Frank Stronach: Canada's economy buckling under weight of growing debt
Re-Printed without permission. This needs to be saved.
Swelling bureaucracy and complex tax system are additional obstacles to success
Author of the article:
Frank Stronach
Some financial experts say we’re headed towards a recession, while others maintain that we’re already in one. What no one would argue with, however, is the fact that our economy is slowing to a crawl.
Recessions come and go. Some are deeper and longer lasting than others, but the one thing they have in common is they always inflict pain and leave behind financial wreckage.
I can still vividly recall when the so-called economic meltdown ripped through financial markets in late 2008. I was the chairman of Magna International Inc., and the meltdown sent the North American automotive industry into a tailspin that would lead to Chrysler and General Motors filing for bankruptcy.
Hundreds of thousands of jobs in the auto industry were incinerated almost overnight. Magna, through absolutely no fault of our own, had to lay off a number of employees as a result of the economic collapse brought about by Wall Street’s casino capitalism. It wasn’t fair — but that’s the sort of damage economic downturns always cause.
In terms of where we’re at today, the question isn’t whether or not we’re heading into a recession. The real question is: why?
Why now, at a time when the government is pumping unprecedented billions of financial stimulus into our economy? Shouldn’t the economy be booming?
Here is my view: until we address several core underlying fundamentals, the economy will not only remain anemic, but will deteriorate even further. Three key factors are having a devastating and long-term impact on the Canadian economy.
The first of these is debt. The fall economic statement tabled a few weeks ago was packed with bad news, including the fact that debt service charges are going through the roof. Interest on the debt currently eats up $46.5 billion in government spending — more than double what we paid only three years ago. What’s worse, it’s projected to soar to $60 billion by 2028.
The second factor hollowing out our economy is the dramatic growth and expansion of government overhead and spending. We’ve got close to 400,000 federal bureaucrats working for the federal government today — and that’s on top of those at the provincial and municipal levels. That expanding bureaucracy is hamstringing business with more red tape.
In the late 1950s — around the time I opened my own small tool-and-die business — government spending as a percentage of national GDP was around 16 per cent. Our economy was flourishing. Living standards were rising. Now fast forward to today: government spending as a percentage of national GDP is approximately 44 per cent, living standards are falling, our economy is stagnant and our middle class is shrinking.
The third and final factor that’s eroding the Canadian economy is the overly complex tax system. It benefits the rich at the expense of average Canadians. It’s also tilted in favour of financial transactions and wealth transfer instead of investments in the real economy.
Worst of all, the tax system is a drag on productivity because it requires a large bureaucracy to administer the convoluted tax code. The number of employees working at the Canada Revenue Agency continues to grow year after year — from around 41,000 in 2013 to just over 59,000 in 2023 — a 44 per cent increase. But, if our tax system was straightforward and black-and-white, we’d only need a fraction of those employees.
An economic charter of rights and responsibilities — something I’ve been advocating for several months now — would help us address these three structural problems holding our economy back.
The charter would require government to reduce our national debt by five per cent per year for 20 years, making Canada debt-free within two decades. It would also compel government to curtail our ballooning bureaucracy by cutting overhead by five per cent per year for the next 10 years. And lastly, the economic charter would require government to simplify our tax system by making it easy to understand, clear-cut and fair, with no loopholes and deductions for the rich and special interests.
If we did that, our economy would become one of the fastest-growing economies in the world.
National Postfstronachpost@gmail.com