Canadian debt crisis: Trudeau burdening future generations with higher interest costs and even higher taxes
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Pop the campaign; it’s official: Prime Minister Justin Trudeau doubled the federal debt.
It took nearly two dozen prime ministers and a century-and-a-half to rack up $616 billion in debt, where the total stood before Trudeau’s first year in office.
Less than a decade later, on Aug. 30 of this year, Trudeau officially doubled the debt to $1.232 trillion.
Trudeau’s debt binge has a material impact on Canadians’ lives.
First, Canadians want to leave their kids and grandkids with a bright financial future.
But a baby born today is already on the hook for about $30,000 in federal government debt. That debt must be paid back with interest, which means higher taxes for future generations unless future governments cut spending.
The future looks bleak.
New data published by the Parliamentary Budget Officer (PBO) forecasts the next federal balanced budget in 2040. That would mean another $296 billion added to the debt.
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And even that balanced budget projection won’t materialize if the government introduces new spending and the economy doesn’t grow for 16 years straight.
Second, more debt means more money wasted on interest charges.
The federal government’s debt interest charges cost taxpayers more than $1 billion every week.
The government now wastes more money servicing the debt than it sends to the provinces in health transfers. In fact, it takes every penny collected from the GST to pay the interest on the debt.
According to PBO projections, debt interest charges over the next decade-and-a-half will cost taxpayers $847 billion. That’s a cost of more than $18,000 for every Canadian.
Third, big deficits make it more likely the government will take more money from Canadians, as evidenced by this year’s capital gains tax hike.
“Canada could finance these critical investments by taking on more debt, but that would place an unfair burden on younger generations,” Finance Minister Chrystia Freeland said while introducing her capital gains tax hike.
That tax hike was sold to Canadians, in part, to keep the debt from spiralling further. But it illustrates how the government has a spending problem, not a revenue problem.
The capital gains tax hike is expected to take $6.9 billion from taxpayers this year. But with the government spending $535 billion, it will burn through that cash in five days.
Trudeau can’t lay the blame for this fiscal dumpster fire on the pandemic.
Trudeau promised to balance the budget in 2019. He broke that promise and instead ran a $20-billion deficit before the pandemic struck.
In fact, the Trudeau government was spending at all-time highs in 2018, even after accounting for inflation and population growth. That means the Trudeau government was spending more money than the government did during any year of the world wars or past recessions.
Trudeau then used the cloud of a pandemic to go on a debt-fueled spending spree.
The federal government announced $576 billion in new spending during the pandemic. Of that new spending, $205 billion was for “non-COVID-19 measures,” according to the PBO.
You may believe that a high level of spending was warranted, even though the auditor general found $32 billion – 15 percent – of pandemic subsidies went to ineligible or suspicious recipients.
You may even believe there was no way to cut other areas of the budget to fund pandemic subsidies, even though families and businesses make these tough decisions all the time.
But $205 billion, or 35 percent, of new spending announced during the pandemic had nothing to do with the pandemic.
And spending is still ballooning.
Last year, the government promised to find $15 billion in savings over five years.
How is that going? Well, the government increased spending by $24 billion last year and plans to increase spending by another $111 billion over the next five years.
Taxpayers have many reasons to be pessimistic.
Trudeau doubled the debt in less than a decade. Debt interest charges blow a $1-billion hole in the budget every week. The government is on track to run deficits for the next decade and a half. And this government has proven it doesn’t care about fiscal responsibility.
But here’s a reason to be optimistic: things aren’t too far gone, yet.
The federal government could reverse its capital gains tax hike and still balance the budget next year if it stuck to its spending plan from just two budgets ago. And nobody was screaming about austerity when Trudeau tabled his 2022 budget.
After a decade of runaway government borrowing, limiting spending growth isn’t enough. Canadians need the government to cut spending.
Franco Terrazzano is the Federal Director of the Canadian Taxpayers Federation.
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