With the start of a new year and the expected release of the federal budget in the next few months, it is time to stop and take a look at the status of the current Canadian financial situation. Projections at the beginning of 2017 included the increase of GDP growth and an overall thriving economy. According to the Conference Board of Canada, this increase in economic growth was the fastest of all the G7 nations with the exception of the United States. The government has credited much of this growth to be the successful result of heavy “injection spending” to stimulate the economy. Government spending, however, comes at a literal cost.
During the 2015 election campaign, Justin Trudeau promised “modest” deficits of $10 billion every year for the three years following his election. This number expanded to around $30 billion per year after the formation of the government and looks like it may even jump to an annual $40 billion before returning towards a balanced budget. While Keynesian economics explain the need for government spending to jumpstart the economy after a recession, such as in 2008, there is a problem with injection spending in an already expanding economy; it’s like washing your car in the rain. It is completely unnecessary and a waste of allocated time and resources.
The arguments in favour of this wild spending include the idea that it will assist middle class Canadians, yet the government has provided no real plan for investing in areas like infrastructure to really help the middle class, and continues to flush out large international payments. While it is important for Canada to contribute to the global economy by helping countries less equipped to be self-sustaining, it is crucial that if the government plans on spending outside of their means, that this money goes directly into specific programs designed to grow the Canadian economy first. There is a reason why we’re told to put on our own oxygen mask first, before assisting others.
The current levels of spending are made worse by Canada’s aging population. There are now more seniors in Canada than youth, and in just over a decade, seniors will make up 25% of the Canadian population. The result is this: the current debt that is dangerously escalating is now shackled to Canadian youth. The more debt that is racked up now, will result in a larger number with less people to pay it off later, so either taxes will rise excessively or the government will print more money. These options may result in economic stagnation or hyperinflation – neither are good options.
The Liberals have proven capable of reducing the national debt in the past, especially under the financial oversight of Paul Martin, but Mr. Trudeau has taken no actions steps to indicate that he plans to shrink the federal budget deficits in the next few years. The Fraser Institute reported in 2016 that annual government, (federal, provincial, and municipal), interest payments are now equal to the total annual Canadian spending on education: $62.8 billion. While that number reflects the debt of all three levels of government, the federal government specifically needs to choose to eliminate spending that cannot be paid for.
Since the start of 2018, the winter gloom has masked the vibrant growth of our economy, but it also hides the giant shadow of growing debt that shows few signs of halting.