Opinion: It's official — Trudeau has now literally doubled down on debt
Special to Financial Post | Franco Terrazzano
5 min read
Prime Minister Justin Trudeau in Vancouver, B.C., on Sept. 12. (Credit: Ethan Cairns/The Canadian Press files)
By Franco Terrazzano
Pop the champagne! It’s now official. Prime Minister Justin Trudeau has doubled the federal debt. It took nearly two dozen prime ministers and a century and a half for the federal government to rack up $616 billion in debt, which is where the total stood before Trudeau’s first year in office. But less than a decade later, on Aug. 30 of this year, the debt has officially doubled to $1.232 trillion. That’s according to calculations done by the Canadian Taxpayers Federation based on annual debt increases outlined in the government’s latest budget.
The Trudeau government’s debt binge has had, and will continue to have, a material impact on Canadians’ lives.
We all want to leave our kids and grandkids a bright financial future. But a baby born today is already on the hook for about $30,000 in federal government debt. That debt may never fully be paid back: Canada’s federal debt has never been zero, though at times it has been very low. But even if it’s entirely rolled over and not a penny of it paid back, the debt will generate continuing interest payments, which means higher taxes for future generations unless future governments cut spending and run surpluses.
In this regard, the future looks bleak. New data from the Parliamentary Budget Officer doesn’t see a balanced federal budget until 2040. That would mean another $296 billion added to the debt between now and then — even assuming the government introduces no new spending and the economy grows for 16 years straight.
The federal government’s debt interest charges already cost taxpayers more than $1 billion every week. The government now wastes more money servicing the debt than it sends to the provinces in health transfers. Paying debt interest takes every penny collected from the GST.
Over the next 15 years, debt interest charges will cost taxpayers $847 billion, according to PBO projections. That’s more than $18,000 for every Canadian.
Big deficits also make it more likely the government will raise taxes, as evidenced by this year’s capital gains tax hike. “Canada could finance these critical investments by taking on more debt, but that would place an unfair burden on younger generations,” Finance Minister Chrystia Freeland said while introducing her capital gains tax hike, trying to sell Canadians on the idea that tax hikes are necessary to keep the debt from spiralling further. But what the tax hike really illustrates is how the government has a spending problem, not a revenue problem.
The capital gains increase is expected to take $6.9 billion from taxpayers this year. But with spending slated to be $535 billion, the government will burn through that new cash in just five days.
Whatever Liberals may say, blame for this fiscal dumpster fire can’t be put on the pandemic. In the 2015 campaign, candidate Trudeau promised to balance the budget in 2019. He broke that promise from the get-go and instead ran a $20-billion deficit before the pandemic struck. The Trudeau government was spending at all time-highs in 2018, even after accounting for inflation and population growth. And truly “all-time”: inflation-adjusted per capita spending was higher than in any year since 1867, including years of economic depression and world war.
The pandemic then led to a debt-fueled spending spree, with $576 billion of new spending announced while it was on. Of that new spending, however, $205 billion was for “non-COVID-19 measures,” according to the PBO.
You may believe such a high level of spending was warranted, even though the auditor general found $32 billion — 15 per cent — of pandemic subsidies went to ineligible or suspicious recipients. You may even believe there was no way to cut other areas of the budget to fund pandemic subsidies, even though families and businesses make these tough decisions all the time. But, as the PBO says, $205 billion of new spending announced during the pandemic — 35 per cent of the total — had nothing to do with the pandemic. A pandemic was an awful thing to waste, the big spenders in the Liberal party clearly decided. And spending is still ballooning.
Last year the government did promise to find $15 billion in savings over five years. How is that going? Well, the government increased spending by $24 billion last year and plans to increase it another $111 billion over the next five years. Best-case scenario? The new grand total is $15 billion less than it could have been. But it’s still through the roof.
With the debt doubled in less than a decade, debt interest blowing a $1-billion hole in the budget every week and the government on track to run deficits for the next 16 years, taxpayers have many reasons to be pessimistic. This government has proved beyond a reasonable doubt that it doesn’t care about fiscal responsibility.
But here’s a reason to be optimistic: things aren’t too far gone, yet. The federal government could reverse its capital gains tax hike and still balance the budget next year if it stuck to its spending plan from just two budgets ago. And nobody was screaming about austerity when Chrystia Freeland tabled her 2022 budget.
After a decade of runaway government borrowing, limiting spending growth isn’t enough. Canadians need the government to actually cut spending.
Franco Terrazzano is federal director of the Canadian Taxpayers Federation.
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