heading down this road again.
“Given the surge in deficit financing at the federal level currently underway in the wake of the 2016 Budget, one wonders if the lessons of the 1990s have already been forgotten.”
Di Matteo also points to the growing net debt to GDP ratio we can expect.
“The progress made in bringing the ratio of federal net debt to GDP below 40% will be largely squandered if we allow debt to once again grow uncontrollably.”
And then, what this all means for your wallet.
“Income tax brackets and rates had stayed stable for many years but 2015 saw the introduction of a new income-tax bracket, raising the top tax rate from 29% to 33% on incomes over $200,000. Combined with increases planned for CPP contribution rates and a cancellation of more generous limits for Tax Free Savings Accounts, it would appear that there is a return to higher rates of taxation underway.”
I’ve been warning for a long time, the new Trudeau Liberals are a lot like the old Trudeau Liberals - big spending, big taxes, big deficits - none of that good for the Canadian economy and this report backs up my warnings from before the last election.
Let’s hope enough people get it and vote this guy out come the next election before too much damage is done.