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Federal government expenditures

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Federal government expenditures

Where should the federal government be spending our money and how much should it be spending? To try to answer this question, and I admit that I will fall far short of providing an answer, let me start with the 2010 fiscal year budget. The federal government spent $274 billion in fiscal 2010, approximately $8,000 for every Canadian.

A summary of some of the “big” ticket categories: old age security benefits, guaranteed income supplements and spouse’s allowances – $35 billion; interest payments – $29 billion; Canada health transfer – $25 billion; employment insurance benefits – $22 billion; National Defence – $21 billion; equalization payments – $16 billion; children’s benefits – $12 billion; and Canada social transfer – $11 billion. If you are counting, these outlays totaled $171 billion. Was the money well spent?

I will return to this question shortly. For the time being, I will look at other expense categories that are much more problematic.

For example, the federal government spent $10 billion on Crown corporations. Are any of them still needed? If any are, the number is likely to be quite small.

How about the CBC, which cost taxpayers $1.1 billion. This is in addition to the $120 million contributed to the Canadian Television Fund. Once upon a time investing in a public broadcaster in this country probably made a lot of sense. In today’s world there is no logic to maintaining this entity, other than to generate economic rents for many individuals and to placate the chattering classes in Toronto and Montreal.

VIA Rail received a subsidy of $387 million, while airlines operating across Canada, and thus their passengers, were directly and indirectly taxed close to $1 billion. Other than a potentially weak environmental argument, there is no good case for continuing this subsidy.

The federal government spent money on transfer payments and department expenses for four regional development agencies: Atlantic Canada Opportunities Agency ($378 million); Economic Development Agency of Canada for the Region of Quebec ($386 million); Western Economic Diversification ($406 million); and Southern Ontario Development Program ($44 million). Other than providing photo ops for Cabinet ministers and a means for buying votes, it is difficult to see any merit in these programs.

The same can be said for the $1.5 billion in agriculture subsidies and other agriculture transfer payments to the provinces, and the $537 million in operating expenses for the Department of Agriculture.

Now I will return to the major expense categories, and some “minor” ones.

Three questions need to be asked and answered: What are the objectives – do they really make sense? How can they best be achieved? What will this cost?

Take health care as an example. We know the five basic principles as set out in the Canada Health Act: universality, comprehensiveness, accessibility, portability, and public administration. But what do any of these principles have to do with health care outcomes?

If our real goals are to increase life expectancy and/or enhance the quality of life, more rigorous enforcement of traffic laws and spending more money on educating the public about life style choices probably would produce superior results to throwing more money into the existing system. Without real goals, and explicit trade-offs, it makes little sense to put more money blindly into the system. Indeed, less money, but much more wisely spent, might be desirable.

Similarly, with National Defence and the RCMP ($3 billion in fiscal 2010): what are the objectives? Without clear-cut objectives, it makes little sense to continue spending billions of dollars. Maybe we should spend more, maybe less; but unless the three questions posed above are addressed, we are possibly wasting a lot of money.

How about the $3.3 billion flowing through the Canadian International Development Agency? Or, how about the money spent to facilitate research: Canadian Institutes of Health Research – $929 million; Contributions under the Knowledge Infrastructure Program – $988 million; Contributions under the Technology Partnerships Canada program – $131 million; Grants to the Canada Foundation for Innovation – $129 million; National Research Council of Canada, other subsidies to industry – $202 million; National Sciences and Engineering Research Council – $1 billion; and Social Sciences and Humanities Research Council – $659 million ($4 billion in total)? Since we still do badly in terms of productivity growth, perhaps we should stop spending money in these ways.

I easily could go on to raise similar concerns with the other major expenditure categories. But by now my message should be clear. There are many important initiatives for the federal government. However, we need to be clear on what we are trying to achieve, and then figure out how to best achieve our goals. Otherwise, the federal government is fiddling as the country burns.

The opinions expressed in this blog are personal and do not reflect the views of either Global Brief or the Glendon School of Public and International Affairs.

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