Freeland looks to take the federal debt to infinity and beyond

The fall economic statement should worry anyone concerned with Canada’s long-term economic future

Aaron Wudrick

By Aaron Wudrick

CTF Federal Director

It’s official: the Trudeau government has taken the federal deficit from $19 billion to $381 billion in just nine months.

That’s the staggering takeaway from Finance Minister Chrystia Freeland’s fall economic statement, and it means Canada’s total federal debt will for the first time shoot past $1 trillion in a few weeks.

Critics will argue that with the global pandemic, all this spending is necessary and with low interest rates it’s really nothing to worry about.

This is wrong for at least four reasons.

First, even if some temporary emergency spending is necessary, it can’t explain why the Trudeau government has managed to get such poor returns.

Canada’s deficit has increased the most among its G7 peer countries and yet still has the highest unemployment rate. In fact, it sent a whopping $54 billion out the door to compensate Canadians for $21 billion in lost income. Helping people out is one thing, but piling up new debt to send people two dollars for every one dollar they’ve lost is a very expensive way to miss the target.

Second, not all new government spending is even related to the pandemic.

Many of the Trudeau government’s recent announcements – from green infrastructure to child care – are simply repackaged versions of their longstanding hobby horses, trotted out under the pretext of “reinventing” the economy. And yet if there wasn’t enough money to pay for these things when the deficit was only $19 billion, how on earth can there be enough now that it’s $381 billion?

Third, just because the government needs to spend on pandemic priorities, doesn’t mean it can’t save money elsewhere.

A prudent government would look at lower priority areas and show some restraint. Something as obvious as rolling back the bureaucracy to the size it was in 2017 – two full years after Justin Trudeau came to office – would help save taxpayers at least $13 billion.

It would also have the added benefit of demonstrating that those in government are willing to share the burden being borne by the millions of Canadians who have seen their jobs wiped out or their small businesses go bankrupt.

Finally, just because interest rates are low now doesn’t mean they will stay low forever, and it would be foolish to bet Canada’s fiscal house on this sweeping assumption.

Even a one per cent increase in the effective interest rate would mean an additional $10 billion per year in interest costs. In spite of this, Freeland did not bother imposing any fiscal “guardrails” on spending or debt, suggesting that this could wait until after the economy had recovered.

But that rather defeats the purpose of having fiscal guardrails in the first place: the time you need them most is when you’re at risk of going over a cliff, not when there are no longer any cliffs in sight.

The fall economic statement should worry anyone concerned with Canada’s long-term economic future.

Freeland needs to produce a full budget in early 2021 that contains real fiscal targets and a plan to get the deficit under control. If she does not and the current debt trajectory continues, our country will eventually face a fiscal reckoning that will make the painful cuts of the 1990s look like a walk in the park by comparison.

Get local stories you won't find anywhere else right to your inbox.
Sign up here

Just Posted

It was a special treat day at Points West Living in Stettler as the local Dairy Queen donated mini blizzard treats for residents and staff to enjoy. It was a way to celebrate the end of a recent COVID-19 outbreak at the facility. photo submitted
It was a special treat day at Stettler’s Points West Living recently

Dairy Queen provided 150 mini-blizzards for staff and residents

book
Stettler Learning Centre staff broaden services in challenging times

“We are creative, we are innovative and we are resilient. We are flexible and we want to adapt.”

ski
Valley Ski Club Slope Stabilization Project is awarded CFEP Grant

With forecasts predicting continued mild weather, the board made the decision not to proceed with the current season

Alberta has 3,651 active cases of COVID-19.  (File photo)
750 new COVID-19 cases identified in Alberta Sunday

Central zone currently has 1,182 active cases of the virus

county
County of Stettler council meeting highlights for Jan. 13th

County council chambers will be getting some audio-visual upgrades

A scene from “Canada and the Gulf War: In their own words,” a video by The Memory Project, a program of Historica Canada, is shown in this undated illustration. THE CANADIAN PRESS/HO - Historica Canada
New video marks Canada’s contributions to first Gulf War on 30th anniversary

Veterans Affairs Canada says around 4,500 Canadian military personnel served during the war

Lacombe is looking at its options for reclaiming sewage lagoons that are no longer needed. Vesta Energy Ltd. has signed a deal to use three lagoons to store water for fracking.
Map from City of Lacombe
Energy company to use former Lacombe sewage lagoons to store water for fracking

Vesta Energy Ltd. will pay Lacombe more than $100,000 a year in 20-year deal

Alberta Chief Medical Officer of Health Dr. Deena Hinshaw said on Monday that11 more people had died from COVID-19, bringing the province’s death toll to 1,447. (Photography by Chris Schwarz/Government of Alberta)
Eleven more Albertans die from COVID-19

There were 739 people in hospital, 120 in ICU on Monday

World Juniors’ referee Mike Langin makes a called during the Canada vs. Slovakia at the 2021 World Junior Championship at Rogers Place in Edmonton, Dec. 27, 2020. (Photo by Matthew Murnaghan/Hockey Canada)
Former Sylvan Lake man lives his dream at World Junior Championships

Mike Langin was one the 25 Canadian officials who worked during the tournament

The Mountain Cree Traditional Band headquarters in Mirror, Alta. has been the target of theft and vandalism. (Photo submitted)
Mountain Cree Traditional Band’s headquarters broken into five times

AWNTB says not enough been done to deter crime in Mirror, Alta.

Indigenous people gather for a ceremony for Cindy Gladue held at the courthouse in Edmonton, Alta, on Wednesday, January 13, 2021. Bradley Barton, a 52-year-old long-haul truck driver from Ontario on trial for manslaughter, is accused of killing Gladue. THE CANADIAN PRESS/Jason Franson
People stand in support of mother as new trial gets underway in death of Cindy Gladue

Bradley Barton, a long-haul truck driver from Ontario, will now be tried for manslaughter in the 2011 death

(Photo submitted)
RCMP say ice climber seriously injured after reportedly falling 12 metres near Abraham Lake

Police say man’s injuries were serious but not life-threatening

U.S. military units march in front of the Capitol, Monday, Jan. 18, 2021 in Washington, as they rehearse for President-elect Joe Biden’s inauguration ceremony, which will be held at the Capitol on Wednesday. (AP Photo/J. Scott Applewhite)
Biden aims for unifying speech at daunting moment for U.S.

President Donald Trump won’t be there to hear it

Facebook/ The Open Door 24/7 Integrated Response Hub- Wetaskiwin.
Wetaskiwin residents show support for 24/7 Integrated Response Hub

Wetaskiwin residents and City Council members showed support for Hub with positive signs.

Most Read