The freebies are already pouring forth from the Trudeau government in the lead up to the April 14 federal budget announcement. So far their pre-announcements include free contraceptives and more free child care, but expect more giveaways over the next couple of weeks as the Liberals do all they can to try and woo voters back.
What we shouldn’t expect though are any signs of fiscal restraint from what could be described as Trudeau’s “desperation budget,” given his dreadful showing in the polls.
The deficit in Canada is climbing once again as interest rates rise. A recent Statistics Canada report revealed that the feds are now spending 10 percent of all revenue raised on interest payments on our debt. In the last fiscal quarter alone, we spent nearly $25 billion on interest payments.
It’s a staggering amount. For comparison, the City of Toronto’s entire yearly operating budget is $17 billion. This is taxpayer money that could be going to services we actually rely on. It could be fixing health care or infrastructure. Or it could be given back to Canadians in the form of tax relief.
Almost a decade ago, Justin Trudeau pledged to run modest deficits of only $10 billion per year, for just a couple of years, and then promptly return Canada to surplus. How things have changed. Trudeau—who was the leader of the third-place Liberals at the time of the 2015 election when he made that promise—never did stick to it. (The phrase “modest” was his, not mine. There’s nothing modest about spending billions more than you bring in.)
Trudeau and former Finance Minister Bill Morneau quickly doubled and almost tripled that figure in some years, and got nowhere close to balancing the books.
It was clear at the time that it wasn’t a wise decision. The federal government had recent experience with not one but two examples of bringing in much-needed fiscal sanity. First, there were the 1990s budgets of Liberal Prime Minister Jean Chretien and Finance Minister (later PM himself) Paul Martin. The debt was getting unmanageable. Wall Street didn’t even want to issue bonds to Canada. Things were getting rocky. So they worked hard to right the ship and bring things back to balance.
When Stephen Harper became PM after Martin, he likewise had no appetite for deficits. But the financial crisis of 2008 happened and he had little choice. Harper, though, wanted out of deficit as soon as possible. He wasn’t happy to wallow in the red. And so Harper’s last budget in 2015, led by Finance Minister Joe Oliver, saw Canada in surplus. We haven’t seen black since then, however.
There’s an old saying that you pay down the debt when times are good because you never know when truly bad times are just around the corner. This is the ultimate folly of Trudeau’s early deliberate deficits, when he squandered the good books passed on to him by Harper and Oliver.
If he had been a more responsible steward of the public purse in his first term, the federal government would have been in a better position to deal with the financial shocks that the COVID-19 situation resulted in, with massive spending followed by major interest rate hikes.
Trudeau still has no plan to balance the books, with Liberal financial projections showing red for the foreseeable future. Big deficits are the plan for the years ahead.
There will come a time when we just can’t carry the debt burden anymore. The consequences on our economy will become significant and further erode our standard of living. Not a week goes by now without a major figure in the financial world warning of impending doom.
“I predict that the next 10 years will be the Decade of Debt,” said Arthur Laffer Jr., a prominent investment voice in the United States, on CNBC the other day. “Debt globally is coming to a head. It will not end well.”
That’s just one example. These sorts of pronouncements are becoming all too common. Sooner or later, they’re going to come true.
We have a major debt problem. We’re wasting untold billions of hard-earned taxpayer dollars on debt payments while we are failing to maintain basic services across the country.
Trudeau could use the upcoming budget to signal the beginning of a course correction. But don’t hold your breath.
