Canada has a serious fiscal challenge looming as the federal debt explodes
Federal debt that grows faster than the economy is not sustainable. If next week's fiscal update shows that, then alarm bells should ring. The longer we delay, the larger and more difficult our fiscal challenges will become.
If I was a young person today, I would be clambering for the removal of my generation for saddling them with so much debt for our greed. We must learn to live within our means
16th November 2023 at 9:00 am
RJKWells
“Unless it is politically profitable for the wrong people to do the right thing, the right people will not do the right thing either, or if they try, they will shortly be out of office.” – Milton Friedman
Those words came to mind while reading today’s piece by Trevor Tombe. As was the case in 1995, our political leadership will likely have to be pushed to the edge of the fiscal abyss, compelled by external forces to make the necessary changes that address our growing fiscal imbalance.
While Mr. Tombe is correct in saying “The longer we delay, the larger and more difficult our fiscal challenges will become,” I suspect ‘delay’ will continue to be the order of the day when finance minister Freeland provides her fiscal update later this month. With the NDP’s Jagmeet Singh calling in his markers in return for continuing to prop up the Trudeau Government, they’ll likely kick that fiscal bucket down the road for someone else to pick up and sort out.
As we are already seeing in some of the comments posted by others today, the process of demonization will be in full swing against those forced to make the necessary changes for the good of the country, along with certain industries that are always in their cross hairs. We always look for convenient objects on which to hurl our displeasure, while avoiding the mirror that the late former Premier of Alberta Jim Prentice once had the temerity to suggest we look into. Circling back to Friedman’s observation, look what we in Alberta did to him in response.
16th November 2023 at 11:09 am
Richard Courtemanche
Canada is certainly in a precarious situation because it’s managed by irresponsible, incompetent, corrupt, greedy… beings who are serving WEF’s interests rather than Canadians.
16th November 2023 at 9:35 am
Al Raftis
As pointed out, government debt is a global problem that will be difficult to manage without major negative impact on peoples standard of living. In Canada, we should focus on total Debt – Federal, Provincial and personal. My understanding is when you take all debt into account, Canada is among the worst indebted countries in the western world.
16th November 2023 at 8:33 am
Shahryar Saigol
The federal debt is denominated in Canadian Dollars which means that the federal government pays interest on it by printing Canadian Dollars. There is no other way to pay the interest. Where else is the money going to come from? Revenue? Well, the revenue is also Canadian dollars that were printed in the past. The question of defaulting on federal debt simply doesn’t exist.
The more relevant question is why does the government pay interest on the debt when there is zero chance of default. In fact the interest on debt is a form of welfare to rich people who already have money. Why should they get to make profit on a zero risk investment while poor people can’t get proper dental care? Do you know how much an implant costs?
And the BOC should explain to us how raising interest rates will slow down the economy while pumping 4.3 billion more into the economy through interest payments.
With half a million new immigrants entering Canada every year, we should be increasing spending not cutting it. Only then can we provide the housing, jobs, healthcare, transportation to make the new immigrants productive.
If we lower spending, the record numbers of people going to food banks will only increase.
Evidence of the damage from too little spending can be seen in the fact that the US economy is growing with record deficits while our economy stagnates. The US FED has failed to slow down their economy because of the massive amount of interest it is injecting into that economy when it raises interest rates.
We need to pour additional billions into canadian defence industries, we need to bring our domestic energy cost down sharply. We are, after all, an energy exporting country. Why are we paying more than the Americans when we are the ones exporting energy to USA!
We need to rapidly recruit new immigrants with foreign medical degrees into our healthcare system. We need to invest in heavy industrial manufacturing. And we need to build chip fabs. Lots and lots of chip fabs. We should be the Taiwan of the G6 with high tech industry because we have the energy and the knowhow.
16th November 2023 at 8:39 am
GH
I think you should enroll in a basic economics course. First, not all of Canada’s debt is denominated in Canadian dollars. Second, the way a government covers a deficit is by borrowing. They do this by issuing bonds. To get people with savings to invest in those bonds two things have to happen. One is they must be convinced they will get their money back. They also would like a return on that money or why lend it? If they borrow too much they will have to pay higher interest rates to compensate for the risk of default and they will crowd out productive investment by the private sector. If I loan my money to the government I cannot loan it to a business for expansion. If the government simply printed the money as you advise we would have more inflation. We have higher inflation now because of all the money printing by central banks of the last several years. When the government pays interest it comes from either tax revenue or borrowing more. Only central banks can create/print money. The US has deficits because they spend a lot and tax very little. For example, the Americans have no HST. Canada has deficits because we spend more than we tax, and our problem is we are already taxing at a dangerously high level. Canada cannot solve our deficit problem by taxing a lot more without damaging our economic competitiveness. At the end of the day everyone, including governments, must live within their means. There is no other way. We learned that in the early 1990’s.
16th November 2023 at 3:22 pm
L
My point below was meant to respond to GH’s comment. To re-post: The Canadian dollar is not a reserve currency, which both dampens the appeal of Canadian bonds and increases the vulnerability of the Canadian economy generally.
17th November 2023 at 2:09 am
L
Agree with all your points. Also the Canadian dollar is not a reserve currency, both dampening the appeal of Canadian bonds and increasing the vulnerability of the Canadian economy generally.
17th November 2023 at 2:07 am
Pat Howard
I like you ideas.
16th November 2023 at 9:53 am
The Hub Staff
Trevor Tombe writes that with Chrystia Freeland’s announcement set for next Tuesday on the fiscal update, we need to be prepared for the challenges that come with federal debt. He argues that the government sticking to previous plans would be one solution. What are other ways the government could confront this issue?
16th November 2023 at 8:01 am
Doug Lee
The overall perspective of the article is good. I like the comparison to 1995 having lived through that time. It is also good to understand that serial deficit spending is a global issue. For those aiming to replace the current very tired government I would suggest the following slogan “Spend wisely, Save more”.
16th November 2023 at 2:51 pm
Evelyn Chisamore
Never thought I’d see the day when a leader’s call to exercise restraint where civilian lives were at risk was seen as ‘polarizing.’ Can I assume that if he had said ‘go in with guns blazing and vaporize anyone who stands in your way’ that there would have been approval from the authors employed here?
16th November 2023 at 2:03 pm
Peter Campbell
Off topic.
16th November 2023 at 4:13 pm
norm
we need to get this under control it is hurting all Canadian especially seniors
16th November 2023 at 1:30 pm
A. Chezzi
I guess this is one of those damned if you do or damned if you don’t. Canadians are clamoring for the government to do more to make life affordable but that means spending. The Opposition is clamoring that the government is spending too much so that means cuts. Canadians have to know that they can’t have it both ways. Many of the provincial premiers are sitting on huge surpluses while their provinces are in need of cash infusion in many programs. They fudge the figures claiming they are spending more than previous governments. They use simplistic rhetoric and specious arguments to defend their legislation or try to cover it up by using issues such as parental rights to distract the voters.
A government led by Poilievre would be lean but very mean. I hope Canadians see through his deceptions before they mark their ballot for Con candidates.
16th November 2023 at 8:29 am
Keith
There is lots of waste in governments today none more than the federal liberals now in power. A gradual cut of 10-15% implemented over 3-4 years can be done without pain. A government led by Poilievre would be a great start to getting CAnada back on the road to fiscal stability.
16th November 2023 at 9:48 am
Michael F
Please tell us where this magic 10-15% will come from? Skippy has been long on jargon and populist slogans but short on actual policy. Cut health spending with a healthcare system in crisis just as the boomer generation head into the time they will need it most? Cut defence spending when we are being asked to spend more by allies? Cut programs for seniors and the poor?
16th November 2023 at 12:25 pm
J.
Can’t trust the Conservative, especially after what Doug Ford almost did to Ontario Green Belt. Their interests were never aligned with ordinary people.
16th November 2023 at 12:05 pm
Aaron Alkins
The people of Gaza voted in Hamas, but this doesn’t mean they are disposable in the hunt for terrorists. The terrorists must be liquidated with extreme prejudice. Isreal needs to be much more surgical in the way they do this.
16th November 2023 at 8:15 am
Evelyn Chisamore
Criticizing the Israeli gov’t’s actions is not in vogue. Yes, most definitely Israel has the right to defend itself, there isn’t much debate on that. And to rescue any taken hostage. But who knew that Israel’s version of self-defence meant levelling much of Gaza, killing so many civilians and obliterating infrastructure. Or that so many Jewish people at home and abroad would be perfectly ok with that. That has been the hardest pill to swallow out of all this ugliness.
16th November 2023 at 2:11 pm
dave trudell
Every thing freeland or Trudeau touches turns to SHIT
17th November 2023 at 12:25 am
Delores
TRUDEAU and Freeland are not worried about government debt because when they bring in Central Banking Digital Currency, they will devalue our currency and wipe out the debt, just as they will also devalue your savings.
16th November 2023 at 6:45 pm
Barb Singbeil
Canada is one of the most taxed countries in the world with the least to show for it! I am a 72 year old senior, female, who can’t even make it paycheck, (pension) to paycheck. I launched a Canadian Human Rights Commission complaint when seniors over the age of 75 received a large increase in their pension. My complaint was not accepted. This was just so unfair to me, especially as a baby boomer who worked part time from the age of 15. (You want new clothes…you go to work.) There were plenty of jobs available when I finished school but for women, compared to men, the jobs were all low paying. This meant my contributions towards my future pension, were minimal at best. I can see where female seniors are showing up at the poverty level. I am commenting from a poverty level position.
Why is the US so much cheaper? The answer is so obvious……they aren’t taxed to the hilt like Canada is. Every summer and just before Christmas, Canadians flock to the states in droves, just to shop. Even with the enormous difference between the American and Canadian dollar, Canadians will still pay less.
There is not one bank official or government personnel who can explain why we have a recession looming and the methods they are using! Newer, younger financial experts are saying our old “tried and true” method of dealing with these excruciating financial challenges is wrong. There are other ways to handle this without the pre-determined suffering of the Canadian people. But no….no one is listening to them. The government is happy with the “old way”, just apologizing to the people of Canada!
I have a real problem. I always vote but this time I don’t think I will be able to. I don’t want Trudeau, I don’t trust Poilievre at all and forget the NDP!!! There literally is no one I want to vote for. I would hate to miss a federal election for the first time in my life but the candidates are just too lame.
16th November 2023 at 2:41 pm
Pat Howard
The government needs to legislate a windfall tax on oil and grocery companies. The oil companies gouged gas prices and sent everything else into inflation. Canada is a large country and transportation is a huge factor in the cost of everything.
Comments (24)
If I was a young person today, I would be clambering for the removal of my generation for saddling them with so much debt for our greed. We must learn to live within our means
“Unless it is politically profitable for the wrong people to do the right thing, the right people will not do the right thing either, or if they try, they will shortly be out of office.” – Milton Friedman
Those words came to mind while reading today’s piece by Trevor Tombe. As was the case in 1995, our political leadership will likely have to be pushed to the edge of the fiscal abyss, compelled by external forces to make the necessary changes that address our growing fiscal imbalance.
While Mr. Tombe is correct in saying “The longer we delay, the larger and more difficult our fiscal challenges will become,” I suspect ‘delay’ will continue to be the order of the day when finance minister Freeland provides her fiscal update later this month. With the NDP’s Jagmeet Singh calling in his markers in return for continuing to prop up the Trudeau Government, they’ll likely kick that fiscal bucket down the road for someone else to pick up and sort out.
As we are already seeing in some of the comments posted by others today, the process of demonization will be in full swing against those forced to make the necessary changes for the good of the country, along with certain industries that are always in their cross hairs. We always look for convenient objects on which to hurl our displeasure, while avoiding the mirror that the late former Premier of Alberta Jim Prentice once had the temerity to suggest we look into. Circling back to Friedman’s observation, look what we in Alberta did to him in response.
Canada is certainly in a precarious situation because it’s managed by irresponsible, incompetent, corrupt, greedy… beings who are serving WEF’s interests rather than Canadians.
As pointed out, government debt is a global problem that will be difficult to manage without major negative impact on peoples standard of living. In Canada, we should focus on total Debt – Federal, Provincial and personal. My understanding is when you take all debt into account, Canada is among the worst indebted countries in the western world.
The federal debt is denominated in Canadian Dollars which means that the federal government pays interest on it by printing Canadian Dollars. There is no other way to pay the interest. Where else is the money going to come from? Revenue? Well, the revenue is also Canadian dollars that were printed in the past. The question of defaulting on federal debt simply doesn’t exist.
The more relevant question is why does the government pay interest on the debt when there is zero chance of default. In fact the interest on debt is a form of welfare to rich people who already have money. Why should they get to make profit on a zero risk investment while poor people can’t get proper dental care? Do you know how much an implant costs?
And the BOC should explain to us how raising interest rates will slow down the economy while pumping 4.3 billion more into the economy through interest payments.
With half a million new immigrants entering Canada every year, we should be increasing spending not cutting it. Only then can we provide the housing, jobs, healthcare, transportation to make the new immigrants productive.
If we lower spending, the record numbers of people going to food banks will only increase.
Evidence of the damage from too little spending can be seen in the fact that the US economy is growing with record deficits while our economy stagnates. The US FED has failed to slow down their economy because of the massive amount of interest it is injecting into that economy when it raises interest rates.
We need to pour additional billions into canadian defence industries, we need to bring our domestic energy cost down sharply. We are, after all, an energy exporting country. Why are we paying more than the Americans when we are the ones exporting energy to USA!
We need to rapidly recruit new immigrants with foreign medical degrees into our healthcare system. We need to invest in heavy industrial manufacturing. And we need to build chip fabs. Lots and lots of chip fabs. We should be the Taiwan of the G6 with high tech industry because we have the energy and the knowhow.
I think you should enroll in a basic economics course. First, not all of Canada’s debt is denominated in Canadian dollars. Second, the way a government covers a deficit is by borrowing. They do this by issuing bonds. To get people with savings to invest in those bonds two things have to happen. One is they must be convinced they will get their money back. They also would like a return on that money or why lend it? If they borrow too much they will have to pay higher interest rates to compensate for the risk of default and they will crowd out productive investment by the private sector. If I loan my money to the government I cannot loan it to a business for expansion. If the government simply printed the money as you advise we would have more inflation. We have higher inflation now because of all the money printing by central banks of the last several years. When the government pays interest it comes from either tax revenue or borrowing more. Only central banks can create/print money. The US has deficits because they spend a lot and tax very little. For example, the Americans have no HST. Canada has deficits because we spend more than we tax, and our problem is we are already taxing at a dangerously high level. Canada cannot solve our deficit problem by taxing a lot more without damaging our economic competitiveness. At the end of the day everyone, including governments, must live within their means. There is no other way. We learned that in the early 1990’s.
My point below was meant to respond to GH’s comment. To re-post: The Canadian dollar is not a reserve currency, which both dampens the appeal of Canadian bonds and increases the vulnerability of the Canadian economy generally.
Agree with all your points. Also the Canadian dollar is not a reserve currency, both dampening the appeal of Canadian bonds and increasing the vulnerability of the Canadian economy generally.
I like you ideas.
Trevor Tombe writes that with Chrystia Freeland’s announcement set for next Tuesday on the fiscal update, we need to be prepared for the challenges that come with federal debt. He argues that the government sticking to previous plans would be one solution. What are other ways the government could confront this issue?
The overall perspective of the article is good. I like the comparison to 1995 having lived through that time. It is also good to understand that serial deficit spending is a global issue. For those aiming to replace the current very tired government I would suggest the following slogan “Spend wisely, Save more”.
Never thought I’d see the day when a leader’s call to exercise restraint where civilian lives were at risk was seen as ‘polarizing.’ Can I assume that if he had said ‘go in with guns blazing and vaporize anyone who stands in your way’ that there would have been approval from the authors employed here?
Off topic.
we need to get this under control it is hurting all Canadian especially seniors
I guess this is one of those damned if you do or damned if you don’t. Canadians are clamoring for the government to do more to make life affordable but that means spending. The Opposition is clamoring that the government is spending too much so that means cuts. Canadians have to know that they can’t have it both ways. Many of the provincial premiers are sitting on huge surpluses while their provinces are in need of cash infusion in many programs. They fudge the figures claiming they are spending more than previous governments. They use simplistic rhetoric and specious arguments to defend their legislation or try to cover it up by using issues such as parental rights to distract the voters.
A government led by Poilievre would be lean but very mean. I hope Canadians see through his deceptions before they mark their ballot for Con candidates.
There is lots of waste in governments today none more than the federal liberals now in power. A gradual cut of 10-15% implemented over 3-4 years can be done without pain. A government led by Poilievre would be a great start to getting CAnada back on the road to fiscal stability.
Please tell us where this magic 10-15% will come from? Skippy has been long on jargon and populist slogans but short on actual policy. Cut health spending with a healthcare system in crisis just as the boomer generation head into the time they will need it most? Cut defence spending when we are being asked to spend more by allies? Cut programs for seniors and the poor?
Can’t trust the Conservative, especially after what Doug Ford almost did to Ontario Green Belt. Their interests were never aligned with ordinary people.
The people of Gaza voted in Hamas, but this doesn’t mean they are disposable in the hunt for terrorists. The terrorists must be liquidated with extreme prejudice. Isreal needs to be much more surgical in the way they do this.
Criticizing the Israeli gov’t’s actions is not in vogue. Yes, most definitely Israel has the right to defend itself, there isn’t much debate on that. And to rescue any taken hostage. But who knew that Israel’s version of self-defence meant levelling much of Gaza, killing so many civilians and obliterating infrastructure. Or that so many Jewish people at home and abroad would be perfectly ok with that. That has been the hardest pill to swallow out of all this ugliness.
Every thing freeland or Trudeau touches turns to SHIT
TRUDEAU and Freeland are not worried about government debt because when they bring in Central Banking Digital Currency, they will devalue our currency and wipe out the debt, just as they will also devalue your savings.
Canada is one of the most taxed countries in the world with the least to show for it! I am a 72 year old senior, female, who can’t even make it paycheck, (pension) to paycheck. I launched a Canadian Human Rights Commission complaint when seniors over the age of 75 received a large increase in their pension. My complaint was not accepted. This was just so unfair to me, especially as a baby boomer who worked part time from the age of 15. (You want new clothes…you go to work.) There were plenty of jobs available when I finished school but for women, compared to men, the jobs were all low paying. This meant my contributions towards my future pension, were minimal at best. I can see where female seniors are showing up at the poverty level. I am commenting from a poverty level position.
Why is the US so much cheaper? The answer is so obvious……they aren’t taxed to the hilt like Canada is. Every summer and just before Christmas, Canadians flock to the states in droves, just to shop. Even with the enormous difference between the American and Canadian dollar, Canadians will still pay less.
There is not one bank official or government personnel who can explain why we have a recession looming and the methods they are using! Newer, younger financial experts are saying our old “tried and true” method of dealing with these excruciating financial challenges is wrong. There are other ways to handle this without the pre-determined suffering of the Canadian people. But no….no one is listening to them. The government is happy with the “old way”, just apologizing to the people of Canada!
I have a real problem. I always vote but this time I don’t think I will be able to. I don’t want Trudeau, I don’t trust Poilievre at all and forget the NDP!!! There literally is no one I want to vote for. I would hate to miss a federal election for the first time in my life but the candidates are just too lame.
The government needs to legislate a windfall tax on oil and grocery companies. The oil companies gouged gas prices and sent everything else into inflation. Canada is a large country and transportation is a huge factor in the cost of everything.