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Fraser Institute

Federal government should have taken own advice about debt accumulation

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From the Fraser Institute

Authors: Grady Munro Jake Fuss

In 2024/25 the federal government now expects to pay $54.1 billion in debt interest, or $1,331 per Canadian, which is $2.0 billion more than it plans to spend on health care transfers to provinces.

In the foreword of the Trudeau government’s recent budget, Finance Minister Chrystia Freeland declared that, “it would be irresponsible and unfair to pass on more debt to the next generations.” Minister Freeland is absolutely right—if only she had listened to her own advice.

Fairness was the purported theme of this federal budget and nearly every new policy is presented as something that will help make life fairer for Canadians—especially younger generations. But the glaring contradiction is that partly due to all of the new spending on these policies, the Trudeau government is doing the very thing it admits is “unfair” and saddling future generations with hundreds of billions in added debt.

By 2027/28, the Trudeau government plans to add $395.6 billion to the total (gross) amount of debt held federally, which is $180.0 billion more than it planned to add just last spring. Overall, gross debt is projected to increase by nearly 20 per cent over the next four years. Adjusting for population growth and inflation during this period, by the end of 2027/28 every Canadian will be responsible for $2,301 more in gross federal debt than they are currently.

Much of this added debt stems from the introduction of new programs, which have caused federal program spending (total spending minus debt interest) over the next four years to be an expected $77.2 billion higher than was forecasted last spring. And though the Trudeau government will increase capital gains taxes to try and pay for this new spending, much of the new spending will still be financed through borrowing. Indeed, combined deficits from 2024/25 to 2027/28 are $44.7 billion higher than forecasted in last year’s budget, and there is no balanced budget in sight at all.

The problem with accumulating substantial amounts of debt, and why Minister Freeland is right when she asserts that it’s “irresponsible and unfair,” is that a growing government debt burden imposes costs on Canadians now and in the future.

One of the most important consequences of government debt are debt interest payments. These interest payments represent taxpayer dollars that don’t go towards any programs or services for Canadians, and have grown to impose a significant burden on federal finances. Specifically, in 2024/25 the federal government now expects to pay $54.1 billion in debt interest, or $1,331 per Canadian, which is $2.0 billion more than it plans to spend on health care transfers to provinces.

While debt interest costs represent a more immediate impact, debt accumulated today must also ultimately be paid for by future generations, again in the form of higher taxes. In fact, research suggests that this effect may be disproportionate, with one dollar borrowed today needing to be paid back by more than one dollar in future taxes.

One study estimates that Canadians aged 16 can expect to pay the equivalent of $29,663 over their lifetime in additional personal income taxes as a consequence of rising federal debt. Older age groups shoulder a much smaller burden in comparison. A 65-year-old can expect to pay $2,433 over their lifetime in additional personal income taxes due to rising federal debt.

The outsized burden of federal debt borne by younger generations of Canadians is hardly what any reasonable person would consider “fair.”

For all its talk about fairness and helping the next generation of Canadians, the Trudeau government’s incessant spending and substantial debt accumulation will simply result in young Canadians paying disproportionately higher taxes in the future. Does that seem fair to you?

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DEI

School boards need leaders who focus on education not politics

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From the Fraser Institute

By Michael Zwaagstra

Canada’s largest school board is looking for a new leader. Colleen Russell-Rawlins, director of education of the Toronto District School Board (TDSB), will retire this fall.

To say her tenure has been controversial would be an understatement. During her three years in the top job, TDSB doubled down on its diversity, equity and inclusion (DEI) policies, with tragic consequences. Former TDSB principal Richard Bilkszto took his own life last year after facing relentless harassment from other administrators for challenging DEI orthodoxy during a professional development session.

The harms caused by DEI extend even further. Two years ago, TDSB voted to abolish its merit-based admissions policy at specialized arts and sports schools in the name of “equity.” Parents of students in these schools were not happy about this erosion of standards. After spending years building up these specialized schools, TDSB is now tearing them down.

Add to this the ongoing harassment of Jewish students in TDSB schools and the failure of administrators to crack down on employees who disseminate blatantly anti-Israel propaganda. Expect things to get even worse if trustees replace Russell-Rawlins with someone with a similar mindset and approach.

Unfortunately, this is exactly what will happen if TDSB follows the guidelines provided by the Ontario Public Supervisory Officers’ Association (OPSOA), the organization representing superintendents and directors of education in Ontario.

To be eligible for the position, prospective directors of education must complete the OPSOA’s Supervisory Officer’s Qualification Program. However, this program looks like a woke propogandist’s dream. According to the OPSOA’s website, the qualification program focuses on “anti-oppression, anti-racism, [and] anti—colonialism.” No wonder education directors appear obsessed with these topics.

Education Minister Stephen Lecce has stated that he wants school boards to focus more on academics. He’s even gone so far as to publicly rebuke school boards that get mired in debates over secondary issues such as masks or transgender policy. Lecce is right to be concerned. From 2003 to 2022, Ontario’s PISA math test scores declined from 530 to 495. That’s the equivalent of nearly two years of learning loss. Clearly, something needs to change.

However, things will only change for the better when school boards start hiring education directors who reject DEI ideology and who put academics first. This means choosing men and women who haven’t climbed the career ladder by pushing DEI initiatives.

At a minimum, the province must drop the requirement for education directors to hold supervisory officer’s qualifications. Making the completion of a program replete with DEI buzzwords such as “anti-oppression” and “anti-colonial” mandatory is a surefire way to ensure that education directors will focus on non-academic issues.

Fortunately, the Ford government has started making at least some changes. Back in 2020, Ontario removed the requirement for directors of education to be former teachers. Considering the uselessness of most Bachelor of Education courses, it’s legitimate to ask why anyone would need an education degree to run a school board.

Obviously, none of this means that qualifications don’t matter. The Ford government’s recent announcement that all future teachers must pass a math proficiency test shows that basic competency matters. People working for school boards, particularly those in the top job, must also be familiar with the education system and know how to lead effectively.

It’s important to remember why we have schools in the first place. The purpose of education is to help students master the academic basics, acquire important life skills, and become responsible Canadian citizens—not to indoctrinate students into woke ideology.

Schools can only function if they have the trust of the communities they serve. If parents feel that teachers are ignoring their concerns or are disrespecting their beliefs, they will pull their kids out of the government school system and pursue other educational options. While parents should always have this right, it’s unfortunate when they are forced into it by administrators who are hostile to their values.

TDSB trustees have a real opportunity to make a change for the better by hiring an education director with a track record of putting academics first. Otherwise, TDSB will continue its downward spiral.

Real change starts at the top. Hopefully, TDSB trustees realize the importance of the decision they are about to make and hire the right person for the job.

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Fraser Institute

Scathing auditor general reports underscore political realities

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From the Fraser Institute

By Jake Fuss

Nearly 20 per cent of the SDTC projects examined by the AG were in fact ineligible (based on the government’s own rules) for funding, with a total price tag of $59 million. There were also 90 instances where the SDTC ignored conflict of interest provisions while awarding $76 million to various projects. Indeed, the AG found 63 cases where SDTC agency directors voted in favour of payments to companies in which they had declared interests.

If you needed more proof that the Trudeau government is misusing taxpayer money, the auditor general (AG) just released two scathing reports about improper contracting practices, conflict of interest, and funding provided for ineligible projects. Clearly, politicians and bureaucrats in Ottawa do not always act in the best interest of Canadians.

According to the first AG report, Sustainable Development Technology Canada (SDTC), the federal agency responsible for funding green technology projects, demonstrated “significant lapses… in governance and stewardship of public funds.” Nearly 20 per cent of the SDTC projects examined by the AG were in fact ineligible (based on the government’s own rules) for funding, with a total price tag of $59 million. There were also 90 instances where the SDTC ignored conflict of interest provisions while awarding $76 million to various projects. Indeed, the AG found 63 cases where SDTC agency directors voted in favour of payments to companies in which they had declared interests.

The second AG report focused on 97 contracts totalling $209 million awarded by the federal government to the McKinsey & Company consulting firm from 2011 to 2023. According to the AG, the government demonstrated “frequent disregard for procurement policies and guidance and that contracting practices often did not demonstrate value for money.” About 70 per cent of these contracts were awarded non-competitively—meaning no other companies were permitted to bid on the contracts.

These findings also follow an earlier report in February that found the federal government “repeatedly failed to follow good management practices in the contracting, development, and implementation” of the ArriveCAN mobile app, which cost Canadian taxpayers at least $59.5 million.

While the Trudeau government’s record-high levels of spending have made it clear that taxpayer money is being dished out left and right without much regard for the consequences for future generations of Canadians, the AG reports reveal chronic mismanagement, little accountability, and decision-makers acting in their own interests.

Government officials are handing huge sums of taxpayer money to people or companies who spend it without proper transparency or oversight. When considering these findings, Canadians should be skeptical of any politician or commentator who downplays government excesses or says we can’t reduce federal spending.

It’s also naïve to think that politicians and bureaucrats are benevolent civil servants who simply want to make the world a better place. In reality, like most people, they’re human beings motivated by self-interest.

James Buchanan, who won the Nobel Prize in economics in 1986, explained these concepts when pioneering a branch of economics called Public Choice Theory, which pays particular attention to the incentives policymakers face.

Politicians do not always act in the best interest of their constituents, and bureaucrats do not always act in the best interests of the public.

Why? Because it’s often in their interest to make decisions that benefit themselves, family members, friends or other cronies. If you decide to give money to companies despite a conflict of interest or if you award contracts to friends, you’re not making decisions in the best interest of society. People don’t suddenly become selfless when they enter the government sector. They respond to the same incentives as everyone else. The latest AG reports underscore this reality.

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