This report, from the highly regarded, albeit conservative, Fraser Institute, is two years old, but it points out how the tax burden on ordinary Canadian working families has changed over the past 50+ years, from 1961 …
… when the “bundle” of food, clothing, housing and utilities accounted for almost 60% of the average family’s spending and taxes accounted for less than 35%, until 2014 …
… when the situation was nearly reversed because, after spending over 40% of their money on taxes Canadians had only 35%+ left to pay for food, clothing and housing.
Now, of course it wasn’t quite that simple. First look at the total spending: in 1961 Canadians spent 91% of their money on “household” expenses plus taxes. In 2014 those same to “baskets” accounted for only 79% of spending ~ clearly our priorities changed new spending opportunities appeared and we went from spending 9% on “others” which would include e.g. vacations and telecommunications to 21%. But, even if we had kept “other” at 9% and added 12% (the unexplained growth in “other”) to the “household” (home, food, clothing) basket we would have, by 2014 an image in which “household” expenses and taxes were nearly in balance, instead of, as circa 1960 when “household” (<60%) was approaching twice the sum of taxes (>30%).
But the growth in taxes is still pretty clear …
… what we can see is that taxes began to rise, dramatically, after Prime Minister Pierre Trudeau had been in office for about five years. Put simply, he had spent all the fiscal “cushion” that Prime Ministers Diefenbaker and Pearson had managed to create, and he had to find new revenue. Since he didn’t have any new, innovative ways to “grow” the economy he had to raise taxes. By the late 1980s Prime Minister Mulroney and his finance ministers had tamed part of the spending problem ~ they balanced the operating budget, which is to say that in the later Mulroney years we spent less on programmes (defence, old age security, research and harbours, etc) than the government took in through taxes ~ but the interest on the debt, the debt to which Pierre Trudeau committed successive governments, kept growing and Growing and GROWING and taxes had to go up even more just to keep pace. In the late 1990s Prime Minister Jean Chrétien and his Finance Minister Paul Martin had tamed the deficit, too (largely by “offloading” expenses to BC, Alberta and Ontario) but even in good times they could not control spending. The credit crisis of 2007/08, very early in Prime Minister Harper’s term required more and more revenue to pay for the “stimulus” that Canadians, prodded by the Liberals, NDP and media, demanded.
Now, let me be clear: there is a good, sound, sensible economic argument for increased government spending in “tough times,” during recessions and so on. John Maynard Keynes was not wrong. But Keynes also said that the spending tap one wants to turn on during a recession must be turned off, again, when the economy begins to grow on its own. That’s the part of Keynes’ book that Pierre Trudeau appears to skipped reading in the several universities he attended … the kinds of spending that Pierre Trudeau initiated, in pretty good times, was, as Brian Mulroney would later learn from a little lady names Solange Denis, the kind that creates “entitlements” for Canadians and they will not allow politicians to cut it off or even scale back those “entitlements.” Even a self proclaimed fiscal hawk, like me, would never counsel any politician ~ not one I want to win, anyway ~ to slash and burn the social safety net: such proposals are a sure and certain recipe for a loooooong time on the opposition benches.
But, clearly, in my opinion, something has to change … we need to change that balance so that taxes consume a measurably smaller share of the average Canadian working family’s “outlay.”
But, again, if we cannot take a chain saw to Pierre Trudeau’s “just society,” then what can we do?
As I mentioned more than two weeks ago, when I endorsed Erin O’Toole as Conservative Party leader and the next prime minister, the government, the cabinet, needs to be like a surgeon … but it doesn’t want or need to amputate whole arms of government, it needs to slice, carefully, but firmly, at the layers and layers of “fat” that can be found in every single department and agency of government, including in DND and the Canadian Forces. Every minister in Prime Minister O’Toole’s cabinet and every head of every agency and board, including the Chief of the Defence Staff, needs to be personally and professionally committed to ensuring that every taxpayer’s dollar is spent effectively and efficiently (cost effectively). I will say, without one iota of fear of contradiction, that there is no part of government, no programme, no agency, no board, beginning in the PMO and PCO, that cannot stand a cut or two, here and there … but they have to be careful, measured, surgical cuts that trim the fat and do not cut into the meat, muscle and bone of programmes that serve Canadians.
I don’t know how much can be cut, but a 5% cut in government programme spending (which does not count debt payments or interest on the debt) in 2016/17 would mean that nearly $15 billion could be used to reduce the deficit or be redirected (to the military, for example, to help with Erin O’Toole’s promise to double defence spending) or returned to Canadians in tax cuts. It may not be possible to cut even 5% in the first year; perhaps just holding the line, in the first budget, then cutting 1%, then 2.5% then 5% and then 7.5% is possible … I really don’t know, but I am 100% certain that we must try to have a government that has somewhat fewer people taking fewer dollars out of Canadians’ pockets and then spending those dollars more carefully to achieve the results Canadians need and want.
We need to cut away the fat from the body politic and reduce its craving for unhealthy spending and restore it to robust good health … a lean and trim government that works hard to serve the country.