In his concession speech on election night, Stephen Harper said, “While tonight’s result is certainly not the one we had hoped for, the people are never wrong.” This statement is clearly a cornerstone of a democracy. However, although the people are never wrong, we should always have a clear understanding of the implications of our choices. From the perspective of economy, we must understand that the election of a Justin Trudeau government is a vote for larger government. Trudeau said as much in his victory speech on election night when he used the words, “Most of all we defeated the idea that Canadians should be satisfied with less.” This is a clear indication of what we should expect from the Trudeau regime.
Without directly saying so, Trudeau is openly embracing the ideas of his father in two areas, the economy and energy policy. Pierre Elliott Trudeau was a man who believed in a strong role for the federal government in the economy, and his policies reflected this belief. He continually increased the presence of the federal government in the economy and paid for it by running deficits, which lead to a large accumulation of debt and the necessity for higher taxes. We must remember that, prior to the Pierre Trudeau regime, Canada had a history of running budgets that were, on average, balanced. In periods when the economy went down, we ran small budget deficits and when the economy was moving forward, we ran small budget surpluses. Pierre Trudeau changed all of that, and beginning in the early 1970s, Canada ran continual and increasing budget deficits. It did not matter whether the economy was moving forward or in a recession, he just kept running deficits. When Pierre Trudeau left office in 1984, the annual deficit was in the neighborhood of $40 billion, the national debt had ballooned, and we were left with much higher taxes.
We should not pretend that Justin Trudeau thinks any differently than his father. During the leader’s debate on the economy, Trudeau stated, “It’s time to kick start the economy,” indicating that, like his father, he has a strong belief that an economy cannot run properly without a great deal of government involvement. Like his father, Trudeau believes that increased spending and running deficits makes a good economic policy. Even Tom Mulcair, whose NDP is unabashedly pro-interventionist, understands that purposefully running deficits is not a wise economic policy.
It is important to understand that Harper ran deficits when the economy faced a downturn caused by the United States financial meltdown. Once the economy started to recover, the Harper regime worked hard to eliminate the deficit. Now Trudeau is proposing to unwind all of that.
Issuing debt to cover deficits will become more expensive, which will take up more government revenue
This deficit spending will have to be paid for out of some combination of issuing debt and raising taxes. Here is where this economic policy is going to run into what politicians politely call “unintended consequences.” It is well known that interest rates in both Canada and the United States are about to increase. The implication here is that issuing debt to cover deficits will become more expensive, which will take up more government revenue is terms of interest costs. Inevitably, this will lead to the necessity of financing the deficits through increased taxes. This is exactly what happened during the Pierre Trudeau years.
We should also remember the energy policies instituted by Pierre Trudeau, who created Petro-Canada and the infamous National Energy Program (NEP). The NEP was a rather convoluted interventionist policy which attempted to establish two prices for oil: a domestic price and a foreign price. This was basically an assault on the energy industry. To see the similarities of father and son on the energy file, look no further than Justin Trudeau’s top campaign advisor, Gerald Butts. Butts is a former executive of the World Wildlife Fund (WWF). It is fairly clear where the WWF stands on the question of oil in general and the oilsands in particular. There is clear potential here for energy and climate policy that punishes the energy industry.
It is ironic that Trudeau has been described as being progressive. It seems that his polices are a regression back to the regime of his father.