Full Comment - April 22, 2024


Ottawa just guaranteed we’ll all be paying higher taxes soon


Episode Stats

Length

42 minutes

Words per Minute

147.49121

Word Count

6,267

Sentence Count

392

Misogynist Sentences

1

Hate Speech Sentences

2


Summary

Robert Asselin is the Senior Vice President of Policy at the Business Council of Canada and has worked in the Office of Finance Minister Bill Warneau's office for years. He knows the ins and outs of putting together a budget, and he knows a thing or two about economics.


Transcript

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00:01:12.980 The budget is out, the reviews are in, and mostly I would say that Justin Trudeau's eighth budget as prime minister, it's not getting rave reviews.
00:01:28.380 Hello, my name's Brian Lilly, this is the Full Comment Podcast, and today I want to talk to someone who knows the ins and outs of putting a budget together.
00:01:36.580 Robert Asselin is the Senior Vice President of Policy at the Business Council of Canada, but from 2015 until 2017, he also worked in the office of Finance Minister Bill Warneau, helping the Trudeau government bring out their first couple of budgets.
00:01:51.800 Prior to that, he'd worked as an advisor to the prime minister during his election campaign.
00:01:57.360 He knows the world of business, he knows the world of politics, and he knows an awful lot about economics.
00:02:01.840 Robert, thanks for the time today.
00:02:03.820 Thanks for having me.
00:02:05.160 The budget, I described it as tax and spend, and sometimes that's a phrase that people will throw pejoratively at liberals.
00:02:13.540 Oh, they're just tax and spend liberals, but this really was a tax and spend budget.
00:02:19.280 Program spending is up $30 billion from last year, or 7% of spending.
00:02:24.820 The public debt charges now are equal to the amount we collect in GST, and there's a whole pile of new tax measures in here, not just the capital gains tax, although that is the big one.
00:02:38.380 Give us your elevator pitch summary of the budget.
00:02:43.060 What are your initial thoughts?
00:02:45.140 So, Brian, I would agree with your characterization of tax and spend budget.
00:02:49.360 I think it's objectively true when you look at the numbers.
00:02:53.200 You're looking at around $57 billion of new spending over five years.
00:02:58.440 They're raising revenue by about $20 billion, a bit more than that, over five, mostly, as you say, with the capital gains inclusion rate provision going from 50% to 66%.
00:03:12.860 They have a better economic outlook than they had in the fall statement that explained a bit of a bump.
00:03:22.840 And then they're pushing a lot of past committed spending to future years, so that allows them to show better balance number, better deficit number, if you want.
00:03:37.940 So, overall, I would say at a moment where the economy is very fragile, stagnating, putting a tax on investment the way they did, I wouldn't characterize it as a good move.
00:03:50.680 And on the spending side, as I said, I think it's significant spending.
00:03:55.340 The part that bothers me is that I've covered more federal budgets than I can remember at this point, including the year that we had, too, shortly after 9-11.
00:04:09.240 And I understand that when we see these projections that governments make, especially in five years out, you know, you take them with a grain of salt.
00:04:18.520 They're not going to meet, you know, five years from now we project we will generate this much revenue or we will spend this much.
00:04:25.400 That's not going to happen.
00:04:26.580 The numbers will be incredibly different.
00:04:28.080 But this government, over the last several years, especially under Finance Minister Christy Freeland, the projections are like throwing darts at a board.
00:04:39.360 From the budget to the fall economic statement and from the fall economic statement to the next budget, there's always dramatic increases in spending.
00:04:49.220 One year it was $20 billion between the budget and the fall economic statement.
00:04:53.660 This time it's $30 billion from the last budget to this one.
00:04:57.680 Do you feel like the government has control on spending anymore or is this spending just going out the door for political reasons?
00:05:09.460 What's driving this?
00:05:10.700 We kept hearing about guardrails and precautions on spending.
00:05:15.700 I don't see that anymore.
00:05:16.800 No, I think this is a government that admittedly likes to spend, believe in big government, believes that the government can solve a lot of problems that are not even in its own jurisdiction, that are mostly in provincial jurisdiction.
00:05:34.840 And politically, I think this is a government that sees itself capturing the left generally in the electorate.
00:05:48.340 And so doubling down on social programs, on spending at a time where interest rates are rising really fast, at a time where the economy is shaky, I would say a tax and spend budget is not how I would have done it personally.
00:06:08.720 Well, the prime minister has described anybody that calls for spending and be reined in as calling for austerity, meaning cuts.
00:06:17.440 As someone that's worked with liberal governments in putting together budgets, you know, do you necessarily have to cut to control spending?
00:06:29.340 If spending is going up by $30 billion a year, I'm sure there's ways to control that without just cutting frontline services.
00:06:37.240 But, you know, the prime minister would make it sound like you're going to put granny on an ice floe if you suggest that spending should be controlled.
00:06:43.340 The problem that we have is the imbalance between revenues and expenditures.
00:06:49.840 So I think a government can justify more expenses generally if it's willing to say to the electorate, to Canadians, that they will pay more taxes.
00:07:00.280 But obviously, politicians never do that.
00:07:03.080 They don't want the middle class.
00:07:05.500 They don't want ordinary Canadians to pay more taxes.
00:07:08.800 And so, at the end, what we're doing right now is growing a deficit that is, by definition, now structural.
00:07:17.660 And so we're putting more debt into future generations.
00:07:22.840 And the problem with the debt in itself and deficit is very different when you have higher interest rates,
00:07:32.240 the environment that we're in actually right now, than when you have low interest rates,
00:07:38.360 which was the case mostly for about 10 years after the great financial crisis.
00:07:43.040 But post-pandemic, we're in this new environment where interest rates are higher than our growth rate,
00:07:51.960 essentially as a function of how the economy is growing.
00:07:55.420 And so what that does is, without even further spending, your primary deficit, your deficit minus your interest rates,
00:08:04.020 is growing rapidly by itself, just as a function of interest rates being higher than your growth rate.
00:08:12.840 And so that's the problem we're facing.
00:08:15.200 And a government that basically puts more on the credit card, again, for future generations.
00:08:22.660 So I don't question necessarily where they decide to spend.
00:08:28.580 I decide I'm mostly critical on basically not bringing revenues in line with expenditures at this point.
00:08:40.000 One of the things that jumped out at me was when I looked at the public debt charges.
00:08:47.360 I know a lot of people focus on the deficit, and I think that's important.
00:08:50.380 But the deficit piles up, that becomes the debt.
00:08:53.800 We have to service that debt.
00:08:55.680 And the public debt charge is like the monthly minimum on your credit card bill.
00:09:00.660 You're just paying the bare minimum.
00:09:03.820 And that number has grown over the past several years.
00:09:08.840 And I was expecting it to surpass health this year, which it did, by some $2 billion.
00:09:14.620 But I was shocked when I saw, going through the numbers, that the GST, the entirety of the GST that we collect on everything across the country is equal to the public debt charge now.
00:09:28.000 So every 5% that you or I would charge to someone for a service or that we pay for a good that the government collects is just going for that public debt charge.
00:09:39.640 And I think that, I know we can't get rid of the debt tomorrow, but to me that's an example of why being fiscally prudent and not running up huge deficits is so important.
00:09:52.940 That is now squeezing out other spending.
00:09:55.940 I did the math and the national child care program costs $6.6 billion.
00:10:00.800 We could fund that eight times over with what we're paying for this public debt charge now on an annual basis.
00:10:07.860 And as you said, because of interest rates, that's just going up.
00:10:12.000 Yeah, I think this is fundamental, Ryan, for people to understand is the amount of revenues you allocate to debt charges or interest payments on your debt.
00:10:23.280 And so now we're over 10% of, let's say, 10 cents over every dollar we send to just pay the interest payments on our debt.
00:10:34.000 As this number grows, I think it's easy to understand for people that we have less for everything else, as you just said.
00:10:41.780 And so as this 10 cent on the dollar goes even further, 11, 12, 13, 14, you know, you just constrain yourself on all the good stuff you want to do as a government.
00:10:55.800 Independently of whether you're a conservative government or a liberal government, you're going to be much more constrained to spend either on defense, on social programs, on health care transfers, on child care.
00:11:07.680 And this is what people need to understand is that, you know, the government uses this debt to GDP ratio with the best of the G7.
00:11:17.280 There's no problem. Don't worry about this stuff.
00:11:21.600 And these metrics, in my opinion, are really key.
00:11:25.580 It's really the debt servicing charge that people have to look at.
00:11:28.820 And as they grow, it considerably restrains a government to do everything it needs to do going forward.
00:11:36.420 But isn't going over 10% one of the warning signs?
00:11:40.440 Yes.
00:11:41.660 Actually, I had the great privilege of working on a paper with David Dodge, the former Bank of Canada governor and deputy minister at finance when, in the 90s, when we hit the fiscal wall.
00:11:55.380 And David was obviously in the first row of this fiscal crisis that him and Mr. Martin, Mr. Chrétien, dealt very well.
00:12:05.640 And as a result of it, we have a much better situation now.
00:12:09.140 But in that paper, we basically said that once you go over 10% of debt servicing costs, when your revenues exceed 10%, you're going to get into another zone.
00:12:24.340 You know, it's not like fatal from one day to another.
00:12:27.440 However, it doesn't mean you're going to get downgraded necessarily, but it's kind of a slippery slope where you embark on something that is more risky going forward.
00:12:38.160 I covered the Ontario budget recently, and as I've said loud and clear to Finance Minister Peter Bethlin-Falvey, they're spending too much as well, in my view.
00:12:49.800 You get a sense of where I'm coming from fiscally.
00:12:52.220 I like the Chrétien-Martin budgets.
00:12:53.960 I like them a lot better than what we're doing now with the Harper budgets.
00:12:57.700 Those were more constrained.
00:12:59.900 They were in line with what we could afford, with what we were spending.
00:13:02.640 The debt bothers me, but one thing I will say is that through refinancing of Ontario's debt during COVID, when bonds were so low, and they took 30-year bonds at 1.4%, they've been able to shrink that percentage of what is going towards public debt charges, and it's now below 7% again.
00:13:24.460 So instead of climbing, it's going down, even though they are spending more, and we just don't seem to have that in Ottawa.
00:13:31.180 Robert, I went back to the last budget of the Harper government and compared it to yesterday's budget just to see, okay, how much have we increased spending by?
00:13:44.960 And when you look at the total spend, program spending and public debt charges, we've increased spending by $247 billion.
00:13:54.720 So it was $288 billion in the last Harper budget.
00:13:57.640 It's $534 billion now.
00:13:59.780 That's an 85% increase in spending.
00:14:04.400 And when you look at the Bank of Canada inflation calculator, that's just 26.5% inflation over that time.
00:14:11.680 So I know there's population growth, but there's no way that population growth is another almost 60%.
00:14:18.820 Doesn't that show that this is a government with a spending problem?
00:14:25.680 It does, absolutely.
00:14:29.140 I think you just summarized it very well.
00:14:32.420 Part of it is due to inflation, but it's not entirely the cause of it.
00:14:38.820 Obviously, there's a lot of expansion of introduction of a lot of new programs, a public service that has grown a lot, I think by 40% since 2015.
00:14:50.660 Now, you can say, you know, a bigger government requires more people to be employed and render services.
00:15:00.620 But, you know, again, you can, and the government has increased the revenue side as percentage of GDP.
00:15:10.800 We've seen it again yesterday with the capital gain inclusion rate.
00:15:14.700 So that's a choice I think the government has to justify in front of Canadians, you know.
00:15:20.780 And at the end, I think Canadians have to be conscious that a bigger government requires, you know, more revenues, meaning higher taxes.
00:15:34.200 And to me, this is where we're going, for sure.
00:15:37.020 Yesterday was almost maybe just the beginning.
00:15:40.060 If you want to run a government to the size that they're running right now, with all the programs they are introducing at every budget every year, they're going to need much more revenue.
00:15:49.380 And it can't just be a function of economic growth.
00:15:51.500 They're going to have to raise taxes significantly going forward.
00:15:56.540 And that's the choice that Canadians will have to make.
00:15:59.180 Personally, I think it has grown too fast in the last, maybe post-pandemic, the last three, four, or five budgets.
00:16:10.600 But, again, that's for people to decide what kind of government, how big the government should be, especially at the federal level.
00:16:17.940 And I think your point is really important, is that we live in a federation.
00:16:23.160 We pay taxes to two levels of government.
00:16:27.940 And you need to think about it as an aggregate.
00:16:32.300 So, if the Ontario government gets more indebted, and the Canadian government, the federal government gets more indebted, there's only one taxpayer at the end that will pick up the bill.
00:16:43.620 Well, you mentioned that, you know, these programs are going in.
00:16:47.120 But, and the Prime Minister keeps mentioning that.
00:16:49.640 But when I look at it, you know, something like childcare is the most developed of the additions that they've brought in over the last little while.
00:16:58.460 I think it's up to about $6 billion and growing.
00:17:02.000 That's only 1.3% of the budget.
00:17:04.820 The dental care program would barely be a rounding error.
00:17:08.600 The pharma care program, there's no budget attached to it yet to speak of.
00:17:15.020 But the actual cost of running government has increased by almost 100%.
00:17:19.560 94% running government costs more.
00:17:23.940 And you mentioned a 40% increase in the size of the civil service.
00:17:30.800 And I think as my colleague, John Iveson at National Post has documented, it's well over a 30% increase in the use of consultants like McKinsey or whoever.
00:17:40.640 However, this is, you're saying that we need to, we'll have to raise taxes.
00:17:49.680 I agree that might be one issue, but I'm also thinking program review.
00:17:54.720 Something like what David Dodge did or Don Drummond did.
00:17:57.660 Both of them have been very critical of the current government.
00:18:02.200 They seem to, I remember covering John Manley when he was the finance minister and no one sold the idea of cutting some things in government better than Manley.
00:18:13.600 He would always say, we're moving money from low priorities to high priorities.
00:18:18.560 And unfortunately, it seems that once a dollar is being spent now, it remains a government priority, whether it's still serving a purpose or not.
00:18:27.120 So they're not doing a program review.
00:18:29.120 They're not saying, does it still make sense to be offering this?
00:18:32.360 They just add on and then don't look at how else they're spending our money.
00:18:37.300 And this is a big problem.
00:18:40.040 I agree with you.
00:18:41.200 Raising taxes is not a good option, especially when you have a productivity problem.
00:18:45.940 You have a business investment problem.
00:18:48.760 You have essentially a confidence problem for people to invest in the economy.
00:18:53.620 And all the regulatory burden that we have in Canada to get big projects done, approved, permitted.
00:19:00.980 It's a big problem.
00:19:02.720 So I absolutely agree with you that first and foremost, when things are tight, and I think families know this, they tighten their belt.
00:19:11.540 They look at their expenses and they're like, why should I should cut?
00:19:15.180 Maybe this year, we shouldn't do a summer vacation and a winter vacation.
00:19:20.880 We should cut.
00:19:22.340 Maybe we should look at a way to be more efficient in our day-to-day spending.
00:19:29.940 And so unfortunately, this government always, always adds up.
00:19:33.600 They never look back.
00:19:34.620 There are stuff that is in the fiscal framework, frankly, that hasn't been looked at for decades.
00:19:44.220 Agencies, commissions, all kinds of structures that we have inside departments, outside departments, that have been there for a long time.
00:19:56.640 But at the end, it's not cutting for cutting, but you have to just ask yourself, is it doing what we, what this, is this structure or this program or this mission doing what it's supposed to do?
00:20:09.380 Can we revise?
00:20:10.240 Can we do it more efficiently?
00:20:12.120 And these questions are essential.
00:20:14.280 In my opinion, Brian, this should be an ongoing program review for any government, anytime, all the time, because it's kind of important that when you spend public money, you do it the most efficiently and the most effectively possible.
00:20:33.020 Well, you said families do that with their budget.
00:20:35.620 You know, with all these online subscriptions that we all have now, and you can sign up for a service on your phone or on your laptop, and you just say, oh, yeah, I'll do that.
00:20:46.040 And you get a good introductory rate, and then they hit you with a $300 bill if you don't cancel the auto renew.
00:20:53.720 I make it a habit now of going through my bank statement and saying, okay, I'm paying for this on a monthly basis.
00:21:01.100 Do I still need that?
00:21:02.580 Um, you know, and I think that's good for anybody to do, but I also think it's good for government to do.
00:21:09.020 As I said, just because you did something once upon a time doesn't mean it, it still makes sense.
00:21:14.080 Uh, one of my early stories, um, when I joined the sun, uh, in 2010 was to, uh, to look at the cars and drivers and who had them.
00:21:24.420 Um, because, uh, I remember talking to someone on Bay Street and I said, nobody on Bay Street has a car, their own dedicated chauffeur and car anymore.
00:21:32.800 Um, you're expected to drive yourself or if you need a car for a special occasion, you hire a service.
00:21:38.320 Now people would just hire Uber and I went through the list and it would shock people how many civil servants you've never heard of departments and agencies you didn't know exist.
00:21:50.000 The guy at the top or the woman at the top has a dedicated car and driver.
00:21:55.160 Um, how and why do you justify that in 2024 when, you know, allies like Britain, I think it's a three cabinet ministers have a car and driver.
00:22:06.140 Yes, no, exactly.
00:22:08.940 I think, um, structurally, there's a lot of stuff that we've been doing again for many times, many years, uh, that needs to be re-examined and, uh, you know, priorities change.
00:22:21.280 Uh, we live in a very dangerous world now, uh, maybe in the nineties, defense wasn't seen as a priority for our country.
00:22:28.940 Now, obviously with everything that's going on, I think Canadians are rethinking that, uh, and defense is used.
00:22:36.140 It's usually expensive and so you cannot have it both ways.
00:22:40.260 You cannot, uh, just continue to spend everywhere and, uh, continue with the same, uh, this, uh, and leave kind of the ongoing spending unchecked.
00:22:54.740 You need to reallocate, you need to put resource where your priorities are and I'm just not seeing this at the federal level.
00:23:01.940 Uh, Robert, we have to take a break now, but when we come back, I do want to ask you about, um, the tax side of this.
00:23:08.180 We've talked a lot about the spending.
00:23:09.880 Let's talk about the tax side and what it's going to do to productivity.
00:23:13.780 Uh, two of the founders of Shopify, a Canadian tech juggernaut came out very critical of what this is going to do in the tech space.
00:23:21.980 We'll talk about that when we come back.
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00:24:37.400 You're richer than you think.
00:24:38.460 The federal budget has a major tax increase to it.
00:24:42.920 Well, not for everyone, but for some.
00:24:45.500 If you listen to the government, the changes to the capital gains tax inclusion rate will only hit the 0.13% top of the income ladder.
00:24:59.680 They're trying to make this out to be the guy in the monopoly game with the monocle and top hat, and nobody else is going to be hurt by it.
00:25:08.040 Entrepreneurs, they have something different to say.
00:25:10.400 The CEO and the president of Shopify both slamming this change to the capital gains tax rules, small businesses, big businesses, all saying this is the wrong way to go.
00:25:20.020 Robert, you said that this is a tax that's not going to help with productivity.
00:25:24.400 That's an issue that we've got or an area where we've got huge issues right now.
00:25:29.460 Well, why do you see this as the wrong prescription for increasing tax revenues?
00:25:35.040 Because you said earlier, you're not against increasing tax revenues and bringing them in line with where you want to spend.
00:25:40.900 But you said this isn't the right way.
00:25:42.640 Well, just on the last point you just made, the easiest thing that government could have done is just do less spending.
00:25:51.220 And so you don't have to enter into this discussion on higher taxes.
00:25:55.260 That would have been the most efficient way to do this.
00:25:58.280 But on the capital gains inclusion rate change from yesterday, at a moment where our main problem structurally is a lack of business investments that is driving down productivity, you don't want to, you know, bringing in a tax on investment, which is essentially what they did yesterday.
00:26:21.740 Just on the psychology of people wanting to take risk, wanting to invest for their own benefit, essentially, of course, it is something that I think is very detrimental.
00:26:39.460 You almost kind of see it, you can conceive of it as a tax on success.
00:26:44.480 People who try to make money, they take chances, they invest, they start companies, and even for people who have, through their lives, accumulate a little bit of wealth, you know, a cottage or something that they consider as an important investment for their retirement, they're going to be touched by this.
00:27:12.340 And so I just think timing-wise, it couldn't have been a worse moment.
00:27:18.160 Again, at a moment where our business investment climate is not ideal, where there's a lack of confidence for people to form capital in our economy, making capital even more expensive, I think it's not a good idea.
00:27:32.240 I heard from one business owner who is in the manufacturing sector.
00:27:37.640 He has a couple of plants in the GTA, he has plants in the United States and elsewhere, in total about 600 odd employees, 250 I believe are in the Toronto area.
00:27:51.820 He said, at this point, if he's going to expand, this makes it less likely for him to expand inside Canada.
00:28:03.500 And it's a story I've heard from several small and medium-sized manufacturers.
00:28:08.060 These are people who, yeah, admittedly, they're well off, but the money's tied up in their company, which is employing hundreds of people with good-paying jobs.
00:28:16.240 And now they just say, well, I'd be better off putting that in North Carolina or Michigan or Texas or wherever, because if they grow that business and it's a success and they sell it, they're going to get dinged with a lot more taxes.
00:28:33.880 Because they're already paying income taxes on any profits, and then they have to pay a capital gains tax on top of that.
00:28:40.940 I don't think people realize that part, that you're still facing double taxation on this.
00:28:48.160 Yeah, it's essentially what capital gains is when you think of it.
00:28:50.880 I think it's very damaging, to be honest, also to engage in this kind of class war, populism angle for politicians.
00:29:03.500 You know, capital is required in the economy.
00:29:05.620 Some people have more of it.
00:29:07.740 People at the end form business.
00:29:11.400 They employ people.
00:29:12.960 They pay wages.
00:29:14.000 It puts food on people's table and families' table.
00:29:16.940 I don't think we should be, you know, as Canadians, envious of people who are successful.
00:29:25.420 There are a lot of people who started with nothing, build up great big corporations that, again, that employ hundreds of Canadians, thousands of Canadians.
00:29:41.100 And that's really important.
00:29:42.500 And also, as shareholders, people who invest in Canadian companies' stocks, you want your company to succeed.
00:29:51.800 You know, you want a good return on your investment.
00:29:55.080 And so, kind of trying to bring down people who are successful in business, I think is a very bad thing to do.
00:30:05.340 I think it's not helpful because, at the end, if we reduce the size of our pie, all of us, we're going to have less for each of us.
00:30:17.200 And as we're saying with GDP per capita, it is declining.
00:30:20.400 It has been declining for the last six quarters.
00:30:23.580 I don't think that's a good trajectory, a good objective for Canada.
00:30:27.140 At the end, yes, we want to redistribute some wealth.
00:30:31.120 We want to make sure everyone can succeed.
00:30:33.260 But first, we have to create wealth.
00:30:35.060 To create wealth, you need capital.
00:30:37.100 If you put always taxes on success and on capital, then I think we're going to have less of it, you know.
00:30:45.220 Harvey Finkelstein from Shopify asked on X, what are we doing, Canada, in response to this change?
00:30:52.980 And Toby Lucky, who was the CEO, said, message from a friend, Canada has heard rumors about innovation and is determined to leave no stone unturned in deterring it.
00:31:06.460 He sees this as killing off innovation and killing off a move to a more productive economy.
00:31:16.360 You mentioned that capital is expensive and it's needed.
00:31:18.860 You know, the prime minister and his whole government have gone around talking about the need to make sure that there's capital available for building apartments.
00:31:28.380 They want to encourage people to build more apartments, build more homes because of the housing crisis.
00:31:33.820 All of this makes it less likely for the private sector to get involved in doing that.
00:31:39.440 You make a profit, you're going to be punished more for making a profit, even if it's on affordable homes.
00:31:46.780 I think it's an important point.
00:31:49.960 For everything the government is trying to do, energy transition, housing, building a better, a greater supply of houses,
00:31:59.260 you need a private sector that is willing to invest, that is willing to help you solve this problem, this challenge for our country.
00:32:07.360 And if you basically take the attitude that I'm the government, I can do it on my own, I don't need the private sector, well, it's just going to be, you're not going to be successful.
00:32:20.260 And our economy will suffer as a result of it.
00:32:23.160 So it's the attitude vis-a-vis business that it's really important.
00:32:27.780 I think also this like business bashing movement that we're seeing right now that being successful is bad, being a big business is bad.
00:32:36.860 Well, it turns out that it's these very businesses that, as I said, provide good wages to employees, that provide the shareholders good returns on their investments.
00:32:54.620 And at the end of the day, you know, we want better living standards.
00:32:58.220 And for that, we need a dynamic economy.
00:33:01.320 I really want to point out this aspect.
00:33:04.640 Economic dynamism is really important.
00:33:07.040 Why is the U.S. outperforming?
00:33:09.400 Because they are taking risks, they are taking chances, they have innovators who fail once, twice, sometimes before building amazing companies.
00:33:19.140 If you don't develop this culture here in Canada, or if you downplay it, I should say,
00:33:25.100 you can't have an economy that resides just in consumption, real estate, and government spending.
00:33:32.760 You need an economy that resides on economic dynamism, entrepreneurial spirit, innovators.
00:33:38.740 And I feel with this tax move, we're just sending a really bad signal.
00:33:43.520 Well, the balanced budget period that the Gretchen Liberals brought in, followed by tax cuts, not only did it help spur some of what you're talking about there, but government revenues went up despite tax cuts.
00:33:59.420 Yes, yes.
00:34:00.320 And people seem to forget that that is another option.
00:34:04.900 If you grow the economy, then government revenue will go up.
00:34:10.700 You know, they decided to take less from every company, but they got more from companies as a whole.
00:34:18.260 And also, it makes it less attractive to hire a whole floor of lawyers and accountants to find bootpoles.
00:34:25.120 Yes, exactly.
00:34:25.920 So it's incredible to watch.
00:34:30.600 In terms of what they could have done, what could they be doing to spur productivity?
00:34:37.680 Actually, the deputy governor of the Bank of Canada gave a very stark warning about where we're at in terms of productivity just a few weeks ago.
00:34:47.000 And I'm not sure that in the middle of the CEO bashing you were talking about that anyone was listening.
00:34:54.020 Actually, just before, I want to point out that the CEO bashing going on is a cross-partisan activity right now.
00:35:00.520 I don't know if you saw Mirko Bibich appear, the CEO of Belcan at Angel Prizes.
00:35:07.220 He was berated by MPs from every single party.
00:35:11.920 And it wasn't even on the topic that they were supposedly there to discuss.
00:35:15.260 They just wanted to beat him up, same as they did to Gail and Weston a little while ago.
00:35:19.580 CEOs get about as much respect in Ottawa from all parties as a convicted murderer these days.
00:35:25.780 Being a CEO, creating jobs, creating, you know, for a company like Bell, pretty much if you have a pension or an RRSP, you're holding Bell stock and their dividends are helping pay for your retirement.
00:35:40.240 That is considered bad now.
00:35:42.740 And it's across party lines, which I think is very dangerous.
00:35:46.600 You know, it's not just the NDP or a flank of the Liberal Party now.
00:35:50.940 It's the Conservatives and all Liberals as well.
00:35:53.120 Yeah, that's a very unfortunate development.
00:35:57.340 Again, everybody wants to be a workers' party and I totally understand how important it is for the middle class to succeed.
00:36:06.020 But the reality is, if we don't have successful companies, if we don't have scaled companies, you know, companies to a certain size, you're just not going to see the wages and the living standards that we've enjoyed over the last 50 years in Canada.
00:36:27.160 You actually need these big companies to succeed so that employees are equally successful.
00:36:37.500 So it's not a race to the bottom.
00:36:39.420 It's a race to success and taking more chances, competing against companies globally, not just in Canada.
00:36:52.920 So for that to happen, you need successful multinationals that are established in Canada.
00:37:01.680 What are the steps the government could have taken?
00:37:04.280 I know that you've been looking at this along with people like Sean Spear from The Hub.
00:37:08.920 You've written paper with David Dodge.
00:37:11.840 You've been taking a deep, deep dive at this.
00:37:14.060 What are some of the policies that they could have looked at?
00:37:16.480 So first and foremost, it's about creating a macroeconomic environment that is conducive of people wanting to invest.
00:37:27.140 So just as a very concrete example, if it takes 15 years for a mining company or an oil and gas company to get a permit to exploit a new pipeline or a new mine,
00:37:38.640 obviously people will make different decisions and investors might turn to other countries that have a more nimble, agile, regulatory process.
00:37:50.600 And again, I'm not saying that there should not be any environmental assessment process or stuff like that.
00:37:56.920 But is it reasonable that in a country like Canada, it would take 15 years or more than 10 years to get a big project approved?
00:38:05.080 That's something we could fix without money that would give us a lot in terms of confidence of people to invest in our country.
00:38:16.260 And then, you know, other than obviously the macroeconomic environment, and by the way, the fiscal situation is really important
00:38:24.580 because if you keep running structural deficit down the road with investors and people who make business decisions,
00:38:31.560 including CEOs will conclude that taxes will eventually need to go up.
00:38:36.280 And that's not a good thing when you're trying to make money to see an environment where you're going to have higher taxes down the road.
00:38:45.520 And so that's a big break to people thinking about future investments.
00:38:51.680 And on a productivity side, what drives it really at the end, Brian, and you see it in countries like the United States, is innovation.
00:39:01.160 Innovation is something we're not good at.
00:39:03.440 We've been very complacent, I guess, depending on our U.S. trading partner, depending on our natural resources,
00:39:11.940 which are a great gift for Canada, we have not pushed enough on innovation.
00:39:18.860 And as a result, our productivity numbers have been very, very weak.
00:39:25.260 And so we have to do better at innovation.
00:39:30.620 We have to invest more in R&D, public R&D, private R&D, scale our business.
00:39:36.360 We're very much an SME economy.
00:39:38.360 And again, I love small businesses.
00:39:41.580 There's nothing wrong with that.
00:39:43.140 But to invest and be more productive, you need to scale.
00:39:46.840 You need to sell to produce and sell goods to the world.
00:39:51.920 And we need more global champions in competitive industries.
00:39:57.120 But you need the Shopify's that start as a small company to become a big company that now employs 8,000 people.
00:40:04.120 Exactly.
00:40:04.820 That's a great example.
00:40:05.760 Yeah, it's, you know, all of the companies that we have that are big once started out small.
00:40:12.600 And, you know, they only get big because of success.
00:40:16.740 And if you're going to tax them to success, that won't work.
00:40:24.060 One of my favorite lines about taxation is Winston Churchill saying that taxing your way to prosperity is like a man standing in a bucket and trying to pull himself up by the handle.
00:40:33.660 Well, I want to thank you for your time today, Robert.
00:40:38.640 It's been an interesting conversation.
00:40:40.580 And it's unfortunately one that we'll likely have.
00:40:43.840 Again, there's at least one more budget from the government.
00:40:46.320 And they seem more determined to, as you say, play a populist thing.
00:40:50.760 You know, since Donald Trump came along, we've acted as if populism is only on one side.
00:40:57.220 Populism can come from all fronts.
00:40:59.480 And this is very much a populist budget with a lot of class warfare.
00:41:03.320 And I would say age group warfare or demographic warfare baked into the middle of it.
00:41:10.820 But I don't see it helping deal with the economic woes that are affecting our country.
00:41:17.320 Agreed.
00:41:18.280 Thank you very much for the time.
00:41:20.380 Thank you for your time.
00:41:22.040 Full Comment is a post-media podcast.
00:41:24.620 My name is Brian Lilly, your host.
00:41:26.000 This episode was produced by Andre Prude with theme music by Bryce Hall.
00:41:29.460 Well, Kevin Libin is the executive producer.
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00:41:50.320 Until next time, I'm Brian Lilly.
00:41:59.460 Thank you for listening.