Canadians sink into $ 1,000,000,000,000 in debt

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by Franco Terrazzano
Troy Media

If you think the federal government‘s so-called historic spending on a national child care program is significant, wait until you find out how much the government is spending to cover interest charges on the debt.

In its 2021 budget, the Justin Trudeau government promises to spend $ 30 billion over five years for a national child care program. That’s a ton of money considering we couldn’t afford it before the pandemic.

But it’s still five times less than what the federal government will have to pay in interest charges on the debt over that period, which will total $ 153 billion by 2026. That’s nearly $ 4,000 per year. Canadian. And instead of that money going for health care or lowering taxes, it goes into the pockets of bond fund managers.

Assuming the federal government can maintain the budgeted spending line – a generous assumption given the government’s track record – the deficit by the end of 2025 will still be $ 30 billion. The interest charge that year will be $ 39 billion. This meant that borrowing to fill the budget deficit could not even cover interest payments.

In addition to this interest, taxpayers will eventually have to repay the debt of $ 1,000,000,000,000 – a trillion dollars.

It’s no wonder that economists’ fearful senses are tingling with this debt-fueled spending frenzy.

Jack Mintz, University of Calgary, noted that Finance Minister Chrystia Freeland “is rolling the dice that endless deficits will be manageable.” Mintz added that “just a one point increase in interest rates would then increase the annual deficit by almost $ 5 billion.”

In the few months since the fall economic statement was released, the private sector revised its forecast for 10-year government bond rates up by about half a percentage point. What if low interest rates increase slightly?

Mintz isn’t the only expert raising concerns.

“Are we really going to assume that interest rates are going to stay static for the next 10 or 20 years?” David Rosenberg, chief economist and strategist at Rosenberg Research, told BNN Bloomberg. “I just find that a lot of people have short memories of what happened in the 1970s to the 1980s and then all the tough choices and struggles to bring our fiscal situation back into a certain stable mode.”

Former Finance Minister Paul Martin knows a thing or two about tough choices. After all, he cut government spending by about 10%. He also knows a thing or two about the dangers of debt crises.
“The debt and the deficit are not ideological inventions,” Martin said in his 1995 budget speech. “They are facts of arithmetic. The quicksand of compound interest is real. “

The provinces have also learned their lesson the hard way.

“When [Ralph] Klein became prime minister, with government debt wrenching money out of patients and students daily due to escalating interest charges, ”said public finance expert Mark Milke in his book Ralph vs. Rachel. “Between 1985 and 1993 in Alberta, the cost of interest on Alberta’s growing debt was $ 7.2 billion, the equivalent of two full years of what the province had spent on health care a few times. years ago.

Saskatchewan has had to contend with its deficit addiction by going through “a lot of pain,” according to former Finance Minister Janice MacKinnon, who closed 52 hospitals in the Prairie province.

“We left a financial situation in Saskatchewan until it became a crisis so we had to drastically cut core programs and raise taxes to get out of it,” MacKinnon said.

The moral of the story is that the best time to put out a fire is before it spreads. But betting interest rates will stay low forever and almost double Canada‘s debt in a few years, Budget 2021 is fueling the fire.

Franco Terrazzano is the Federal Director of the Canadian Taxpayers Federation

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