Quote:
Originally Posted by Table 5
Yep. Maybe some people missed it, because it was spoilered, but you can tell from this chart that we've followed similar fluctuations because we're pretty close to the hip (for better or worse!) but the gap in prosperity has been steadily widening.
The US is in a different league, but the bigger the gap, the more incentive for our best and brightest minds to move south, start business there instead of here, global investors to prioritize them etc. This of course already happens, but this trend will only exacerbate the issue.
|
To me there are 3 big factors driving that:
1) The US is largely creating economic growth through deficits. For the last decade or so, they're borrowing about 6% of GDP every year to fund artificially low tax rates. That's not an effective long-term strategy, nor is it something Canada can really replicate (we've been about 0-2% of GDP outside of COVID). And the way people talk about Canada's deficits now, their heads would explode if we had $200B deficits like we'd have at the US's rate.
2) Canada had a short-term big influx of people, including a lot of low productivity newcomers (i.e. students). That doesn't add much to the GDP right away, while also making the denominator bigger, reducing GDP per capita. That was clearly a failure of the federal government, but it's not something that's going to have an ongoing impact once it's corrected, so you would expect GDP per capita to rise faster once that normalizes.
3) Much of that divergence is based on the exchange rate. The US dollar has strengthened against virtually every major currency, but unless you think that's a permanent change (it's not) then it will shift the other way. We saw a similar divergence in the '90s when the CAD dropped significantly. But once it recovered eventually then GDP per capita (measured in USD) grew quickly again.