Government spending 40 %, maximized at 26 %, oups !

Extrait de: Conservatives’ vision is hardly conservative, Niels Veldhuis and Charles Lammam, Financial Post, April 29, 2015

There’s only a marginal difference between the 2005/06 Liberals and 2015/16 Conservatives

As expected, the 2015 federal budget had the general feel of an election budget, with a small surplus and a smattering of initiatives to satisfy various voting groups. As Liberal leader Justin Trudeau noted in the House of Commons, “The budget is a political document produced to that end. It is a vision for a Conservative election campaign.”

While many, including Trudeau, have tried to paint the Conservatives as radical, the 2015 budget actually points to a different conclusion. When it comes to the size and scope of the federal government, it’s hard to distinguish the 2015/16 Conservatives from the 2005/06 Liberals.

Let’s start with the most important measure to gauge the breadth and depth of government activity: spending as a share of the economy.

·         Federal program spending (total spending minus interest payments on the federal debt) as a share of the economy (GDP) was 12.6 per cent in 2005/06, the Liberals last year in office.

·         On this measure, the federal government grew in the first three years under the Conservatives (2006/07 to 2008/09) before skyrocketing during the recession.

clip_image002

·         Federal program spending now stands at 12.9 per cent of GDP with the Conservatives planning to increase it to 13.2 per cent this year (2015/16).

Ø     Simply put, the Conservatives have increased the size of the federal government, and if re-elected, plan to keep the federal government larger than the previous Liberal government.

Moreover, when provincial and local governments are added, total government spending in Canada is currently about 40 per cent of GDP.

In a recent book, Measuring government in the 21st century, Lakehead University Professor Livio Di Matteo examines a wide range of international data to measure how the size of government affects economic growth and social outcomes.

Di Matteo finds that economic growth is maximized when total government spending is at approximately 26 per cent of GDP, and for social outcomes there is little additional benefit once government reaches 30-35 per cent of GDP.