Juno News - Government keeps growing, Canadians keep paying

00:00:00.000 speaking of which we'll talk about the ballooning size of government and it's actually a rather

00:00:13.960 natural segue because government tends to just spend money that it doesn't have that isn't its

00:00:20.220 own and not do it in a particularly efficient way i mentioned that they've spent 42 million dollars

00:00:25.620 without confiscating a single gun but you know that money is going towards staff they're administering

00:00:31.440 a bureaucracy they're commissioning reports they're doing all of this stuff that government

00:00:35.720 does that private sector enterprise would never want to do nor would it be able to get away with

00:00:40.900 doing it but it times well with this report that came out from the fraser institute just on how

00:00:47.060 large government has gotten and this is not just a federal problem but you see it at the provincial

00:00:52.580 level as well a new study says that in 2000 from 2007 to 2022 government spending in 8 out of 10

00:01:01.620 provinces so 80 percent of the country in terms of uh provinces uh and went up government spending

00:01:08.620 increased in these provinces and also public sector employment rose not just an 8 out of 10 but rose

00:01:13.840 across the board in all provinces so government is getting fatter and more costly even if we have

00:01:20.060 a lot of economic situations in that that uh would not necessarily support such growth jake fuss is back

00:01:27.220 with us he is the fiscal studies director for the fraser institute jake always good to have you on thanks

00:01:31.860 for coming back today good afternoon thanks for having me on so just to talk about what is at stake

00:01:38.220 here and what you're seeing is is this the normal growth to keep up with growth in the country or is

00:01:42.560 this a a disproportionate growth that you're tracking here yeah what we're seeing is that the size of

00:01:47.680 government has measured by spending is growing faster than the canadian economy like you mentioned

00:01:52.500 in 8 out of 10 provinces but also nationally so when we're looking at local provincial and federal

00:01:57.520 levels of government we're now seeing government spending representing more than 40 percent of the

00:02:02.420 canadian economy whereas it was about 37 percent in 2007 so there's been a pretty substantial increase

00:02:09.260 in government spending as a share of the economy over the last 15 years or so and it's been a pretty much

00:02:14.780 across the board change in all provinces across canada um except for pei and saskatchewan which

00:02:20.400 saw small declines in size of government um in that 2007 to 2022 period do you know what it is that

00:02:27.400 accounts for that for those two it's a good question there have been some some changes over time so i think

00:02:33.900 some of it might have to do with some changes during the pandemic as well um because generally we were

00:02:38.660 seeing you know saskatchewan actually had a higher spending um in 2019 than it does in 2022 for instance

00:02:44.320 um so there there might be some certain temporary programs being removed or other things um so we'll

00:02:50.800 have to keep track of saskatchewan and prince edward island over the long run to see if this is actually

00:02:55.620 a trend or just a blip on the radar um but in pei's case even though they had a declining size of

00:03:01.400 government their size of government is still about 58 percent of the size of the economy for instance

00:03:06.140 um whereas a province like alberta which yes increased in terms of size of government um their

00:03:11.640 size of government is about 27 percent the size of the economy so there's a marked difference here

00:03:16.000 um between a lot of the provinces in canada um especially western provinces compared to eastern

00:03:20.920 provinces um we're generally seeing smaller uh governments in western canada relative to eastern

00:03:26.380 canada obviously in that range a couple of events i think have to be noted here 2007 2022 you've got

00:03:34.260 the the 2008 recession and we know that was just an example for government or of governments shoving

00:03:39.780 money out the door as quickly as they could you also mentioned the pandemic another situation in

00:03:44.640 which governments were racking up insane amounts of spending how much do those if at all skew the

00:03:50.360 overall trajectory you're looking at i think they definitely have an impact i mean especially when

00:03:55.620 you look at the 2020 covid pandemic for instance um you do see a huge spike in government size

00:04:01.760 during that time but what was interesting is that it basically became a permanent increase maybe not

00:04:07.560 to the levels that we saw at the height of the covid pandemic but we have basically had a permanent

00:04:12.380 increase in the size of government between 2019 and 2022 so that really tells us that yes covid does

00:04:18.820 have an impact but governments are actually just increasing in size over time anyways and we had

00:04:24.380 seven out of ten provinces increase their size of government between that three-year period between

00:04:29.100 2019 and 2022 and of course you know the financial crisis in 2008 also has an impact on the size of

00:04:35.260 government as well um but you know in the years when you're winding down temporary programs or other

00:04:40.280 things we're still seeing that permanent ramp up in government spending um it really has nothing to do

00:04:45.100 with the pandemic it's just simply increased bureaucracy increased government spending over time

00:04:49.780 yeah and i i was kind of curious about the public sector growth now i know this study doesn't

00:04:55.820 doing a public private sector contrast but i think we do know that private sector employment

00:05:00.480 is not immune to economic trends private sector employers that don't have a taxpayer to lean on have

00:05:06.660 to make very difficult decisions they all slash their work well not all but many of them slash their

00:05:11.200 workforces during covid but we see a continual increase in as we were talking about earlier every single

00:05:16.780 level of government every single province here over that span yeah that's right i mean essentially what

00:05:22.100 we've seen from 2007 to 2022 is an increased share of the workforce um in employed in the public sector

00:05:28.760 for instance so not just raw numbers it's the share that's going up yeah yeah exactly so it's basically

00:05:34.140 growing faster than private sector employment for instance so if we look at 2007 about 19 percent

00:05:41.220 of total employment in canada was in the public sector now in 2022 um it's about 21 percent and

00:05:47.840 we've seen that across the board in all provinces all 10 provinces had increases in public sector

00:05:53.120 employment relative to total employment in canada so yes private sector employment is still increasing

00:05:58.380 over time but it's not growing as fast as public sector employment is what these numbers show us

00:06:03.000 one of the challenges and i know it's going outside the scope of this study but

00:06:07.760 you can look at these numbers and again just to pull them out here uh in nova scotia government's

00:06:13.520 uh size relative to the economy 63 percent and in alberta 26.8 percent so uh you know even if it's

00:06:20.220 going up in alberta it's still nowhere near uh the size in nova scotia and atlantic canada generally so

00:06:27.420 if you're looking at this as a taxpayer not an economist and you're trying to figure out what's the

00:06:32.280 sweet spot is there a sweet spot is there a a size that it should be or is supposed to be

00:06:37.000 yes uh so we know from empirical research that generally the optimal size of government is

00:06:42.420 generally between 26 to 30 percent of the size of the economy um and this is when you get

00:06:47.360 historically maximizing your economic growth rates um when you start to exceed these levels and you can

00:06:53.040 actually start hindering your economy um and then you can ultimately start hindering living standards

00:06:58.020 for citizens as well um so alberta is the only province that is actually within that optimal range

00:07:03.400 of 26 to 30 percent all other provinces are well above 30 percent um in fact most provinces are well

00:07:09.860 above 40 percent and some of them are even exceeding 50 or 60 percent so they're well above that optimal

00:07:15.240 range um and they're at that point where they're likely harming their economies um and harming the

00:07:20.280 living standards in those provinces as well um rather than helping the citizens by having that optimal

00:07:25.900 range of government um in that 26 to 30 percent of the size of the economy it's actually quite

00:07:31.400 interesting so i i wasn't familiar with that uh that data you referenced so basically we do see

00:07:36.680 an inverse relationship between size of government and overall economic prosperity or health

00:07:41.980 yeah exactly and that analysis is based on a whole bunch of oecd countries very advanced countries

00:07:47.820 around the world it's a historical analysis um you can even extend the analysis a little bit more if

00:07:52.860 you want to uh punch it out a little bit more to about 24 to 32 percent of the size of the economy

00:07:57.560 um but generally what we've seen is that these countries around the world have actually maximized

00:08:02.180 their growth rates when it is within that range um so it provides a good barometer for governments to

00:08:07.660 actually track their progress um and to ultimately see um you know is there ways that we can actually

00:08:12.920 improve economic growth um and can we address this through government spending as the size of our

00:08:16.980 economy are we too high too low are we in the optimal range and i think that's an important metric

00:08:21.760 for governments to track over the long term so if we took the national picture here canada has

00:08:27.240 uh government at 40.5 percent the size of the economy what's needed to take that down to that

00:08:33.660 uh range that we're talking about well it's certainly a complicated question because it's not just one

00:08:38.600 level of government um you know when we're looking at the federal level of government we also have

00:08:43.160 provincial governments and local governments included in that um so really it's a cohesive effort

00:08:47.960 between all three levels of government to actually track their progress on this um right now we're

00:08:53.380 really seeing an explosion in government spending and debt at really all levels of governments

00:08:57.360 and that's certainly a concern moving forward so i think it's going to be important and imperative

00:09:02.600 for governments to begin to review um the amounts of spending what they're spending on are we getting

00:09:08.160 value for this money is this actually leading to economic growth is it leading to improved living

00:09:12.360 standards for canadians because right now what we're really seeing is economic stagnation

00:09:16.460 um and we're not seeing those improved living standards for canadians and just because we have

00:09:21.200 more government spending isn't necessarily leading to better results for us so i think we need to

00:09:25.780 rethink um what we're ultimately doing on government spending as a share of the economy

00:09:29.980 um and what we're spending this money on too all right well fascinating numbers as always jake

00:09:35.980 fuzz director of fiscal studies for the fraser institute thanks so much sir thanks very much for

00:09:40.760 having me thanks for listening to the andrew lawton show support the program by donating to true

00:09:45.680 north at www.tnc.news

00:09:49.360 you

Juno News - March 31, 2024

Government keeps growing, Canadians keep paying

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