The Justin Trudeau era is ending, after nine-and-a-half years as prime minister. His exit coincides with the onset of a trade crisis with the United States. Trudeau leaves behind a stagnant Canadian economy crippled by dwindling productivity, a long stretch of weak business investment, and waning global competitiveness. These are problems Trudeau chose to ignore throughout his tenure. His successors will not have that luxury.
It‘s no exaggeration to describe the Trudeau years as almost a “lost decade” for Canadian prosperity. Measured on a per–person basis, national income today is barely higher than it was in 2015, after stripping out the effects of inflation. On this core metric of citizen well-being, Canada has one of the worst records among all advanced economies. We have fallen far behind the U.S., where average real income has grown by 15% over the same period, and most of Europe and Japan, where growth has been in the range of 5-6%.
Meanwhile, Ottawa’s debt has doubled on Trudeau’s watch, and both federal government spending and the size of the public service have ballooned, even as service levels have generally deteriorated. Housing in Canada has never been more expensive relative to average household incomes, and health care has never been harder to access. The statistics on crime point to a decline in public safety in the last decade.
Reviving prosperity will be the most critical task facing Trudeau’s successor. It won’t be easy, due in part to a brewing trade war with the U.S. and the retreat from open markets and free trade in much of the world. But a difficult external environment is no reason for Canada to avoid tackling the domestic impediments that discourage economic growth, business innovation and entrepreneurial wealth creation.
In a recent study, a group of economists and policy advisors outlined an agenda for renewed Canadian prosperity. Several of their main recommendations are briefly summarized below.
Return to the balanced budget policies embraced by the Chretien/Martin and Harper governments from 1995 to 2015. Absent a recession, the federal government should not run deficits. And the next government should eliminate ineffective spending programs and poor–performing federally-funded agencies.
Reform and reduce both personal and business income taxes. Canada’s overall income tax system is increasingly out of line with global best practise and has become a major barrier to attracting private–sector investment, top talent and world-class companies. A significant overhaul of the country’s tax policies is urgently needed.
Retool Ottawa’s existing suite of climate and energy policies to reduce the economic damage done by the long list of regulations, taxes, subsidies and other measures adopted by Trudeau. Canada should establish realistic goals for lowering greenhouse gas emissions, not politically manufactured “targets” that are manifestly out of reach. Our climate policy should reflect the fact that Canada’s primary global comparative advantage is as a producer and exporter of energy and energy-intensive goods, agri-food products, minerals and other industrial raw materials, which collectively supply more than half of the country’s exports.
Finally, take a knife to interprovincial barriers to trade, investment and labour mobility. These long-standing internal restrictions on commerce increase prices for consumers, inhibit the growth of Canadian-based companies, and result in tens of billions of dollars in lost economic output. The next federal government should lead a national effort to strengthen the Canadian “common market” by eliminating such barriers.
Jock Finlayson is a senior fellow at the Fraser Institute.