Federal debt now 92.2 percent (!) higher than when Trudeau first took office
The Montreal Economic Institute (MEI) expresses concern about the federal budget’s chronic deficits and its lack of measures to address Canada’s lagging productivity.
“The Trudeau government long justified its deficits by saying that it could run them because interest rates were low,” says Renaud Brossard, senior director of communications at the MEI. “Interest rates having since shot up, the logical response from the government should have been to stop piling up debt at a record pace.
“Unfortunately, it’s Canadians who will get stuck with the bill for these excesses, with increasingly costly interest payments on the federal debt.”
Today’s budget projects that the Trudeau government will run a deficit of $40.1 billion this year, with no date put forward for a return to a balanced budget. When the Trudeau government took power, the amount devoted to debt service was $25.6 billion. The government projects that it will cost $43.9 billion this year, or $1,489 per taxpayer. The Trudeau government also projects spending $50.3 billion on debt service in 2028-2029.
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At the start of the current government’s first term, the federal debt was $693.8 billion. According to the projections included in today’s budget, the debt will reach $1,333.6 billion by the end of this year. That works out to an increase of 92.2 percent.
“The growth of the debt in recent years has drastically reduced our ability to deal with crises,” says Mr. Brossard. “By continuing to erode our room to manoeuvre, the Trudeau government seems to be betting everything on the hope that we will never again have to face the slightest crisis.”
Another cause for concern, says Brossard, is the lack of measures to address Canada’s lagging productivity. According to the OECD, Canada is predicted to experience the slowest growth of any advanced economy between now and 2060. The organization’s most recent report specifically mentions productivity as a way to reverse this trend. This productivity lag could lead to a $17,741 gap between the standard of living of Canadians and that of the citizens of other advanced countries by 2060, according to a report from HEC Montréal’s Centre sur la productivité et la prospérité.
An MEI study published in January pointed out the strong inverse connection found in the economic literature between corporate tax levels and amounts invested in productivity. Brossard believes that while productivity growth supports rising standards of living in other advanced economies, Canada is unfortunately stagnating. The Trudeau government has missed an opportunity to reverse course by restoring Canada’s tax advantage over the United States and encouraging investments in productivity.
The Montreal Economic Institute, Brossard says, is urging the Trudeau government to take action to address the chronic deficits and Canada’s lagging productivity. The growth of the federal debt in recent years has drastically reduced Canada’s ability to deal with crises, and the lack of measures to address productivity could lead to a significant gap between the standard of living of Canadians and that of citizens of other advanced countries. The MEI believes that Canada’s tax advantage over the United States should be restored, and investments in productivity should be encouraged to address this issue.
“While productivity growth supports rising standards of living in other advanced economies, Canada is unfortunately stagnating,” says Brossard. “The Trudeau government has missed a good opportunity to reverse course by restoring our tax advantage over the United States and encouraging investments in productivity.”
| Dana Wilson