Published on May 11, 2016

Justin Trudeau launched his campaign for the leadership of the Liberal Party of Canada a couple of days ago. This week, I gave an interview to La Presse about Mr. Trudeau’s economic vision – or rather his lack of vision. Here is an English version of the article by Joël-Denis Bellavance published on Friday. — 14 October 2012

Maxime Bernier goes after Trudeau

October 12, 2012

Joël-Denis Bellavance

La Presse

Justin Trudeau is using “empty slogans” to woo the middle classes, but he has nothing credible to propose to improve their lives from an economic perspective, believes Maxime Bernier, the minister of State for Small Business.

Stephen Harper’s conservatives have until now remained silent on the candidacy of the young MP from Papineau, who wants to lead the Liberal Party of Canada. Mr. Bernier broke that silence by sharply criticizing some passages of the speech delivered by Mr. Trudeau when he launched his campaign in Montreal Tuesday of last week.

In his speech, Mr. Trudeau claimed that the middle class plays a determinant role in economic growth. “We need to learn what we have forgotten. That the key to growth, to opportunity, to progress, is a thriving middle class, he declared. A thriving middle class provides realistic hope and a ladder of opportunity for the less fortunate. A robust market for our businesses.”

“The great economic success stories of the recent past are really stories of middle class growth, he added. China, India, South Korea and Brazil, to name a few, are growing rapidly because they have added hundreds of millions of people to the global middle class.”

Maxime Bernier thinks Mr. Trudeau has it all wrong. “It’s the other way around! It’s not because their middle classes have grown that China and India, among others, have become economic successes. It’s rather because these countries have first experienced strong economic growth that their middle classes have had the chance to develop.”

“And why did they experience strong economic growth? Because over the past couple of decades, their governments have abandoned their old socialist and interventionist policies and have liberalized their economies. They increasingly relied on private enterprise, open markets and a more reasonable tax burden instead of trying to control everything and to stifle innovation with excessive regulation, bureaucratic planning and restrictions on businesses.

In an interview with La Presse, Mr. Bernier said that he did not expect to hear specific proposals from Justin Trudeau right at the start of his campaign. But these words from the aspiring leader about the middle classes convinced him that he had to speak out.

“Justin Trudeau confuses cause and effect in terms of economic development. This is the only economic perspective we find in his campaign launch speech. This does not bode well. You can’t govern a country with empty slogans,” concluded Mr. Bernier.

Sources close to Justin Trudeau did not make much of the conservative minister’s remarks. “Mr. Bernier is ten days late. People are looking for something else than the conservatives’ dirty politics. There’s a reason why Justin’s candidacy is attracting so much interest. And the campaign is only beginning,” said a close collaborator who did not want to be identified.

Published on May 11, 2016

This is the original version of a speech I gave earlier this month at Carleton University, for the second edition of the Government Innovation Conference organized by the Municipal Taxpayer Advocacy Group. On the picture, I am with Ade Olumide, president of the MTAG. — 24 December 2012

The Benefits of Smaller Government
Maxime Bernier

3 December 2012, Ottawa

As a Member of Parliament for the Conservative Party, I am often described as a right-wing politician. According to conventional ideological divisions, this is what distinguishes conservative politicians from those of the Liberal Party, who are supposed to be in the centre. And from NDP or Bloc members, who are seen as left-wingers.

I have never really liked those distinctions, because I don’t believe they really tell us anything useful.

I prefer to use a more precise rule to define my position: when we are faced with a problem, should the government intervene or should we leave individuals to find a solution by working together? Should we have a bigger government with less liberty or a smaller government with more liberty?

My answer is we should have a smaller government with more liberty. Government should intervene less and every time it’s possible, we should defer to the free market and to individual initiative instead of imposing new rules.

I have respect and admiration for politicians considered to be right-wing, like Margaret Thatcher or Ronald Reagan. They managed to reduce government interventions in some areas.

But I also respect politicians considered to be left-wing who did the same. For example, Bill Clinton significantly reformed welfare programs, cut down spending and eliminated the budget deficit of the American government.

Still, I am a member of the Conservative party because it is part of conservative philosophy to understand the benefits of smaller government.

For us conservatives, government should ideally set up and enforce the basic rules of life in society. And then, leave individuals free to cooperate among themselves to provide for their wants. Government should not intervene to solve each and every problem on the road to a utopian and unrealistic vision of society.

To paraphrase John F. Kennedy from a conservative perspective: don’t ask what your government can do for you; ask your government to get out of the way, so that you can be free to take responsibility for yourself, for your family, and for everyone else that you care about.

Good government policy gives individuals the opportunity to dream and to realize their dreams; it does not impose the dreams of some on everyone. I went into politics to defend this kind of policy.

THE EVIDENCE

More specifically, if we look at the available data, what are the benefits of smaller government? I think the evidence is quite clear.

Most of you have probably heard about the Fraser Institute’s “Economic Freedom of the World” annual report. It looks at more than 20 components of economic freedom. Not only the size of government but also other components such as enforcement of property rights and freedom to trade.

Countries in the top quartile of economic freedom had an average per-capita GDP of $37,691 in 2010, compared to $5,188 for bottom quartile countries.

In the top quartile, the average income of the poorest 10% was $11,382, compared to $1,209 in the bottom. Think about this: the poorest 10% in the most economically free countries are twice as rich as the citizens in the least free countries. The poor also benefit from economic freedom.

There are still more benefits to living in an economically free country with a smaller government. Life expectancy is 79.5 years in the top quartile compared to 61.6 years in the bottom quartile, and political and civil liberties are considerably higher in economically free nations than in unfree nations.

Canada has improved in this ranking in recent years and is now in fifth position. The U.S., where government keeps growing, has dropped to 18.

Another recent study by a British think tank, the Centre for Policy Studies, has looked at the impact of the size of government on growth and other outcomes in developed economies.

The study found that for the period between 1965 and 2010, a higher tax to GDP ratio has a statistically significant, negative effect on growth. For example, an increase in the tax to GDP ratio of 10 percentage points is found to lower annual per capita GDP growth by 1.2 percentage points.

A similarly statistically significant negative effect on growth is found with a higher spending to GDP ratio. Between 2003 and 2012, real GDP growth was 3.1% a year for countries with a small government, compared to 2.0% for countries with a big government.

In this study, small government is defined as one where both government outlays and receipts are below 40% of GDP. I’m not sure I would qualify this as “small” government! But there would have been no countries in the category “below 10% of GDP”. About 10% of GDP: that’s how big government was in all rich Western countries like Canada a century ago. It just shows you how governments have grown and become gigantic in the 20th century.

THE LOGIC UNDERLYING SMALL GOVERNMENT

The logic underlying the benefits of small government is the following: governments can only spend what they have taken out of the real economy. A government cannot inject resources into the economy unless it has first extracted them from the private sector through taxes or put us further into debt by borrowing the money.

Every time the government takes an additional dollar in taxes out of someone’s pocket, that’s a dollar that this person will not be able to spend or invest. Government spending goes up, private spending goes down. There is no net effect, no increase in overall demand. No wealth creation.

Government borrowing has the same effect. The private lenders who lend money to the government will have less money to lend to other private business people. Or they will have less money to spend or invest elsewhere. Government borrowing and spending goes up, private borrowing and spending goes down. There is no net effect, no increase in overall demand. No wealth creation.

Government spending always competes with private sector spending for scarce resources. Moreover, bureaucracies use resources less efficiently than private businesses, which have to remain competitive to be profitable and survive. When you divert resources from the more productive uses that they can find in the private sector to less productive uses in the public sector, you will see less growth.

WHAT OUR GOVERNMENT HAS DONE

That is why to ensure we have a growing economy, we need to let entrepreneurs keep the means to create wealth. We need to create the best conditions possible for the private sector to become more productive.

This means first of all to restrain spending. In our Economic Action Plan 2012, we concluded a comprehensive review of approximately $75 billion of direct program spending by federal departments and agencies.

That review identified a number of ways to enhance the efficiency in the way we spend taxpayers’ dollars and achieved ongoing savings of $5.2 billion.

Government program spending is projected to steadily decline over the next four years as a proportion of our economy to return to pre-recession levels.

We also need to reduce taxes. Corporate taxes now stand at 15%, the lowest among G7 countries. They were at 22% when we took power six years ago. That’s a concrete way to leave resources in the hands of the private sector.

We need more free trade. That’s also smaller government. It means smaller tariffs, smaller quotas, less regulation, fewer obstacles, for businesses and consumers.

Our government has announced free trade agreements with nine countries. We are still negotiating with several other countries. We hope soon to be able to announce a very important agreement with the European Union.

We need less regulation on businesses. Unnecessary red tape is a hidden tax on entrepreneurs and weighs heaviest on those least able to bear it: small business owners. Unnecessary red tape stifles economic growth and job creation, reduces productivity and can crush the entrepreneurial spirit of Canadians. As minister for Small Business, this is one of my main preoccupations.

Last January, I unveiled the Report of the Commission to reduce Red Tape. It contained 105 recommendations to get rid of regulatory irritants and to prevent red tape from growing again. Several have already been implemented. That’s a concrete way to free the private sector.

Finally, if government is really going to get smaller, that means it needs fewer people to manage it. The Economic Action Plan 2012 stated that, in total, federal employment would be reduced by about 19,200 positions over a three-year-period.

The federal public service has stopped growing after considerable growth since 1999. Between March 31, 2010 and March 31, 2012, the population of the federal public service decreased by 4,863 employees (from 282,955 to 278,092). In proportion to the Canadian population, the size of the federal public service has decreased from 1 percent in 1983 to 0.82 percent in 2011.

WE NEED TO DO MORE

I think this should only be a beginning. We need to do more, a lot more, to streamline government.

A bigger government means a government that taxes more, spends more, gets deeper into debt, and regulates more. It’s a government which intervenes in all aspects of our lives, all the while curtailing our freedom to act.

You can barely do anything nowadays without having to ask a bureaucrat for some permission. You want to row a rowboat? Better be patient while you try to obtain all the necessary authorisations and learn all the rules that apply. Although there may be thousands of pages of obscure regulation or anything and everything, you won’t be able to claim that you did not know them before a judge if you are caught violating one of them. Ignorance of the law is no defence.

Governments too often treat us like irresponsible children and act as if they know better than we do what is good for us. From their perspective, this justifies all the measures they adopt to hold our hands, from the cradle to the grave and tell us what to do. And also to pick our pockets.

Governments are trying to control everything we do to protect us from all the imaginable dangers and risks of life. But who will protect us against governments?

CONCLUSION

I believe we are at the end of a cycle of government growth that began a century ago. The current crisis has shown that more government spending is not a solution. Government spending doesn’t create wealth. By taxing or borrowing government takes resources from some and give them to others.

It is like taking a bucket of water in the deep end of a swimming pool and emptying it in the shallow end. More government spending will act as an economic sedative rather than an economic stimulus.

We have to become not only better managers of government; we have to become better managers of a smaller government.

We need to rediscover the beauty of a smaller government with more freedom and responsible citizens. That is what made Canada a great country, what made us free and prosperous in the first place.

Thank you.

Published on May 11, 2016

This is the text of the speech I delivered this morning in Montreal before an audience of the Regroupement des jeunes chambres de commerce du Québec. 

How to reclaim our place within Canada

Maxime Bernier, MP for Beauce

20 May 2014

As was probably the case for many of you, when I reflected on the results of Quebec’s April 7 election, I got the sense that Quebec had reached a turning point in its history. Following a campaign haunted by the spectre of another referendum, the Parti québécois suffered its worst defeat since 1970 and the two federalist parties took home two thirds of the vote. Once again, Quebecers clearly rejected separation and embraced a stable future within the Canadian confederation.

Since the election, the media has devoted a lot of space to the uncertain future of the Parti québécois, and how it might bring young people back into the fold. But given the election results, there is a much more pressing and relevant matter to address, one that has received hardly any attention: How are we, as Quebecers, going to reclaim our place in Canada?

imagescae34dm8 Obviously, this question matters deeply to me, as a federal politician from Quebec. But I am here today, not as a member of the Canadian government, but as a Quebecer wondering what we can do to move our society forward.
The sovereignty issue has monopolized political debate in Quebec for decades. It’s a legitimate debate, but it’s one that just keeps going around in circles.

In the meantime, Quebec must continue to develop. We have serious problems that need fixing. Our public finances are in a sorry state. Ours is one of the most heavily taxed regions in North America, and one of the least wealthy. We need to make massive investments in our crumbling infrastructure. And as our population is aging quickly, we have particular challenges to face when it comes to integrating immigrants and keeping our social programs solvent.

If we are to meet these challenges, we need governments, both in Quebec City and in Ottawa, that are focused on the real issues at hand, not on identity crises, referendum dilemmas and constitutional debates that create uncertainty. What we needs is stability, and not just for the next four years, but for the long term.

As I see it, that stability hinges on three major changes in attitude, all of which are related to Quebec reclaiming its place in Canada.

First of all, we must come to terms with who and what we are, we Quebecers.

Throughout the election campaign, Parti québécois politicians kept repeating that we need to defend our identity and values. And they did this by playing on the fear of the other: fear of immigrants, fear of anglophones, and fear of the rest of Canada.

The truth is, they refuse to accept what Quebec is today. They have always been obsessed with changing it. They aren’t interested in defending OUR identity and OUR values. They want to defend THEIR very narrow view of what our identity and values SHOULD be.

Quebecers make up a nation, and our government has formally recognized that. This nation, however, is a pluralistic one.

To me, accepting Quebec’s diversity and pluralism means recognizing that many identities coexist in Quebec and that each of them is legitimate. Those who identify themselves as francophone Quebecers are not the only “real” Quebecers.

This may seem obvious and straightforward to many of you. I don’t believe that it is obvious at all. For the past fifty years, a nationalist elite has been trying to delegitimize any identity that deviates from a narrowly defined Québécois identity.

In particular, politically correct nationalist rhetoric demands that Quebec be referred to as a solely francophone society, where French is the only language that defines our identity. But this is simply not true.

English isn’t a language spoken by some foreign minority that has to be tolerated because we respect basic human rights. A large English-speaking population has been living in Quebec for a very long time. Unless you believe that only the descendants of French settlers are “real” Quebecers, the undeniable reality is that English has been a part of Quebec’s identity for some 250 years.

Can we not just clearly acknowledge this once and for all? Acknowledge that English is a part of us, a part of our history, a part of our culture and a part of our identity. Acknowledge that English isn’t some foreign language but is one of Quebec’s languages. And consequently, give up the endless battle to restrict its use and its legitimacy through coercive policies.

This doesn’t mean ignoring that French is central to our identity or that without it, Quebec would not exist. Nor does it mean we shouldn’t remain vigilant when it comes to protecting and promoting French, which will always be a minority language in North America. But it would allow us to come to terms with a part of ourselves and put an end to a lot of pointless conflict and animosity between the communities that make up Quebec.

We can lament the defeat at the Plains of Abraham and the British conquest all we want, but at some point, we’re going to have to accept the fact that it happened over 250 years ago, and that Quebec came to be what it is today over the course of those 250 years. Quebec is not some version of New France corrupted by the Anglo‑Canadian presence that needs to be restored to its former purity.

In addition to our French heritage shaping who we are, so too did the English language, and so too did British and Canadian institutions and symbols. Our identity includes all of this. Just like the French fact is part of the identity of all Canadians.

Quebecers have chosen to remain a part of Canada. We should draw the obvious conclusions from this. And that begins with accepting the parts of our history and identity that connect us to Canada.

It’s time to challenge the narrow definition of our identity that the nationalist elite want to impose upon us. It’s time to start looking at other Canadians as fellow citizens and as partners.

The second major change in attitude that I see as necessary if we are to reclaim our place within Canada involves the benefits of federalism.

In the 1970s, Robert Bourassa coined the term “profitable federalism” to counter separatist rhetoric. This was a very poor way of defending the merits of federalism. In the mind of many a Quebecer, the more money we extract from the rest of Canada, the more profitable federalism is deemed to be.

Federalist and separatist Quebec governments have both used the threat of separation to go and get more money. Do you remember the Bélanger‑Campeau commission? The whole debate on the supposed fiscal imbalance? It’s always the same story, the same policy of begging for scraps. Even when Ottawa sends more money, the reaction in Quebec City is that it’s never enough. We always want more, and if we don’t get it, well, then there’s the proof that federalism is not profitable.

This year, Quebec will receive $9.3 billion in equalization payments. This represents more than half of the $16.7 billion in the whole program. This money comes from richer provinces like Alberta, British Columbia and Saskatchewan.

It is true that other provinces, like Manitoba and the three Maritime provinces, collect even more equalization money per capita than Quebec, making them even more dependent on Ottawa. But that’s no excuse. As a Quebecer, I’m not very proud of the fact that ours is a poor province that receives equalization money.

And it’s not the rest of Canada’s fault that we are a poorer province, as the separatists would have us believe. It should be pretty obvious that unrestrained state intervention doesn’t lead to prosperity. If it did, Quebec would be the richest place in North America instead of one of the poorest.

If we are poorer, it’s because of bad economic policies that make Quebec’s economy less productive. It’s because the first reflex of much of our political class has been to keep begging Ottawa for more money instead of making the decisions that need to be made to fix our problems.

We need to stop looking at our membership in this country in such a selfish way, solely in terms of its financial benefit for us. Asserting our place in Canada means committing to responsible cooperation with our Canadian partners so that the country can function more effectively for EVERY region and EVERY Canadian.

Finally, the third major change in attitude I see as being crucial concerns the reform of federalism.

It’s been a truism for more than a generation that there is only one constitutional position that could rally the vast majority of Quebecers: a more autonomous Quebec within a united Canada. Federalism at its most decentralized while respecting provincial areas of jurisdiction.

But this autonomist position has always been poorly defended. This is because every Quebec government for the last 50 years has undermined it by constantly making unrealistic demands.

Put yourself in the shoes of Canadians in other provinces. For 50 years, they’ve been on the receiving end of two types of demands from Quebecers. On the one hand, there have been the separatists who want to separate but while remaining associated with Canada, sharing a currency, passports and so forth. In short, they wanted all the benefits of belonging to Canada while still being independent.

On the other hand, the federalists have kept demanding special privileges. Their message to the rest of the country has basically been: Quebec is the only special province, and we deserve more powers and influence than the rest of you.

Among other things, we’ve asked our Canadian partners to recognize Quebec as a distinct society and to use that distinction in interpreting the Constitution. We’ve asked for more representatives in Parliament than our population would justify. We’ve asked for the only veto power over constitutional changes. And we’ve asked for all of this while holding a knife to their throats: Say yes or we’ll separate. Every party has engaged in this game of one‑upmanship.

No one in the rest of Canada, nor in Quebec for that matter, wants to reopen the Constitution right now. If we truly want to achieve a more autonomous and prosperous Quebec, we must change our approach completely. And, in fact, there is absolutely no need to amend the Constitution in order to reform federalism; we just need to respect it. Respect the intention of the Fathers of Confederation who wanted a decentralized federation with provinces enjoying autonomy in their jurisdictions.

Imagine the sway and political influence Quebecers would carry if they rallied behind this vision of autonomy, one supported by a large majority. Imagine how much sway and political influence Quebecers would wield if they joined forces with other like‑minded Canadians who also want to live in a more decentralized Canada with less state control.

In the 1990s, the Reform Party, one of the two parties responsible for making the Conservative Party of Canada what it is today, put forward a vision of federalism that was quite decentralized. So it is with good reason that I support a similar vision as part of the Conservative Party.

What’s more, Quebecers need to take their rightful place in federal political parties if they wish to advance their interests and their vision of the country.

The Liberal Party of Canada has for decades been the party of centralization and of interference in areas of provincial jurisdiction. Now again, its leader Justin Trudeau is proposing that the federal government interfere in the area of education, an exclusively provincial area of jurisdiction according to our Constitution.

The NDP is a socialist party that wants to centralize everything so it can intervene everywhere. It is not at all in the interests of Quebecers to have a large, interventionist government in Ottawa limiting our individual freedom, because this will make us, and all Canadians, poorer.

We, the Conservatives, have a different vision to offer: that of a more modest, less interventionist government in Ottawa, a government that respects provincial autonomy. The Conservative Party of Canada is the natural vehicle for advancing the vision of federalism that is most widely embraced in Quebec.

For half a century, the political history of Quebec in Canada has amounted to a series of constitutional failures and failed referendums. One of the biggest reasons for these failures, in my view, has been an unhealthy and unrealistic attitude. We need to change our attitude.

We have chosen to remain Canadians, so let’s reassert our place within Canada!

• Let’s come to terms with our history and our pluralistic identity;
• Let’s stop begging Ottawa for help and instead solve our problems ourselves;
• Let’s forge alliances with other Canadians who want decentralized federalism;
• Let’s reclaim our place within Canada so that Quebec can thrive and prosper within the Canadian confederation.

Thank you.

Published on May 11, 2016

The Huffington Post Canada and the Huffington Post Québec ran the English and French versions of my article this week on Justin Trudeau’s absurd declarations about the economy these past several months. The English version is reproduced below.
Also, I was in Calgary this week and gave an interview to Licia Corbella, the Calgary Herald‘s editorial page editor. You can read her excellent article here.

–MB

If Trudeau Can’t Define the Middle Class, How Can He Work For Them?

Maxime Bernier, Minister of State for Small Business, Tourism and Agriculture

April 10, 2014

Should we trust a political leader who does not understand basic economic notions? This question is becoming more and more relevant as the leader of the Liberal Party of Canada, Justin Trudeau, keeps making absurd statements about the economy.

One of his key promises is that he won’t raise taxes on the middle class. Who exactly is the Liberal leader talking about? Last week, he gave us several strange and contradictory definitions of who he believes the middle class is composed of.

He started by saying that they are “people who work for their income, not people who live off their assets and their savings.” As several commentators noted, this absurd definition would include millionaire bank CEOs who work for their income, but not retired Canadians. All economists agree on a definition of the middle class based on total household income and not based on the source of income.

He came back with another definition a couple of days later, as absurd as the first one: they are “people who live paycheque to paycheque.” Does that mean that Canadians who manage to put some money aside are not part of the middle class?

Mr. Trudeau seems to have a pretty blurred view of the life of ordinary middle class Canadians. He already has a track record when it comes to saying weird things about the middle class. In October 2012, when he was running for the leadership of his party, he stated that the existence of a middle class was what brought about economic growth. Really?

“The great economic success stories of the recent past are really stories of middle class growth. (…) China, India, South Korea and Brazil, to name a few, are growing rapidly because they have added hundreds of millions of people to the global middle class.”

Justin Trudeau confuses cause and effect in terms of economic development. It is not because their middle classes have grown that China and India have become economic successes. It is rather because these countries have abandoned their socialist and interventionist policies and have liberalized their economies that they have experienced strong economic growth. It was then and only then, that millions of their citizens left the condition of extreme poverty they were in and were able to reach a standard of living which is that of the middle class.

Again, earlier this year, we were treated to another one of Mr. Trudeau’s absurd statements about the economy. In a video, he explained that since households and provincial governments in Canada are heavily indebted, while the federal government has considerably lowered its debt level since the 1990s, Ottawa is the only entity that “has room” to rack up more debt. It should therefore “step up” and spend more to stimulate the economy.

Can we imagine a more absurd economic policy? This is like the guy with a lot of consumer debt who checks the invoices of his three credit cards and thinks: I have reached my limit on these two, but I still have some credit left on this other one. The best way to get richer is to max this one out too. Let’s go shopping! Mr. Trudeau seems to forget that it’s the same taxpayer who will have to pay back the debts of both levels of government as well as his own.

He also seems not to understand that government spending does not create wealth and that to stimulate the economy sustainably, we must do the opposite. That is, curtail public spending and put in place the best possible conditions to allow the private sector to become more productive. We can do this by cutting taxes, reducing the burden of regulation and promoting free-trade.

The Liberal leader uttered another economic absurdity when he reacted to our government’s budget a couple of weeks ago. According to him, there is no need to worry about the deficit. We should rather aim at stimulating the economy and “the budget will balance itself.”

For Mr. Trudeau, the more a government spends, the more it stimulates the economy, the more its revenues will grow, and the less we need to worry about the deficit. One has to wonder why the deficit and debt exploded in the 1970s, when Justin Trudeau’s father implemented this type of irresponsible economic policy. Perhaps he wasn’t spending enough?

There’s not much harm in it as long as Mr. Trudeau cannot act on his absurd beliefs. But if the Liberal Party of Canada ever comes to power again, these ideas could become a threat to Canadians’ economic security. Can we afford to take such a risk?

Published on May 11, 2016

As I noted a year and a half ago already, Justin Trudeau doesn’t understand much about economics. And this is still the case today, as he tries to justify getting us back into deficits and piling up more debt.

The National Post and the Huffington Post Québec ran my article today on the economic proposals of the Liberals following their national convention in Montreal. Here is the English version.

More Liberal debt is not the road to growth

February 25, 2014

Maxime Bernier is the Minister of State for Small Business, Tourism and Agriculture

Now that its Montreal convention is over, we know a little bit more about the Liberal party’s economic platform. One of its central planks is that budget deficits are a good way to grow the economy, and that we should not be afraid to go further into debt.

In a recent video posted on the Internet, Liberal leader Justin Trudeau explains that Canadian households are heavily indebted, just like provincial governments, while the federal government has considerably lowered its debt level compared with other developed countries since the 1990s. His conclusion: Ottawa is the only entity with the ability to spend money and rack up more debt. It, therefore, has to “step up” and do the spending that others are not able to do.

At last weekend’s convention, Liberal delegates heard Larry Summers, an American economist, explain why we need “unconventional support policies” — economic jargon for “spending without restraint.” According to him, accumulating more debt is OK when it serves to stimulate the economy.

Are we in a recession? Does the current situation justify sending our public finances back into the red?

One could almost believe we’re back in the 1970s, when the federal debt, which until then was relatively modest, exploded as Justin Trudeau’s father launched one new program after another, most of the time by intervening in provincial jurisdictions. We saw where that led us in terms of public finance, but also with regard to federal-provincial relations.

Delegates at the Liberal convention discussed a whole set of “national strategies” on issues ranging from transportation to energy, mental health, children, water, pharmacare, youth jobs and science. This is the type of big spending, interventionist and centralizing federal government that Justin Trudeau is once again proposing.

They may claim they intend to remain fiscally responsible, but Liberals are actually going down a very slippery slope, as they adopt these kinds of policies.

The burden of debt diminished considerably during the first three years of the Conservative government — from 34% to 28% of GDP. It has gone back to 33% in the past couple of years due to measures taken to deal with the financial crisis. Our projections show that it should be scaled back to 25% of GDP by 2021.

This debt is not something abstract. Servicing the debt costs taxpayers about $30-billion a year. This is as much money as the GST brings into government coffers. The more we cut down the size of the debt, the fewer resources we will need to pay the interest and the more we will be able to afford to cut taxes.

Justin Trudeau and his American adviser still believe in the old Keynesian theory that says government can create wealth by spending more money.

In reality, every time the government takes an additional dollar in taxes out of someone’s pocket, it’s a dollar that person will not be able to spend or invest. When government spending goes up, private spending goes down. There is no net effect. No wealth creation.

Government borrowing has the same effect. The private lenders who lend money to the government will have less money to lend to private businesses. When government borrowing and spending go up, private borrowing and spending go down. There is no net effect. No wealth creation.

It is like taking a bucket of water in the deep end of a swimming pool and emptying it in the shallow end.

It’s these kind of policies that ruined our economy in the 1970s. This is not what Canada needs today.

To stimulate the economy, we need to give entrepreneurs the means to create wealth. We need to put in place the best possible conditions to allow the private sector to become more productive: by curtailing public spending, cutting taxes and signing free-trade agreements. Growth and progress depend on more economic freedom.

Published on May 11, 2016

Last week, I attended the Manning Networking Conference in Ottawa. I had the pleasure to meet one of the greatest defenders of freedom and small government in the world, former Congressman Ron Paul, who gave the keynote speech. I also made a presentation on how to attract new supporters to the Conservative Party at one of the panels with my colleague Jason Kenney (photo: Jake Wright). The text of my speech is reproduced below.

Manning Networking Conference 2013

8 March 2013, Ottawa

We are discussing today on this panel if the federal Conservative Party has reached a high water mark. I hope not. Because if that’s the case, there won’t be any Conservative left in Quebec when we hit the low water mark! I mean, outside of my riding of Beauce, of course! 

So, to answer the question, how can we continue to attract new supporters?

In conventional politics, the way to get more supporters is usually to reach for the center. If you are on the right for example, all voters who share right-wing beliefs and ideas are assumed to support you already. So if you want to get more support, you make proposals that are a bit more to the left. You do the opposite if you are a left-wing party.

That may be a winning strategy to some extent, in some circumstances. If we’re talking about social or moral issues, or foreign policy for example. It’s obvious that we need to be sensitive to the majority’s opinion and to reach for a broader consensus on such issues.

But when it comes to economic issues, I don’t buy that. I think being more conservative on economic issues is the way to make our economy more dynamic, our country more prosperous, and ultimately to increase our support among voters.
There are only two directions we can take on this issue. Either we create new programs, increase spending and increase taxes – in short, increase the size of government. Or we do the opposite and reduce the size of government.

The evolution of government size

All over the world during the 20th century, the scope, size and powers of government have grown tremendously.

Take for example public spending as a proportion of gross domestic product, that is, the portion of the overall economy controlled by governments. In the principal countries of the western world, it has gone from around 10% a century ago to beyond 40% today.

In Canada, public spending peaked at 53% of GDP in the early 1990s, which put us in the same league as socialist countries like France and the Scandinavian countries. Fortunately, we reversed this trend in the past two decades. Public spending had gone down to 40% of GDP by 2008.

This is the main reason, I think, why Canada has been one of the top performers among industrialized countries since that time. And why we got through the recent crisis better than the others.

During the crisis however, government started growing again. If we take only federal program spending as a proportion of GDP, it went from 13% in 2006 to 16% in 2009. Since then, it has slowly been going down. If everything goes according to plan, we should be back at 13% in 2016.

Note that this is not because spending is going down. Our government has made spending cuts, but overall, total program spending is actually going to increase in the coming years. It is simply increasing less rapidly than the economy, which is why it is going down relative to the economy.

I believe we should be bolder. We should be more conservative. We should stop growing the size of government in real terms. Government is big enough already.

The benefits of smaller government

If we look at the available data, the evidence is quite clear that there are only benefits to having smaller government.

Most of you have probably heard about the Fraser Institute’s Economic Freedom of the World annual report. It looks at more than 20 components of economic freedom. Not only the size of government but also other components such as enforcement of property rights and freedom to trade.

Countries in the top quartile of economic freedom had an average per-capita GDP of $38,000 in 2010, compared to $5,000 for bottom quartile countries.

The poorest 10% of people in the most economically free countries are twice as rich as the people in the least free countries. The poor also benefit from smaller government and economic freedom.

Life expectancy is 80 years in the top quartile compared to 62 years in the bottom quartile. And political and civil liberties are considerably higher in economically free nations than in unfree nations.

The logic underlying the benefits of small government is the following. Governments can only spend what they have taken out of the real economy. A government has nothing to give anybody except what it first takes from somebody. A government cannot inject resources into the economy unless it has first extracted them from taxpayers through taxes or put us further into debt by borrowing the money.

Government spending always competes with private sector spending for scarce resources. Moreover, bureaucracies use resources less efficiently than private businesses, which have to remain competitive to be profitable and survive. When you divert resources from the more productive uses that they can find in the private sector to less productive uses in the public sector, you will see less growth.

A proposal from Beauce

What should we, as conservatives, do to reverse this trend? One way to change the terms of the debate would be to announce that the government is not going to grow anymore.

In January, the convention of the Quebec wing of the Conservative Party of Canada was held in Victoriaville. It adopted resolutions from local associations in preparation for the national convention next June in Calgary.

Among the resolutions adopted was one put forward by the association of my riding of Beauce. The resolution proposes to freeze government spending at 300 billion dollars from the moment when the budget is balanced in 2015-2016 and for the four subsequent years.

Of course, I gave my support to this resolution from the members of my riding and I hope it will become official party policy at the national convention next June. It is similar to a Zero Budget Growth proposal I made in a speech three years ago.

The idea is that given economic growth and inflation, a freeze in current dollar spending would have the effect of reducing both the spending to GDP ratio and real spending in constant dollar amounts.

The meaning of Zero Budget Growth

Think about what a frozen budget would mean. From that moment on, any government decision has to be taken within this budgetary constraint. Every new government program, or increase in an existing program, has to be balanced by a decrease somewhere else.

It means that we no longer have debates about how much more generous the government can be with this or that group, as if the money belonged to the government instead of taxpayers.

The focus of the debate is shifting to a determination of priorities: what are the most important tasks for government to achieve with the money we have? Is this government function really important and should we have more of it? Then what should we do less or stop doing and leave in the hands of the free market, voluntary organisations and individual citizens?

That would be quite a change, don’t you think? A commitment to Zero Budget Growth could become a powerful symbol of fiscal conservatism. But the consequences would be much deeper.

It would mean that every year, the relative size of government would be smaller. It would mean more prosperity through less government. It would force politicians, bureaucrats, lobbyists and everybody else to stop thinking that your salaries are just there to grab for their own benefit. And because of the budgetary constraints, Canadians would have a lot more confidence that we’re not wasting their money.

There is a large constituency for these small-government principles. Many people who don’t necessarily consider themselves conservative and who don’t vote for us are fed up with government overspending. They want to pay fewer taxes and they want their children to be debt free.

I believe that would be popular in Quebec too. There is a large proportion of Quebecers who believe that the federal government is too big and intervenes too much in too many areas. It may be for fiscal conservative reasons or for nationalist reasons but they want a small government in Ottawa.

We have to convince people that we’re not simply aiming to be better managers of a bigger government; we are aiming to be better managers of a smaller government. Being more fiscally conservative and defending the principles of individual freedom, personal responsibility and smaller government is the way to get their support.

Because Canadians want lower taxes to keep their money in their pockets. Because Canadians want to be able to go as far as their talents, ambitions, creativity and industry can take them. Because ultimately, Canadians support economic freedom and a free society. In other words, limiting government is a lofty endeavor. It is a powerful message that will give us more supporters.

If we do this, and if we ensure that Canada becomes an even more prosperous country, I can tell you that the Conservative Party will reach an even higher water mark! Thank you.

Published on May 11, 2016

Speech at Conservative Party of Quebec convention: Let’s end business subsidies

Maxime Bernier

Quebec City, November 14, 2015

Dear Quebec Conservative friends,

It gives me great pleasure to be with other Conservatives here in Quebec City, in the most Conservative region in all of Quebec!

As a Member of Parliament, I of course do not get involved in provincial politics. I also know that there are people who share our principles in other provincial parties.

But all those who want to get involved in a true Conservative party, a party that does not defend conservative principles only half of the time or a quarter of the time, but all of the time, are here today, with the Conservative Party of Quebec.

I know your leader very well. Adrien and I were both involved with the Montreal Economic Institute. Adrien is someone who truly understands conservative principles, someone who is not afraid to defend them openly.

After half a century during which the Quebec government experienced continual growth, half a century during which Quebec was the Canadian champion of economic intervention, the champion of debt accumulation, the champion of costly and overly bureaucratic programmes, the champion of high taxes, it is now more crucial than ever to have another voice. A consistent, confident, full-time conservative voice.

What do we mean exactly when we talk about conservative principles, the principles that differentiate us from our political opponents? We are speaking first and foremost of freedom. Freedom is the fundamental value that brings us together here today. Freedom is nothing less than the foundation of our civilization. It is our duty to explain to everyone how freedom is important, so that we can live in a society that is even freer and more prosperous. A society that is tolerant and open to the world.

For our political opponents, the solution to the challenges faced by society is always about increasing government intervention, and never about increasing individual freedom.

Former US president Ronald Reagan explained it best when he said that these people tend to see the government’s role in three steps: if it moves, tax it; if it keeps moving, regulate it; and if it stops moving, subsidize it!

For us conservatives, on the contrary, government should ideally set up and enforce the basic rules of life in society. And then, leave individuals free to cooperate among themselves to provide for their wants. Government should not intervene to solve each and every problem on the road to a utopian and unrealistic vision of society.

To paraphrase John F. Kennedy, from a conservative perspective, don’t ask what your government can do for you; ask your government to get out of the way, so that you can be free to take responsibility for yourself, for your family, and for everyone else that you care about.

Unfortunately, over the past hundred years, government has grown to gigantic proportions. And not only in Quebec, but everywhere in the Western world. It intervenes in almost every aspect of our lives. It makes us dependent and irresponsible by taking care of us from the cradle to the grave. And it tries to plan economic development.

To fund all these interventions and costly government programmes, we got to a situation where every child that is born is already burdened with tens of thousands of dollars in debt. And if you take all levels of government into account, about half the wages of working people in this country goes to fund all this.

How did this happen? Economists and political scientists of the so-called “School of Public Choice” have tried to explain this dynamic. Their research shows how particular groups have a strong interest in getting organized to put pressure on politicians. These special interest groups want subsidies, trade protection, more generous social programs, a fiscal or legal privilege, regulation that favours them and keeps out competition. Any favour they get from the government can potentially bring them huge benefits.

It’s very hard for politicians to say no to these lobbies because they have the means to hijack debates, quickly mobilize support and fuel controversies in the media. On the other hand, nobody hears what the silent majority have to say, even if it is the one paying the bill.

So, there is a fundamental imbalance in political debates. On one side, you have concentrated benefits to special interest groups who have a strong incentive to do their lobbying; on the other side, you have dispersed costs that fall on society at large.

That’s how government grows and grows. That’s how we become less and less free. And more and more dependent on government.

We, Conservatives, have to give voice to this silent majority, the one paying the bill, as we defend our principles and values.

We’ve had a good example of this kind of detrimental intervention these past few days when the government of Quebec provided a single business, Bombardier, with 1.3 billion dollars in aid. Talk about a concentrated benefit!

You can be proud of your leader, Adrien, who has defended our principles and values with passion and with conviction and who was not afraid to go against the current by categorically opposing this government handout.

Among the many arguments we have heard in favour of this type of intervention, there is the argument that Bombardier is too big to let it fail. Meanwhile, there are thousands of small and medium-sized enterprises that declare bankruptcy every year, causing far more significant job losses. But those don’t have a strong enough voice to get the government’s attention.

Those who claim that this intervention saves jobs do not understand that the government is destroying as many, if not more jobs, elsewhere in the economy by transferring resources from other sectors to Bombardier. Moreover, there is no guarantee that CSeries aircraft jobs will be maintained in the long term.

By subsidizing Bombardier over and over again for decades, governments have created a company that takes too many risks, that gets involved in more projects than it is able to handle. Why not instead let the market operate as it is supposed to, let other investors and other businesses take control of Bombardier and manage it more carefully by generating wealth, instead of wasting resources?

There is also the argument that our aircraft manufacturer must be subsidized because the Americans, the Brazilians and the Europeans are doing so. But if we have to squander billions of dollars in sectors that our competitors subsidize, it will never end. They have ten times more resources than we do. Why not instead reduce taxes and provide a more favourable business environment? All businesses would benefit, not just the biggest ones or those with the best connections in government circles. They would, as a result, become more competitive, generate more wealth and long-term jobs, and our standard of living would increase.

Quebec’s minister of Economic Development, Jacques Daoust, has invited the new federal government to offer aid like it did to Bombardier. As a Quebec taxpayer, I don’t like to see my government in Quebec City waste my tax money. But it would be even more pernicious for Ottawa to follow suit.

Mr. Daoust justifies his request by saying that the federal government intervened in order to save Ontario’s auto industry. It’s always the same argument from those who see the federal government as a cash cow, wherever they may be in the country: Ontario received this investment, Newfoundland benefited from this programme, Quebec received this amount, that industry was favoured over another. So I deserve it too!

Everyone wants a portion of the big pot of government money. Since governments have spent money carelessly for decades, it is impossible to refute this argument. To give each region the impression of fairness and to buy peace, Ottawa gives in to the pressure and continues to distribute funds that it simply does not have.

This never-ending cycle of subsidies distribution has contributed to the rapid growth of the federal government. Our Conservative government did this as well during the past nine years, even if I would have preferred a different policy.

We must put an end to this dynamic. There is another, simple way for the federal government to show fairness to all regions of the country, to industries, to businesses, as well as to taxpayers: It is to completely stop subsidizing businesses and to reduce their taxes. This is not only a fair solution, but one that is economically efficient. It is a solution that emphasizes the rigorous management of public finances, the accountability of business players and the discipline of the free market. It is the only coherent conservative solution that respects our values of freedom and responsibility.

It is this solution that I will defend in Ottawa. And I hope that the next Conservative government will adopt it once elected in Ottawa or… in Quebec City!

Best success with your convention! Thank you.