OPINION: Government policies should encourage – not stifle – economic growth

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Unfortunately, on a case-by-case basis, government policies remain stuck in redistributing existing incomes rather than promoting income growth and virtue rather than economic pragmatism.

Recessions are, by definition, periods when the production of goods and services, and the income associated with the production, declines. It is increasingly clear that the risks of a recession in Canada, as in most Western countries, is increasing. Government policies that discourage economic growth increase the risk of prolonging the recession.

Alarm bells about Canada’s long-term economic growth prospects were ringing long before thoughts of recession. For example, as shown in the Federal Budget 2022 (graph 28), OECD predicts that Canada has the lowest prospects for growth in GDP per capita (adjusted for inflation) between 2020 and 2060 among 17 countries.

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Meanwhile, Canada’s central bank is rising interest rates and reduce liquidity to control inflation and bring the economy back to relative price stability.

In light of these challenges, Ottawa and the provinces should focus on improving economic growth, that is, increasing the capacity of the economy to produce goods and services. This will ease inflationary pressures, as inflation is always tied to too many dollars for too few goods and services.

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Creating a more predictable business climate is key to encouraging investment, which in turn underpins future economic growth. To this end, Ottawa and the provinces should act more aggressively and decisively to balance budgets with spending cuts and budget restriction.

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Governments can also encourage growth by reduce business taxes and regulations. Corporate tax cuts will improve Canada’s attractiveness for business investment, a necessary improvement before COVID and the current economic malaise.

Reducing red tape is also important because it lowers the cost of doing business and frees up more time for entrepreneurs, small business owners and managers to focus on innovation, product development, customer service, etc

Ottawa and the provinces should also reduce marginal personal income tax rates to encourage entrepreneurship, innovation, risk-taking and labor market participation, which would improve prospects for economic growth.

And while not fashionable in Ottawa or many other capitals (including Washington), a revival of Canada’s oil and gas industry would improve economic growth and reduce global greenhouse gas emissions. . Replacing increased oil and gas production in Canada (and possibly the United States) with coal-fired electricity in countries like China and India would result in a net decrease in global emissions.

These are all win-win, pragmatic and proven solutions to the economic challenges we face today. Better policies focused on economic growth and informed by pragmatic solutions that have worked in the past are now urgently needed.

Jason Clemens is an Economist and Professor Steven Globerman is a Resident Scholar at the Fraser Institute.

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