GOLDSTEIN: Federal and provincial government debt soared 85% since ’07

Get the latest from Lorrie Goldstein straight to your inbox

Article content

Canadian taxpayers face major fiscal challenges because federal and provincial governments have increased Canada’s combined public debt over the past 16 years by 85%, according to a new study by the fiscally conservative Fraser Institute, released Thursday.

Advertisement 2

Article content

“The Growing Debt Burden for Canadians: 2024 Edition” by study authors Jake Fuss and Grady Munro, says Canada’s combined federal and provincial debt increased from $1.18 trillion in inflation-adjusted dollars in 2007-2008, to $2.18 trillion in 2023-24.

Article content

“Over the past 16 years, government debt across Canada has grown quickly,” the report says, during a period when federal and provincial governments were presided over by political parties of all stripes.

Exacerbated by higher interest rates, the study says, tax “revenues directed towards interest payments mean that in the future there will be less money available for tax cuts or government programs such as health care, education and social services.”

To cite one of many examples, federal taxpayers this year, according to Finance Minister Chrystia Freeland’s November economic statement, will pay $46.5 billion in interest payments this year on the federal debt of $1.2 trillion, on its way to $60.7 billion in 2028-29 when the federal debt will reach $1.36 trillion.

Article content

Advertisement 3

Article content

To appreciate the increasing financial burden this places on federal taxpayers, the $46.5 billion they will spend in interest payments on the federal debt this year, would pay for almost all of the Trudeau government’s signature Child Care Benefit program ($25.6 billion), plus employment insurance ($22.2 billion), for a total of $47.8 billion.


We apologize, but this video has failed to load.

By contrast, interest on debt payments don’t lower the total debt by a penny. All they do is service the annual interest on the debt.

The Fraser Institute study says that combined federal and provincial net debt per person across Canada is highest in Newfoundland and Labrador at $67,471, followed in descending order by Ontario ($60,609); Quebec ($59,088); Manitoba ($57,182); Nova Scotia ($52,246); New Brunswick ($49,003); P.E.I. ($48,262); B.C. ($47,042); Saskatchewan ($46,715) and Alberta ($42,293).

Advertisement 4

Article content

Part of the explanation for current high government debt levels is that the Fraser Institute is using data from a 16-year period that included the global economic crisis in 2008 that began with the subprime mortgage derivative scandal in the U.S., plus the negative economic impact of the COVID-19 pandemic, which began in 2020, necessitating increased spending.

Finance Minister Chrystia Freeland has defended the level of federal debt by arguing Canada has both the lowest deficit and net debt-to-GDP ratio (currently 42.4%, scheduled to fall to 39.1% in 2028-29) in the G7 countries — U.S., U.K., France, Italy, Germany, Japan and Canada.

“This commitment to fiscal responsibility is a pillar of Canada’s AAA credit rating,” Freeland said in October, “which has led to over a million more Canadians working today compared to when COVID first hit.”

The reason Canada’s combined debt level hasn’t yet led to a full-blown economic crisis as occurred in the early1990s, is that interest rates have remained below historical norms, even with the Bank of Canada hiking its key interest rate 10 times from 0.25% in March 2022 to its current level of 5.0%, to fight inflation.

That said, make no mistake. Interest payments on federal and provincial debt across the country are part of the reason that key government services such as health care, education and social services are under severe financial strain today.

Article content

Source link