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Lorne Gunter: Swelling size of federal Liberal government hobbles national economic growth

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Perhaps Albertans should be grateful to the federal government for spending so little per capita in our province.

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Canadians who have paid close attention know the Alberta claim that the province pays far more into Confederation than any other province (including those like Ontario and B.C. which have larger populations. In return, it receives less per capita from Ottawa than of the other provinces in transfers to health, education and social services, as well as federal government spending on projects.

This has long been a sore point for Albertans, but maybe it shouldn’t be.

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As governments have expanded enormously, during the past decade in particular, they have become enormous drags on national and provincial economies. Many economists peg 30 per cent of GDP as the optimum size of government to provide universal services while also sustaining maximum growth. Larger than that and governments just get in the way of economic expansion and job creation.

Thanks in part to Ottawa spending just $1,700 a year per capita in Alberta (the highest nationally are in New Brunswick and P.E.I. at over $5,300), Alberta is the only province where combined municipal, provincial and federal spending is within the magic 30 per cent limit.

This isn’t as big an achievement for Alberta as it appears on the surface. Alberta has far and away the largest per capita GDP in the country — $97,000 per year versus the national average of just over $75,000.

That means Alberta governments can spend a lot more money than other provinces’ governments before the percentage of GDP consumed by governments exceeds the 30 per cent level.

Alberta’s governments are not being all that frugal. They just have more income to spend.

That’s not to say Alberta governments deserve no credit all. Governments, particularly in the last 10 years, have tended to spend the maximum they think they can get with.

According to a new study by Vancouver’s Fraser Institute, this spend-to-the-max attitude is why the three levels of government in Ontario now consume 43.4 per cent of that province’s GDP. Meanwhile, in Quebec the percentage is 50.1 and in Nova Scotia (the highest level), it’s 61.2 per cent, according to Fraser.

When governments grow that big, they squeeze the life out of private-sector growth. The money they borrow makes borrowing more expensive for businesses wishing to start up or expand. Their taxes are an albatross around the necks of ordinary citizens and investors, alike.

Private businesses in the economy create money; governments consume it. That’s why the bigger governments are the more of a roadblock they are to growth.

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One glaring example of what this means for prosperity and per capita standard of living can be see in the Trudeau years. From 2015 through 2024, the federal government expanded by 40 per cent — the highest level in the G7. At the same time, Canada’s economy was the slowest growing in the OECD.

There may not be a direct correlation, but the connection is undeniable — massive public-sector spending slows growth.

It’s important to recognize that this connection started long before U.S. President Donald Trump and his farcical but damaging tariffs.

Have Trump’s tariffs damaged the Canadian economy? Without a doubt. But by nowhere near as much as 10 years of “green” policies and massive increases in the size of the bureaucracy brought about by Liberal governments.

As the government of Prime Minister Mark Carney has continued to grow the size of the federal government, even after promising to scale back from the Trudeau years, our economy has continued to limp along.

In February, the Canadian economy lost 84,000 jobs rather than adding the 10,000 new jobs economists predicted. And last week, the Bank of Canada revised downward it’s projection for GDP growth this year from an anemic 1.2 per cent to a pathetic rate of under one per cent.

It’s not Trump’s policies that drove away $400 billion in investment since 2015 or ran up the national debt by 50 per cent.

That was all the doing of consecutive Liberal governments.

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