COVID-19 spending sin is not Justin Trudeau’s alone – it’s every government’s

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Jason Clemens and Jake Fuss are economists with the Fraser Institute.

An Auditor-General’s report recently cited billions in questionable spending in Ottawa’s management of handouts related to COVID-19. But while the report certainly raises questions (again) about competence, it should not mislead Canadians into believing that such failure is unique to the Trudeau government.

We’ve seen much of the same from previous administrations. This is a larger problem of systemic government failure.

This new assessment is damning indeed. Auditor-General Karen Hogan found $4.6-billion in overpayments to ineligible recipients, and recommended that the government investigate the nature of another $27.4-billion in spending. The AG also criticized Ottawa for failing to require social insurance numbers for workers in firms claiming the Canada Emergency Wage Subsidy, which means proper verification and tracking cannot be completed.

This is on top of the poorly targeted federal COVID-19 spending. Our 2020 study, for instance, examined almost $82-billion of pandemic spending and estimated that 27 per cent was poorly targeted, representing more than $22-billion in wasted taxpayer money. Coupled with the mismanagement noted by the AG, this means that Ottawa spent much more than was needed and accumulated far more debt than was necessary to stabilize the economy and help those in genuine need.

There is, therefore, a legitimate question about the government’s competence. However, to focus too much on the Trudeau administration means there is a risk that Canadians will assume these failures are simply a result of the current government’s incompetence.

Consider a 2013 study, which analyzed more than 600 instances of government failure from AG reports between 1988 and 2013, covering multiple federal governments. One example was the 2001 heating expense relief program, which aimed to provide financial assistance to low-income Canadians to offset higher energy costs using the existing GST credit system. The AG found that less than one-quarter of the $1.5-billion spent went to low-income families facing emergency heating costs, and that up to one million of the 7.6 million households that received money may have received multiple payments. Moreover, at least 4,000 Canadians living abroad, up to 1,600 prisoners and at least 7,500 dead people also received payments.

Or consider a 1998 report examining the integrity of Canada’s social insurance number system, which is the basis for government payments to individuals. The report found that more than 50 per cent of SINs had no supporting documentation, that the registry had 12 million uncertified SIN accounts and that there were 3.8 million more SINs for Canadians 20 years of age and older than there were people. The potential for fraud is obviously significant.

The reality of government is that it has many constraints and features, which means it operates differently from markets and, perhaps most importantly, differently than how many Canadians envision.

Those constrains and features include the need to be popular and win elections; competition between interest groups and their primacy in the political marketplace; the monopoly environment within which most governments operate; the lack of prices and profits as a source of information about how to best allocate limited resources; the separation of revenues (taxes) from the delivery of services; and the lack of traditional financial restraints.

All of that means governments operate uniquely in the economy. Their natural leaning toward more spending, often poorly targeted, can sometimes be a stronger force than the will and wishes of the party in power.

The sooner Canadians better understand these limitations, the sooner we can minimize waste and the effects of government failure by focusing our criticism and demands on the right areas.