Brian Lee Crowley explains why government in Canada is much larger than previously thought
OTTAWA, Dec. 18, 2015 – How big, exactly, is government in Canada?
Bigger than we think.
The Macdonald-Laurier Institute’s Managing Director Brian Lee Crowley explains in a new video why we aren’t correctly measuring the size of government and that if we did we’d discover that government in Canada is nearly half again as big as it claims.
Simply comparing how much government spends on programs to GDP isn’t enough, he says. For example, a proper measure of government control of the economy would include tax expenditures, which are really just more spending disguised as tax cuts because they go to individuals to encourage an outcome the government wants. A real tax cut lowers taxes for everyone.
Munir Sheikh, former Chief Statistician at Statistics Canada, has analysed this issue for a Macdonald-Laurier Institute paper. As he explains in the video, Sheikh found that for the period studied, governments at all levels in Canada took in and spent “10 more cents per every dollar than the published data show”, a staggering $154 billion.
“It’s a big number”, says Crowley, “but we’re not done yet”. Crowley points out that one should also include regulations that manipulate prices or production in particular industries in properly measuring the size of government.
In an interview for the video, Philip Cross, an MLI Senior Fellow and former Statcan Chief Economic Analyst, uses the example of supply management to make this point. He explains that supply management of dairy products costs the average family with children nearly $600 a year. “If governments taxed us and wrote cheques to farmers we would see this clearly as a major, deliberate transfer of wealth”, says Cross in the video, but because it’s regulation instead, the cost is hidden. In a companion paper to Sheikh’s, Cross estimates that this kind of regulation raises the footprint of government by at least another 10.5 percent of GDP and combined with Sheikh’s analysis it’s clear that government spends another 20 cents on every dollar more than it appears.
Properly measuring the size of government is important for holding the government to account. “We’ve been fighting taxation without representation since Magna Carta, but where’s the accountability on regulation or tax expenditures?” asks Crowley.
These findings don’t settle whether government is too big or too small says Crowley, but they do allow us to properly understand the issue in order to have that discussion.
Brian Lee Crowley is the Managing Director of the Macdonald-Laurier Institute.
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