Election calls come before a fallout from record deficits and debt hits: Analysts


Opinion polls show that the majority of Canadians are concerned about federal debt and deficits, but the bounce from bloated debt hasn’t had a big impact yet, so the problem is postponed during the elections. Can be, says veteran political economy analysts.

The Trudeau government has borrowed heavily to respond to the pandemic, causing a $ 354 billion deficit in 2020-21 and is expected to reach a deficit of $ 154.7 billion this year. According to a May Nanos poll, nearly three-quarters (74%) of Canadians say they are concerned about the size of their current deficit.

Tom Flanagan, an emeritus professor of political science at the University of Calgary, says the spending party will continue until election day and the hangover will be left at some point in the future.

“They just sent an announcement that they are giving $ 500 to all their seniors. [Old Age Security]”Flanagan said in an interview.

“The CRB will be gone in September, so I’m sure they’re trying to get it. [election] Before they start finishing some of the temporary programs. But even after the temporary program ended, they produced huge structural deficits. “

Last spring’s federal budget resulted in $ 100 billion in new spending, including an additional $ 30 billion for childcare and a $ 17 billion for the environment. Parliamentary budget officials say that without changing direction, annual government revenues will not overtake spending until 2070. By that time, Canadians will pay $ 3.8 trillion in interest.

“As long as it’s a multi-billion dollar news article, it’s just a number, and I think that’s why the Liberal Party is hitting the elections right now. Before the results begin to appear, they say it. Must be retained, “Flanagan said.

“When interest rates start to skyrocket, consumer costs, the Cost of Living index soar, when taxes rise to cover it, it’s when people start to notice.”

Steven Ambler, Chairman of the CD Howe Institute’s Monetary Policy, agrees that low interest rates limit the impact of Canada’s debt.

“Payment of debt repayments is much easier because interest rates are so low, which seems to have led to complacency for federal parties, especially the Liberal Party,” Ambler said in an interview.

At a press conference shortly after the election, Conservative leader Erin O’Toole renewed his pledge to return Canada to a balanced budget within 10 years. In a conservative economic plan, stimulus measures need to be “targeted to avoid structural deficits” and “to earn income for government services that Canadians depend on, the economy. Need to grow again. “

“they [Conservatives] Don’t say whether it’s due to tighter government control, or by lowering tax rates, rationalizing the tax system, and letting private companies invest and grow that way.It’s a small-c conservative approach, but it’s not [say that].. It’s very vague, “said Ambler.

High government spending is always a problem, even without red ink, according to Ambler.

“There seems to be a pretty strong relationship across time and country, which means that government spending on GDP of up to 25% will have a negative impact on growth. And we are certainly now. I’m at the stadium, “he said.

He mentioned Jean Chrétien’s efforts to balance the budget after the debt-to-GDP ratio reached 66.6% in 1995.

“I actually have a lot of praise for Paul Martin as the Chrétien administration and the Minister of Finance. They basically planned and implemented. And the plans at the time were not just a part, but a lid. Was to do [government spending in] Regarding GDP, it’s about growth in real spending. “

Mr Flanagan said the Liberal Party of Chrétien had “more or less” diverted the reform party’s deficit elimination plan that he and Stephen Harper had created “behind the napkin” in 1993. Budget for NDP to maintain balance of power.

“The majority of liberals may find it easier to shut down temporary programs, but they still can’t bring us closer to balance, and because you have the power and responsibility to separate. , It’s the worst of all possible worlds. NDPs don’t have to be responsible for governments, but they have the power to influence government spending to get their support, “he said. Said.

Debtclock.ca, run by the Canadian Taxpayer Federation, has a federal net debt of $ 1.13 trillion, with an average Canadian cost of $ 29,883. Debt grows to $ 424 million daily and over $ 17 million per hour. On August 10, CTF announced a cross-country billboard and social media campaign to publicize this issue.

Lee Harding

Lee Harding is a Saskatchewan-based journalist and think tank researcher and contributor to The Epoch Times.