Canadian governments ought to get serious about bringing down debt
Without a doubt, Canadian governments should take debt reduction seriously. In reference to this, it is well known that Canadian governments will soon present their tax and expenditure plans in their 2020 budgets. This year’s budget season offers an opportunity for federal and provincial governments to reverse the trend of accumulation of debt we have seen for more than a decade.
It should be noted that since 2007–08, the combined federal and provincial government net debt has grown to $ 1.5 trillion from $ 837.0 billion, an increase of more than $ 650 billion in 12 years, largely due to increased spending public. In other words, the current federal-provincial net debt is broken down into $ 39,483 of government debt for each man, woman and child in Canada.
While nominal levels of federal and provincial debt increased in all provinces between 2007–08 and 2019–20, Canadians face different debt burdens depending on where they live.
Levels of debt that vary and burden of debt that is unevenly distributed
A fact that is important to mention is that the levels of provincial debt vary widely while the burden of federal debt is unevenly distributed among the provinces.
Now, the debt / GDP ratio is another way to compare public debt between provinces and assess the sustainability of debt accumulation. According to this measure, Ontario has the highest debt burden combined with 75.4 percent of the economy, followed by Newfoundland with 73.6 percent.
Thus, it is understood that at the national level, the combined ratio of federal-provincial net debt to GDP in Canada is projected to increase to 64.3 percent in 2019–20 from 53.1 percent in 2007–08. And this growth is likely to continue in the future.
Likewise, without changes in policies, the current projections of the Department of Finance suggest that the federal government will not balance its budget until 2040, while several provinces are likely to continue accumulating debt in the foreseeable future.
For starters, governments must pay interest on their debt, just as households must pay interest on mortgages, vehicle purchases, and credit cards. Together, the federal and provincial governments spend almost $ 55 billion in annual interest payments, leaving fewer resources for tax cuts or government programs, such as medical care, education, and social services.
Source: Jake Fuss and Milagros Palacios | The Globe and Mail