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Notes -
Canada’s decline
Things are not going well in Canada. The hashtag #Canadaisbroken has been going around for a while, but the scale of the decline remains underdiscussed, especially in our media. Canada’s real GDP per capita is 2.5% lower now than it was in 2019. In the U.S. its 6.0% higher. For decades, Canada has had per capita GDP (adjusted for purchasing power) that was about 80% of the U.S. level, now its 72% and falling. Canada is rapidly becoming a European country in terms of living standards. This understates the problem because in Europe its easier to live on less: cars are not necessary in many places and, crucially, rent is much lower. Canada is in the midst of an unbelievable housing crisis. At current prices and interest rates, the ownership costs of a typical home would consume 60% of the median household's income, the highest ever recorded. I went to the U.S. southwest recently and my overriding impression is how much better off America is than Canada now.
The Liberal government’s response to this has been deficit spending. Their lack of fiscal responsibility was dramatic during Covid, but hidden under the guise of emergency they spent $200+ billion on new entitlements and spending programs which has resulted in Canada running a permanent structural budget deficit. When combined with our provinces (which unlike U.S. states are allowed to borrow) and measured as a % of GDP, the country is running Bush Jr.-tier fiscal deficits without wars. And what are these new programs? Almost all of them are means-tested benefits for behaviours progressives like. A new daycare program aimed at moms working 9-5 jobs (i.e. white collar) that does nothing for SAHMs, a dental care program which is only for families making under 90k (creating a huge marriage penalty and implicit tax rate), a carbon tax rebate which is income redistribution in disguise, replacing the modest but universal child benefit with a generous means tested one, etc. If you put it together, Canada has largely rebuilt our 1970s welfare state but will claw it back from you more than dollar for dollar as you earn more. We variously incentivize poverty and moms to work, stay unmarried and put their kids in daycare. Our taxes are high.
The other big push from our government is immigration. They occasionally frame it as a way to stop inflation, but usually they don’t defend it at all and assume the pro-immigration consensus is unshakable. The levels were shocking last year, but they keep rising. Over just the past 3 months, Canada admitted 430,000 new people. Canada now has an absolute annual level of legal immigration (including temporary migration) of about 1.2 million -- higher than the United States. We get about 500,000 traditional immigrants, but the big change from recent years is about 700,000 net “non-permanent residents” who form a new helot class. Canada now has 2.5 million temporary residents who come to study or work low-paid jobs and it has rapidly transformed the entire country. These people represent 6% of the population, but because they are highly concentrated by age, they are about 20% of adults aged 20-40. I spend time in a small town that is hundreds of kilometers from any major city and nearly every store now employs temporary foreign workers from India. Every worker at McDonalds. Every worker at Tim Hortons. They live 6+ to an apartment and have tightened the rental market pricing locals out. With population growth running at its highest ever pace, homebuilding is unchanged at about 250,000 units creating an incremental housing need of a quarter million units per year. Rent inflation is over 7% compared with approximately 0% month over month in the US.
What the past few years has made plain to me is how deep leftism runs in Canada and how dedicated it is to ignoring the effect of incentives on behaviour: We can just subsidize bad behaviour and punish good behaviour endlessly without actually changing behaviour. In many ways Canada is running on the fumes of vestigial British earnestness, politeness and self discipline which has made this work in the past, but I think we’re rapidly burning up our cultural capital and once its gone, I think we’ll tip into a much worse equilibrium. I have leftist friends whose perspective is: “sure things aren’t great, but would the conservatives do better?” which makes me sad. For most people, even smart people like my friends, seeing the bad consequences of things they support doesn’t move the needle at all in terms of their worldviews. And I didn’t get into spiraling crime and government celebration of the deracination of our traditional culture.
I think part of what is happening is Anglo culture’s seemliness has become our greatest weakness. Its unseemly to ‘punch down’ and blame an avalanche of mostly-poor international students for the rental market, or permissive and ‘anti-racist’ criminal justice policy for a huge increase in crime so we equivocate and people say things like “its so brutal, how sad” while continuing to vote in the same way. There is no transmission from failure in office to electoral results, so we end up with people like Trudeau for three terms. One astute observation I’ve heard about Canadian ‘niceness’ is that its fake: people are very cagey about saying what they think in public about anything controversial. Our entire country is a university campus. Canadians live in a world of feel good pablum as our way of life is destroyed. People rage about it, but there is no honest sensemaking apparatus in Canada – because talking about things plainly is unseemly – so rage is dissipated randomly. Even today, even after its failures, the combined polling share of the LPC-led ruling coalition (i.e. LPC+NDP) is nearly 50%.
One funny thing about the Daycare situation is that now everybody can afford to put their kids in, but there aren't enough daycares. My wife knows people who have been waitlisted for years in our small city. Of course, the proposed solution is to just import more workers to do this job nobody wants to, and also pay them more money which will increase the cost and competition for houses even further, and around and around we go.
The daycare situation is a perfect example of what is wrong with Canada. The government got involved by subsidizing demand and restricting supply, so it all became worse. When the subsidy program was created, the conditions to receive the subsidy for the daycares entailed capping employee compensation. Demand exploded because prices fell by half and then half again, but supply was constrained by labour availability so much that today there are 15% fewer daycare spots than in 2019. So it is as you say, a windfall if you get a spot, but much worse than before if you can't. Statscan had a report in 2022 which admittedly was still a Pandemic year that 8% of kids aged 0-5 were waiting for a spot to open. Thats 200,000+ kids.
Everyone knows about the crazy long waitlists, which is an obvious and inevitable consequence of capping the price, but what I haven't seen anyone talk about are the dangers of giving your children to an insitution under these conditions. There is a shortage, so the daycare doesn't have to do anything to attract customers, and so they'll have every incentive to cut costs. Is this who you want looking after your children? People who are trying to do the worst job they can legally get away with knowing that there is a long line of children to take your spot if you leave, also knowing that many of the children's parents may not be able to easily afford an alternative?
Someone should do some reading on how such things worked in the Soviet Union or in other Eastern Bloc countries. I'm sure there are horror stories and I'm sure whatever they are will be repeated here.
The fact that this was such an obvious and inevitable consequence which was a widely known side effect of the system it was directly cribbed from should point to maybe "availability of childcare" not being a major motivating factor. I think the clue is in "while doing nothing for stay at home mothers"- this is intended to wag a finger at SAHM's and reward mothers who already have kids in daycare.
There was a very badly done (and not peer reviewed) paper that got a lot of media attention claiming that subsidized daycare in Quebec induced more women to enter the workforce, thus raising income tax revenue and resulting in the subsidies paying for themselves. To come to this conclusion, they made some ridiculous assumptions, such as that women who were induced to enter the labour market earned average wages.
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