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

Alberta’s chief medical officer of health Dr. Deena Hinshaw and Premier Jason Kenney say the province would look at adding additional COVID-19 measures in the coming weeks if the virus continues to spread. (Photo by Government of Alberta)
Walk-in COVID-19 vaccination clinic to open in Red Deer

Alberta adds 1,345 new cases of the virus

Public health restrictions on non-essential travel and vacation bookings are being increased in B.C. (B.C. government)
COVID-19: B.C. announces signage along Alberta border to discourage non-essential travel

B.C. extends COVID-19 indoor dining, group fitness ban until May 25

Damien Kurek
MP Damien Kurek reflects on newly-released federal budget

‘Further, they recycle old promises they have consistently failed to deliver on’

A vial of some of the first 500,000 of the two million AstraZeneca COVID-19 vaccine doses that Canada has secured through a deal with the Serum Institute of India in partnership with Verity Pharma at a facility in Milton, Ont., on Wednesday, March 3, 2021. THE CANADIAN PRESS/Carlos Osorio - POOL
Alberta begins rolling out AstraZeneca COVID vaccine for those aged 40 or older

There are more than 70 pharmacies offering AstraZeneca, including 26 offering walk-in appointments

In this image from NASA, NASA’s experimental Mars helicopter Ingenuity lands on the surface of Mars Monday, April 19, 2021. The little 4-pound helicopter rose from the dusty red surface into the thin Martian air Monday, achieving the first powered, controlled flight on another planet. (NASA via AP)
VIDEO: NASA’s Mars helicopter takes flight, 1st for another planet

The $85 million helicopter demo was considered high risk, yet high reward

FILE - Dan Smyers, left, and Shay Mooney from the band Dan + Shay perform on NBC's Today show in New York on June 28, 2019. The duo will perform at Sunday's Academy of Country Music Awards. (Photo by Charles Sykes/Invision/AP, File)
Luke Bryan wins top ACM Award, but female acts own the night

Luke Bryan wins top ACM Award, but female acts own the night

In this undated photo provided by John-Paul Hodnett are a row of teeth on the lower jaw of a 300-million-year-old shark species named this week following a nearly complete skeleton of the species in 2013 in New Mexico. Discoverer Hodnett says it was the short, squat teeth that first alerted him to the possibility that the specimen initially dubbed "Godzilla Shark" could be a species distinct from it's ancient cousins, which have longer, more spear-like teeth. The image was taken using angled light techniques that reveal fossil features underneath sediment. (John-Paul Hodnett via AP)
‘Godzilla’ shark discovered in New Mexico gets formal name

The ancient chompers looked less like the spear-like rows of teeth of related species

Alberta Biobord Corp. recently hosted a virtual open house from Stettler

The company plans to develop a fuel pellet and medium density fibre board (MDF) plant near the community

The Rogers logo is photographed in Toronto on Monday, September 30, 2019. THE CANADIAN PRESS/Tijana Martin
Rogers investigating after wireless customers complain of widespread outage

According to Down Detector, problems are being reported in most major Canadian cities

People are shown at a COVID-19 vaccination site in Montreal, Sunday, April 18, 2021, as the COVID-19 pandemic continues in Canada and around the world. THE CANADIAN PRESS/Graham Hughes
Nothing stopping provinces from offering AstraZeneca vaccine to all adults: Hajdu

Health Canada has licensed the AstraZeneca shot for use in people over the age of 18

Deputy Prime Minister and Minister of Finance Chrystia Freeland responds to a question during Question Period in the House of Commons Tuesday December 8, 2020 in Ottawa. The stage is set for arguably the most important federal budget in recent memory, as the Liberal government prepares to unveil its plan for Canada’s post-pandemic recovery even as a third wave of COVID-19 rages across the country. THE CANADIAN PRESS/Adrian Wyld
Election reticence expected to temper political battle over federal budget

Opposition parties have laid out their own demands in the weeks leading up to the budget

Most Read