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The Trudeau government loves to spend money. Lots of it. And all that spending is making life less affordable in Canada — housing in particular.
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When the Liberals came to power in 2015, Ottawa was spending a total of $281 billion a year. This year, the federal Liberals are expected to spend $499 billion and next year $519 billion.
Even after accounting for inflation and rapid population growth, that’s a 28% increase. The federal government spends over a quarter more than it did just nine years ago, and that doesn’t include emergency pandemic spending.
What’s more, following the prime minister’s recent cross-country orgy of spending announcements on home building, a renters’ bill of rights, school lunches, defence and more, the Parliamentary Budget Officer expects next week’s budget to contain at least an additional $18 billion in expenditures.
Far from helping the housing affordability crisis, the Trudeau government’s spending has probably made matters worse. And even more spending will make things worse again.
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Government spending can cause inflation. Too many easy government dollars flooding into the economy drive up prices by competing with consumer and business dollars for limited goods and services.
There are also only two basic ways for governments to raise money for their added spending — higher taxes or more borrowing.
Higher taxes leave taxpayers with less money in their pockets, thereby reducing affordability. In the case of the carbon tax, not only does paying the tax make consumers poorer, the tax also makes nearly every good consumers buy more expensive — a double whammy on affordability.
Because it is politically unpopular to raise taxes endlessly, governments also rely on borrowed money. In the case of the Trudeau government, they have borrowed so much they have nearly doubled the national debt.
That much government borrowing increases competition for money from banks and other lenders, which drives up interest rates and increases the cost of loans (including mortgages) for everyone.
The increased cost of borrowing is passed on by businesses in the form of higher prices, which fuels inflation, which prompts the Bank of Canada to try to cool inflation by — you guessed it — raising interest rates even further.
And I haven’t even gotten to the part yet where the Trudeau government’s fanatical environmental policies have slowed our economy and reduced government revenues, lowered personal incomes and limited the profits of small businesses.
What made anyone think the woke, high-school debating club we call the Trudeau cabinet would be any better at managing a complex, two-trillion-dollar economy than it was at designing the ArriveCAN app, renewing passports or keeping its buddies in Beijing from meddling in our elections?
Into this perfect storm of incompetence comes the Liberals’ open-door immigration policy which last year added over a million new permanent residents, temporary residents, refugee claimants, illegal entrants and foreign students all needing to find housing and buy goods.
The cherry on top is that the CMHC recently estimated housing starts in Canada will decline for the next two years.
For all Trudeau’s boasting about “building more homes, faster,” the Canada Mortgage and Housing Corporation projects “rents will rise and vacancy rates will fall,” in 2024 and 2025. Meanwhile, housing starts will fall to as low as 225,000 new units this year, down from 241,000 two years ago.
Why so few new homes when there is so much demand? Because of the Liberal government’s inflationary policies, slow economic growth and higher interest rates. Unemployment is up and so are mortgage rates, both of which depress home construction.
Combine high interest and high immigration, and CMHC expects housing prices will go “beyond previous peak levels.”
When Trudeau came to office, it took 44% of the median Canadian income to afford a house and now, according to the Royal Bank, its take 63%.
Isn’t it fun being governed by economic illiterates?
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