By Fraser Institute ——Bio and Archives--December 6, 2022
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(1) a debt reduction target, (2) a ceiling on the ratio of interest payments to revenues, and (3) a balanced budget rule. Balancing budgets could be achieved under this rule by either spending restraint or tax increases.The study finds that balancing the budget (excluding interest costs) through spending restraint is the best fiscal rule for Canadian governments to adopt. Such a fiscal rule has a number of benefits:
“Canadian governments should adopt clear fiscal rules as soon as possible to return Canadian government finances to sustainability,” commented Bev Dahlby, senior fellow with the Fraser Institute and co-author.
- Sustainability for future generations: Better fiscal policies now mean less of a debt burden for young Canadians in the future.
- Better economic growth: Deficit-financed spending by governments crowd out private sector investment and activity that would otherwise occur, harming economic growth.
- Allows more household spending: When governments balance their budgets through spending restraint, it leaves more money for households.
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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.
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