ballz said:
The point is, when a government borrows to inject money into the economy, you can't just say "well the numbers improved, case closed everyone." The government did exactly that. There should be no surprise that the GDP increased, after all, it simply measures spending.
Economic growth of 4.6% did not occur. The GDP increased by 4.6% The GDP measures spending, it measures consumption, it is not a measurement of economic growth, simply an indicator. It measures *consumption* and that is a very different thing. There is no specific measurement of economic growth and this obsession with the GDP serves us more harm than good.
GDP is often used as a key figure but it is not the only one nor is it a black and white measurement of "GDP increased, therefore there was economic growth" or vice versa. It just means more consumption occurred. More consumption doesn't necessarily mean anything if you have to input borrowed money into the equation to make it happen. As Peter Schiff responded to the question about increasing the GDP, "yes, but at what cost?"
If the government borrowed 3.5 trillion dollars and gave $100,000 to every Canadian, consumption would sky rocket and therefore the GDP would sky rocket. That doesn't mean the economy is more productive or more efficient, it does not mean it is more sustainable. In isolation, the GDP just means people spent more money. You need to look at other variables as to "why" to figure out if it's a good thing.
If all other variables remained unchanged, but half the labour force stopped working and the GDP fell by 10%, it does not mean there was economic contraction.... it means the economy almost doubled it's efficiency. People who focus only on consumption (GDP) would argue that the economy is collapsing... I'd be doing back flips with excitement of how much more efficient our economy became.
Respect begets respect, and the reverse is often also true.
Indeed, the 4.6% is GDP growth. However, your explanation of GDP requires some refinement. GDP can be calculated in 3 ways, being the production approach (sum of gross product of all enterprises), income approach (GDP= Compensation of Employees+Gross Operating Surplus+Gross Mixed income+(taxes-subsidies on imports and production), and expenditure approach (GDP = Consumption + Investment + Government Spending + (Exports − Imports). The IMF definition states that, "GDP measures the monetary value of final goods and services - that is, those
that are bought by the final user - produced in a country in a given period of time (say a quarter or a year). As exports account for about 31% of our GDP and imports 33%($389,071,103,128 in 2016) the effects of export purchases has to be put into the final calculations as well.
In your example, yes, if we gave everyone $100,000 GDP would go up, assuming that they all buy only Canadian made goods and services. If they go out and buy, say, a Lamborghini than the GDP of Italy would go up as the final product was produced there (assuming they're all made in Italy... I didn't actually research that last part). There is more than just Canadian consumption involved, though I agree that the GDP is an imperfect measure of economic success. Your assertion that GDP only measures spending is therefore, incorrect.
Also, I would also argue that your assertion that if half the labour force stopped working but GDP only fell by 10% it wouldn't mean anything negative was occurring. Aside from the obvious effect on unemployment numbers and therein government spending, if we use the income approach for this example, than the factors that would need to change to create the 10% drop would be compensation of Employees, Gross Operating Surplus, Gross Mixed income, or the taxes-subsidies on imports and production. We can assume that the halving of the work force would reduce the compensation of employees, meaning that you would have more wealth held by fewer people with more people unemployed or underemployed.
In the Harper era, GDP grew about 1-1.5% per annum, or from $1.46 trillion in 2007 to $1.55 trillion in 2016. At the same time debt (total debt - total assets, not straight debt) grew from $516 Billion in 2007 to $727 billion in 2015, a rise of $211 billion, or an average of $21 billion/year. So, the GDP grew about $80 billion during that time, or at a rate of 38 cents for every dollar of debt. In 2008, when the CPC took on $58 billion in debt the GDP rose 1% only, a terrible Return on Investment if just taken in the context of consumption.
Since Trudeau came in, the debt has rise to $759 billion this year, a rise of $64 billion, of which $32 billion was accumulated this year. The GDP grew from $1.53 trillion to the anticipated $1.6 billion (last year x 1.046)
If the factor of GDP were only government spending that led to consumption than each dollar of debt should be equal regardless of whether it was CPC or Liberal. So, why does the $70 billion increase for 2017 equate to a $2.19 increase to GDP for every dollar of tax debt incurred? The reason is that GDP is not solely a consumption factor and that many factors, including overall world economic health, which was as true in the days of the Social Credit party of Alberta in the depression as it is today.
There are a myriad of factors as to why the economy is improved this year of which the LPC has control over as many as the CPC had (very few). However, Altairs comment is factual and for more than the rationale you presented.
https://www.statcan.gc.ca/pub/13-607-x/2016001/174-eng.htm
https://www.statcan.gc.ca/eng/trade/data
https://www.bnn.ca/imf-raises-2017-canada-growth-forecast-1.880306
https://www.fraserinstitute.org/sites/default/files/federal-fiscal-history-canada-1867-2017.pdf
