VANCOUVER—Instead of reducing the debt when the economy was growing as the Chrétien government did, the current federal government has actually increased the national debt by $84.3 billion before any COVID-19 spending is accounted for, according to new analysis by the Fraser Institute, an independent, non-partisan Canadian public policy think-tank.
“The economic crisis brought on by the response to COVID-19 is a poignant reminder that sound fiscal policies matter,” said Jason Clemens, executive vice-president of the Fraser Institute and co-author of What Would Chrétien’s Budget Rules Have Meant for Trudeau.
“Whereas the Chrétien government made a point of running surpluses and paying down the debt in good years, the Trudeau government has done the opposite.”
The new analysis highlights the fiscal performance of the Chrétien government in the mid-1990s and early 2000s and compares it to the current federal government.
Notably, the Chrétien government had as a fiscal rule a requirement to balance the budget, with the small surpluses used to pay down the national debt. And from 1996/97 through to 2007/08 successive governments followed Chrétien’s budget rules and reduced the national debt by $105.2 billion (18.7 per cent).
Crucially, that established a foundation for Canada to weather the 2008/09 recession better than almost any other industrialized country.
By comparison, the current federal government has run deficits every year since taking office and added $84.3 billion in new debt since 2015/16.
But if the current government had followed the same fiscal rules as the Chrétien government and run small surpluses—for example, the budget surpluses projected in the previous government’s 2015 budget—Ottawa would have recorded annual surpluses averaging $2.6 billion from 2015/16 to 2019/20.
Under this scenario, the federal debt going into the current recession would have stood at $617.9 billion rather than the expected $713.2 billion.
Put another way, the federal government could have implemented almost the entirety of its direct spending aid package—currently valued at approximately $108 billion—and the overall debt level of the country would be roughly at its current level.
“The Chrétien government set an example of fiscal prudence that unfortunately the Trudeau government chose not to follow,” Clemens said.
Support Canada Free Press
“If Ottawa had been more fiscally responsible over the past few years when the economy was growing, we would be in a better position now—as we were in the 2009 recession—to tackle the economic crisis unfolding as a result of COVID-19.”
Media Contact:
Jason Clemens, Executive Vice-President, Fraser Institute
jason.clemens@fraserinstitute.org
To arrange media interviews or for more information, please contact:
Bryn Weese, Fraser Institute,
bryn.weese@fraserinstitute.org
The Fraser Institute is an independent Canadian public policy research and educational organization with offices in Vancouver, Calgary, Toronto, and Montreal and ties to a global network of 86 think-tanks. Its mission is to measure, study, and communicate the impact of competitive markets and government intervention on the welfare of individuals. To protect the Institute’s independence, it does not accept grants from governments or contracts for research. Visit fraserinstitute.org.
Follow the Fraser Institute on Twitter | Like us on Facebook
