NCPA - National Center for Policy Analysis

Big Government in Canada

June 26, 2003

In nine of ten Canadian provinces, consolidated federal, provincial and local government spending is too high to be beneficial, says a new study from the Fraser Institute.

Researchers determined that the "historically optimal size of government" -- the level of government spending at which growth rates have typically been maximized -- is about 30 percent of Gross Domestic Product (GDP).

Based on this figure, researchers found:

  • Only Alberta is close to the historically optimal size of government, with total federal, provincial, and local government spending at 28.1 percent of GDP.
  • Prince Edward Island's total consolidated spending takes up two-thirds of its GDP, the highest of any province.

Researchers ranked government spending rates from lowest to highest in all of the provinces and U.S. states. Among their findings:

  • New Hampshire's government sector was the smallest, with total government spending accounting for 22.8 percent of GDP.
  • Ontario, Canada's second-ranked province, dropped to 36 place in the combined rankings.
  • The six bottom ranking positions, with the highest government spending rates, were all Canadian provinces.

Thus, Canadian provinces tend to maintain larger governments than the U.S. states, which leads to slightly lower rates of economic growth and prosperity. To counteract this economic reality, Canada needs to reduce the size of government on all levels, say the researchers.

Source: Jason Clemens and Niels Veldhuis, "The Size of Government in Canada," Fraser Forum, May 2003, Fraser Institute.

 

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