Matthew Lau: Canadian governments are spending us into misery

financialpost.com:

Two statistics illustrate Canada’s disastrous economic outcomes in recent years and the bleak outlook. First, as Fraser Institute senior fellow and former Statistics Canada chief economic analyst Philip Cross observes in a recent study, Canada’s 10-year average real GDP growth per capita was its lowest since the Great Depression. And it’s not a problem we’ve imported: from the fourth quarter of 2015 to the fourth quarter of last year cumulative growth was about two per cent in Canada versus 12 per cent in the United States.

Second, this trend of poor economic growth is unlikely to reverse anytime soon since business investment, which drives growth and productivity, declined 20 per cent in Canada (per worker, inflation-adjusted) from 2014 to 2021, compared to a 15 per cent increase in the U.S. over the same period, as Fraser Institute economists Tegan Hill and Joel Emes document in a separate study. In 2014, business investment per worker in Canada was already 21 per cent below the U.S. — by 2021 it was barely half the American level.

The strategy employed by Canadian governments, both federal and provincial, of trying to achieve economic growth through increasing government spending clearly is not working. Nor should anyone have expected it to. Milton Friedman’s adage, “Nobody spends somebody else’s money as carefully as he spends his own” pithily expresses the problem with government spending: it’s done less carefully and less productively than private spending, and since economic resources are limited, government consumption inevitably takes away from the private sector.

Empirical studies provide abundant evidence that: government spending does not stimulate economic growth (not even in recessions); government spending