The bottom line is our economy is in significant trouble, largely as a result of bad government policy at the federal level. Photo Credit: Adrian Wyld/The Canadian Press.
As much as it may seem otherwise, economists don’t really take any pleasure in delivering bad economic news. That being said, individuals, families and businesses need to know what’s going on so they can prepare accordingly. It won’t come as a surprise to any Canadian reading the financial pages these days or checking the contents of their wallet, but things are not looking great these days for the Canadian economy. The latest data to bear this out are the bankruptcy statistics published recently for January 2024.
The bad news is that business insolvencies more than doubled in January relative to numbers from last year. They also exceeded the number of bankruptcies registered prior to the pandemic. There was a total of 759 bankruptcies in January, which was more than a 42 per cent increase relative to December 2023 and almost 130 per cent more than January 2023. The impact of the pandemic, plus bad government policies, is clearly coming home to roost in a big way.
One of the factors that surely contributed to this terrible result was the decision on the part of the federal government to not extend the repayment period for businesses that had taken advantage of the Canada Emergency Business Account (CEBA) loan program during the pandemic. Fully 900,000 businesses and not-for-profit organizations had taken out CEBA loans, which represents the majority of businesses in Canada. Most of these would have been small- and medium-sized businesses.
The CEBA rules were that one third of the loan amount would be completely forgiven if the other two-thirds were repaid by Jan. 18, 2024. If the two-thirds were not repaid, the debt amount would become a loan for three years at five per cent interest. Businesses had been asking for an extension of this repayment period until the end of 2024 – not an outrageous ask considering that many of the problems small businesses faced were a result of government policies that demanded small firms be shut down during the pandemic while big box retailers were allowed to remain open. This was a nonsensical policy that did nothing to limit the spread of Covid but badly damaged small businesses.
An extension of CEBA until the end of 2024 was estimated to have “cost” the federal government about $900 million. Considering that governments have been perfectly fine spending tens of billions of our tax dollars on such questionable items as a handful of electric vehicle battery plants, it should have been a no-brainer to extend the CEBA program by a few months to help many thousands of small businesses. However, this Trudeau Liberal government has consistently implemented policies that hurt the small business sector, so perhaps their foolish CEBA decision should not have come as a surprise.
Another factor to keep in mind is that for every business bankruptcy that shows up in the statistics, there are likely several businesses which quietly close their doors without owing creditors or employees any money, don’t show up in the bankruptcy statistics but still have a significant impact on the economy. In Canada, small- and medium-sized businesses account for about half of Gross Domestic Product, half of total employment and about 75 per cent of net new job creation, so the health of the sector greatly affects the economy overall.
In January, the largest increases in bankruptcies took place in restaurants, accommodation, retail businesses and construction. The expected tax increase on beer, wine and spirits on April 1 will be yet another problem that the struggling hospitality sector will have to deal with. Despite its rhetoric to the contrary, this Liberal federal government has been anything but a friend to the important small business community.
Although many people seem to think Conservative governments represent the large corporate sector, the reality is that Liberal governments are much more in sync with the large corporate crony capitalists who cash in on government subsidies and tax breaks, while Conservative governments are more likely to implement tax and regulatory changes that benefit the small business community.
Unfortunately, the recent bankruptcy data just underscores the serious difficulties faced by the Canadian economy. Although the Liberal government tries to pretend that our problems are global in nature and that all countries are dealing with similar issues, that is simply false. Global issues do have an impact, but Canada’s major problems with housing shortages, out-of-control immigration, rising crime, inflation, tent cities (now called “Trudeau Towns”), rampant drug abuse and the ridiculous pro-Hamas demonstrations in our major cities are all products of bad policy on the part of the federal government.
Another significant factor is the failure of the so-called mainstream media to do its job and properly inform citizens as to what is really going on. It’s interesting to think back to the Harper era, where something like a $16 orange juice led to the resignation of a cabinet minister as media ensured such a story was in the headlines daily. Considering how the big-spending Trudeau gang loves to enjoy pricey hotels, meals and junkets on the taxpayer dime, why have we not heard about $25 orange juices or similar from the media? Such stories surely exist.
Could it be the hundreds of millions of dollars of our tax money that much of the media has enjoyed as a bribe? Considering the many colossal failures of the Trudeau government, most recently underlined by the ArriveCAN fiasco, it is outrageous that we can’t count on so much of our media to tell the truth to Canadians.
The bottom line is our economy is in significant trouble, largely as a result of bad government policy at the federal level. Most Canadian economists don’t expect things to improve much in the near future. Even the normally staid bank economists have been speaking out in recent months about the dire state of our economy. It may have taken a while, but the polls suggest that Canadians are finally wising up to reality and the fact that many of our problems are of our own making. It’s about time.
She has published numerous articles in journals, magazines & other media on issues such as free trade, finance, entrepreneurship & women business owners. Ms. Swift is a past President of the Empire Club of Canada, a former Director of the CD Howe Institute, the Canadian Youth Business Foundation, SOS Children’s Villages, past President of the International Small Business Congress and current Director of the Fraser Institute. She was cited in 2003 & 2012 as one of the most powerful women in Canada by the Women’s Executive Network & is a recipient of the Queen’s Silver & Gold Jubilee medals.
