Higher deficit-financed spending by provincial governments leads to 26% higher taxes and 10% higher debt interest costs, historical analysis shows
“The evidence is clear—despite the rhetoric, even temporary deficit-financed government programs impose significant future costs on taxpayers,” said Bev Dahlby, Fraser Institute senior fellow and study co-author.
By Fraser Institute —— Bio and Archives--May 2, 2023
Canadian News, Opinion | Comments | Back To Full Article
CALGARY—Despite misperceptions that government deficits have no cost, higher deficit-financed spending by provincial governments over the past 50 years has led to higher taxes and higher debt-servicing costs, according to a new study released today by the Fraser Institute, an independent, non-partisan, Canadian public policy think-tank.
“Governments that run ongoing deficits ultimately have to face the fiscal music in the form of higher taxes and higher debt interest payments for future taxpayers,” said Ergete Ferede, a senior fellow at the Fraser Institute and co-author of How Provincial Governments Respond to Fiscal Shocks and Federal Transfers.
The study analyzes provincial government finances between 1966/67 and 2020/21 and finds that for every $1 increase in per-capita deficit-financed program spending, there was a corresponding increase in taxes of 26 cents and 10 cents in higher debt servicing costs in the future.
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