(This column originally appeared in the Toronto Sun on March 6th, 2017)
In the 2015 election, Justin Trudeau’s Liberals campaigned on a simple fiscal plan. You could like it or not (and we at the Canadian Taxpayers Federation certainly did not) but at least it had the benefit of clarity: if elected, they would run three years of “modest” deficits, which in their interpretation meant no more than $10 billion in the first year and less in the next two, followed by a return to balance.
It never turned out that way, of course. In the Trudeau government’s first budget, Finance Minister Bill Morneau shattered the Liberals’ own promise in spectacular fashion, running a $29 billion deficit which did not even include any plan to return to a balanced budget. With his government’s second budget expected sometime in March, it’s time Morneau explained just how they’ll get us out of the red – that is, unless he wants us to rely on his department’s latest long-term forecast which doesn’t predict a return to balance for another 35 years, in 2052.
Normally, much of the media focus is on the size of each year’s deficit, but the real concern for taxpayers should be on the debt, which is simply the combined total of all previous deficits that are never paid off. Just like for your credit card, paying interest on your carryover balance is unpleasant – but much worse is if you never pay if off, you’ll be paying interest on it each and every month. Forever.
At the federal level, this balance has been rising. Sadly, over the past 50 years, there have only been 13 years when the debt didn’t increase: in 1970; between 1998 and 2008 (under the Chretien/Martin Liberals and the first years of the Harper Conservatives); and in 2015. Under the supposedly tight-fisted Stephen Harper, the debt rose from $481 billion to $610 billion. And under the Trudeau Liberals, it is now on pace to rise to $746 billion by 2021.
How much does this cost us? Since 1990, interest payments have cost Canadians $1 trillion. Last year alone, Canadians paid nearly $26 billion in interest – and that’s with record low interest rates. That’s far more than the $19 billion we spent last year on the Canadian Armed Forces (or to put it into further context: the GST generated $33 billion in revenue last year).
Some critics argue that focusing on the dollar figure of debt alone is unfair, and a better measure is what is known as the debt-to-GDP ratio, which measures the size of public debt relative to the size of the economy.
This is like saying that carrying a growing balance on your credit card doesn’t matter – so long as your salary keeps growing at a faster rate.
While there’s no question that a lower debt-to-GDP ratio is better than a higher one, it doesn’t change the fact taxpayers are stuck spending billions in interest that can’t be spent on anything else (or returned to struggling Canadians in the form of tax relief). Or to go back to the credit card analogy, it may be less painful to pay bigger interest payments if your salary keeps growing, but paying down and eventually eliminating your borrowed balance altogether will still save you much more in the long run.
Which brings us back to Morneau and his imminent budget. We can’t even begin to tackle the debt until we balance the budget, and Canadians deserve to hear a credible plan to get there.
It took the Harper Conservatives six years to get the federal budget back to balance – but they did get it back.
It’s time for Morneau to step up and explain how and when he plans to do the same.
