The Prime Minister may have made a mistake when he focused on social policies over economic ones in his first term, according to economist David Rosenberg.
Mr. Rosenberg, the chief economist & strategist at Gluskin Sheff + Associates Inc, has said the government’s spending plan provided a one-sided GDP boost in the short term, but will not be useful in the long run.
“The first move to play Robin Hood by raising top marginal income tax rates in the personal sector was a huge mistake … this is a government that got elected on social policies as opposed to economic growth policies,” Rosenberg said.
Multiple economists have urged the Canadian government to focus on more deeper cuts at the corporate level in order to remain competitive with the U.S. which recently announced its own corporate tax rate cut.
The federal government has defended its policy, saying fewer Canadians live in poverty and that the middle class has more money to spend.
“Middle-class Canadians can see first hand that our plan is working,” said Pierre-Olivier Herbert, a spokesman for Finance Minister Bill Morneau.
Interestingly, the Finance Minister has also refused corporate rate cuts matching the U.S., noting that that they would add billions in new debt.
While the Trudeau government has pointed to massive job gains this month as a piece of good news in a wave of problematic data, David Rosenberg has issued caution, noting that such high labour market volatility is hard to believe.
“Did you really believe that the Canadian labour market is so volatile that we could have a decline in the labour force in one month, followed by a 100,000-increase in the next month? Is our labour market more volatile than the stock market is? It’s hard to believe,” Rosenberg said in an interview with BNN Bloomberg Friday.
Rosenberg also pointed out that a large portion of the gains was in the construction industry, which would be good if the country was not battling a housing bubble in some of its largest metropolitan areas.
Perhaps most worrying though is the state of some parts of the business sector. For example, according to the Office of the Superintendent of Bankruptcy Canada, there were 32,239 consumer insolvencies in the first quarter of 2019.
What do you think about the state of Canada’s economy? Did the federal government make a mistake? Join the conversation by commenting below!