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FOR SUBSCRIBERS | JULY 8, 2025 |
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Crude oil tankers are docked at the Trans Mountain Westridge Marine Terminal in Burnaby, B.C., on June 10, 2024. The Canadian Press/Darryl Dyck |
Big Infrastructure Projects Can Boost Canada’s Economy, but Burdensome Climate Policies Must Be Scrapped |
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Commentary
Although Donald Trump and Mark Carney took office only a few months apart and are approaching somewhat similar economic problems, there is a large contrast in their approaches to them.
Some of this is the result of Trump having been president before, but interrupted in his incumbency by a controversial election, and he returned to office much more knowledgeable of the ways of Washington than he had been previously, with largely the same agenda. He has pledged to strengthen the military, reduce taxes, reduce wasteful spending, and do the necessary to seal the borders and entry points of the United States to illegal migrants. One of the consequences of this is that he presents a comparatively precise series of revenue estimates and expense reductions.
In the case of Mr. Carney, he was elected with a more ambiguous mandate than Mr. Trump as he has a parliamentary minority, and has not yet indicated which way he will go in choosing between tax increases, heavy deficit financing, and deferring some of his more ambitious climate-related promises. Since Carney only reversed a Conservative lead in the polls and was elected because of his claim that Trump was on a campaign to “break” Canada, his policy direction is comparatively indistinct. He has deferred a budget, but initially indicated that he would keep funding his climate ambitions while promoting economic growth in the face of the American threat, which was grossly overblown for electoral reasons. His official deficit projections were extremely high and will presumably be adjusted downward as he becomes more specific about a more restrained and affordable approach to climate and energy policy, and the revelation of his stance on income and other taxes.
Canada is waiting to see whether Carney will charge forward in pursuit of the public policy goal that has most preoccupied him for many years in different countries and ignore the trend now in place practically everywhere in the Western world, and roll back extreme and highly expensive climate objectives for the fiscal and cost-of-living convenience of citizens.
Carney’s principal piece of legislation so far in his two months of government has been Bill C-5, including the Building Canada Act, which promises to clear away regulatory and minority objections in favour of fast-tracking large public works and infrastructure policy deemed to be in the national interest. These include pipelines, and the prime minister has attempted to straddle divergent horses with incomprehensible references to carbon-neutral pipelines.
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Carney specifically supports large projects such as strategic minerals in the Ring of Fire mining region of northern Ontario as a method of accelerating Canada’s economic growth, and growth of income per capita. This is a traditional approach, which includes pitching public policy to national pride and uplifting the morale of the public with grandiose but practical projects. Canada has done this before, most famously with the Canadian Pacific Railway, the St. Lawrence Seaway, the TransCanada pipeline, and the Montreal World’s Fair in 1967.
The prime minister’s apparent determination to refuse to be mouse-trapped by pettifogging environmental and indigenous groups’ complaints is commendable, and the atmosphere this legislation inspires of an overriding national interest guiding federal policy toward the elevation of Canada to a higher level of national significance is excellent. All of the projects that have been identified to date by premiers should be undertaken.
But this does leave fiscal, monetary, and budgetary policy an almost complete mystery. If Mr. Carney is prepared to forgo indefinitely his wildly impractical climate ideas, then there is a clear possibility of a well-thought-out program focused on spending restraint and fiscal incentives for building projects that will help unite the country and enhance public morale.
Donald Trump, upon returning to office, had a clearly articulated program, having been the leader of the Republican Party for nine years, four of them as president. His first objective was to ensure that the tax cuts of his first term were continued. In addition to that, he included many other fiscal benefits, including elimination of taxes on tips and on most categories of overtime work. He passed expense reductions of $1.2 trillion, including a good deal of environmental-related expenses that he dismissed as completely superfluous to legitimate current environmental matters and based on unsubstantiated ecological fairy tales about unproved consequences of climate warming tendencies.
The United States has traditionally had a lower level of personal and corporate income tax than in Canada, with a few exceptions, since President Johnson’s sharp reduction of taxes in 1965, reinforced by President Reagan‘s in 1981 and President Trump’s in 2017. These were countered by tax increases under President Clinton and President Biden. But it is generally conceded that Trump had a mandate to reduce taxes, and he has done it with a single stroke. The president claims that he will reduce the deficit by generating sharp economic growth with resulting increases in revenues and income that will more than make up for the apparent loss of revenue by tax reductions. This did substantially occur under President Johnson and under President Reagan, and may well do so again.
Economics is essentially half psychology and half Grade 3 arithmetic, and there is little doubt that Trump possesses the persuasive abilities opposite the American electorate to create an ambience and public psychology of growth and optimism. His talents in that respect are already being reflected in public opinion polls.
If Mark Carney thinks he can stimulate the Canadian economy by embracing a number of these desirable and impressive projects at the same time that he lumbers the economy with tax increases and the continued war on the oil and gas industries to reduce our carbon footprint, the result will be a political and economic disaster. The stimulus of the grant projects will be more than offset by the depressive impact of the continuing war on oil and gas, which may well provoke the voters of Alberta to request consideration of the virtues of secession from Canada, an event that would produce instantaneous concurrence from Quebec for different reasons. An atmosphere of serious political lack of confidence will ensue, and the economy will both evoke and reflect that fact.
Carney certainly possesses the ability to produce a much more positive result with a deferral of his more ambitious climate goals, which would not only ensure increasing public confidence and comparatively reasonable tax levels, but would also enable these great infrastructure projects to have maximum positive economic consequences, as proceeding with projects on this scale, including the great hydroelectric development of Quebec and Ontario, have demonstrated. The country, and the dwindling number of foreigners who pay attention to Canadian events, are awaiting an indication of which way the new government will move.
The picture is clearer in the United States. The public has already taken to the economic program, and they support Trump’s tax reductions and his steady liberation of the social services of the country from the burden of many millions of illegal immigrants. The U.S. economy is already responding well and moving steadily to lower inflation, lower unemployment, and accelerating economic growth.
In Canada, the psychology and the state of the economic cycle are different and so is the condition of the government. It is all to play for.
Views expressed in this article are opinions of the author and do not necessarily reflect the views of The Epoch Times.
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