Economy
If Canadian families spent and borrowed like the federal government, they would be $427,759 in debt
From the Fraser Institute
By Grady Munro and Jake Fuss
If the median Canadian family spent and borrowed like the federal government, they would already be $427,759 in debt and continuing to borrow, finds a new study published today by the Fraser Institute.
“If the median family in Canada spent and borrowed like the federal government, they would be in serious financial trouble,” said Grady Munro, a Fraser Institute policy analyst and co-author of Understanding the Scale of Canada’s Federal Deficit.
The $39.8 billion deficit expected by Ottawa in 2024/25 represents the 17th consecutive annual federal deficit, with continued deficits expected into the foreseeable future, eventually resulting in higher taxes for Canadians.
Continuous annual borrowing by Ottawa to finance increased spending has driven federal total debt from 53.0 per cent of the economy ($1.1 trillion) in 2014/15 up to an expected 69.8 per cent ($2.1 trillion) in 2024/25.
To put this into perspective, the study’s analysis offers an example of what a median family’s household finances would look like if they were to spend and borrow like the federal government in 2024.
The study found that the median Canadian family in 2024 would spend $109,982 while only earning $101,821, meaning that it would borrow $8,161 just to pay for its normal spending. This $8,000-plus in additional debt is on top of the $427,759 in existing debt the family would already hold based on previous borrowing.
Illustrative of the burden of debt, $11,066 of the family’s income, representing almost 11 per cent, would be spent on just the interest costs of existing debt.
“Unlike most households, where debt is often offset by assets such as a home or investments, the federal government has little in the way of assets to offset its enormous debt,” said Jake Fuss, director of fiscal policy at the Fraser Institute and coauthor. “And it’s important to note that this government debt burden on Canadian families does not include the burden of provincial and municipal government debt, which depending on one’s location, can be significant.”
- For many years the federal government’s approach to government finances has relied on spending-driven deficits and a growing debt burden, causing a deterioration in the state of federal finances.
- While deficits can sometimes be justified in certain circumstances, perpetual spending-driven deficits have become the norm rather than a temporary exception for the federal government. The $39.8 billion deficit expected in 2024/25 is the 17th consecutive annual deficit, and deficits are expected to continue into the foreseeable future.
- Deficits have helped drive federal gross debt from 53.0% of the economy ($1.1 trillion) in 2014/15 up to an expected 69.8% ($2.1 trillion) in 2024/25.
- This increase in the level of federal debt comes with costs and will result in higher taxes on Canadians.
- It may be hard to comprehend the scale of the deficits and debt, so to contextualize the current state of federal finances this bulletin provides an example of what a median family’s household budget would look like in 2024 if it managed its finances the way the federal government does.
- The median family earning $101,821 in 2024 would be spending $109,982 if it spent the way the federal government does. To cover the difference, it would put $8,161 on a credit card, despite already being $427,759 in debt.
- Of the total amount spent, $11,066 would go towards interest on the debt his year. Simply put, a Canadian family that chose to spend like the federal government would be in financial trouble.
Authors:
From the Fraser Institute
In case you haven’t heard, the Trudeau government has proposed a new set of “Clean Electricity Regulations” (CERs) to purportedly reduce the use of fossil fuels in generating electricity. Basically, the CERs would establish new standards for the generation of electricity, limiting the amount of greenhouse gases that can be emitted in the process, and would apply to any unit that uses fossil fuels (coal, natural gas, oil) to generate electricity.
The CERs would hit hardest provinces that rely on fossil fuels to generate electricity: Alberta (89 per cent fossil fuels), Saskatchewan (81 per cent), Nova Scotia (76 per cent) and New Brunswick (30 per cent). Not so much Ontario (7 per cent) and Quebec (1 per cent), which are blessed with vast hydro potential.
In theory, the government has been in “consultation” with electricity producers and the provinces that will be most impacted by the CERs, although some doubt the government’s sincerity.
For example, according to Francis Bradley, CEO of Electricity Canada, which advocates for electricity companies, there is “insufficient time to analyze and provide feedback that could meaningfully impact the regulatory design” adding that the “engagement process has failed to achieve its purpose.” And consequently, the current design of the CERS may impose “significant impairments to the reliability of the electricity system and severe affordability impacts in many parts of the country.”
This was not the first time folks observed a lack of meaningful consultation over the CERs. Earlier this year, Alberta Environment Minister Rebecca Schulz told CBC that an update to the CERs made “no meaningful corrections to the most destructive piece of Canadian electricity regulation in decades” and that CERs “would jeopardize reliability and affordability of power in the province.”
Simply put, with CERs the Trudeau government is gambling with high stakes—namely, the ability of Canadians to access reliable affordable electricity. Previous efforts at decarbonizing electrical systems in Ontario and around the world suggest that such efforts are relatively slow to develop, are expensive, and are often accompanied by periods of electrical system destabilization.
In Ontario, for example, while the provincial government removed coal-generation from its electricity generation from 2010 to 2016, Ontario’s residential electricity costs increased by 71 per cent, far outpacing the 34 per cent average growth in electricity prices across Canada at the time. In 2016, Toronto residents paid $60 more per month than the average Canadian for electricity. And between 2010 and 2016, large industrial users in Toronto and Ottawa experienced cost spikes of 53 per cent and 46 per cent, respectively, while the average increase in electric costs for the rest of Canada was only 14 per cent. Not encouraging stats, if you live in province targeted by CERs.
Reportedly, the Trudeau government plans to release a final version of the new CERs rules by the end of this year. Clearly, in light of the government’s failure to meaningfully consult with the electrical-generation sector and the provinces, the CERs should be put on hold to allow for longer and more sincere efforts to consult before these regulations go into effect and become too entrenched for reform by a future government.
Otherwise, Canadians may pay a steep price for Trudeau’s gamble.
Author:
Haulage bridge at Cando Rail & Terminals’ Sturgeon Terminal in Alberta’s Industrial Heartland, near Edmonton. Photo courtesy Cando Rail & Terminals
From the Canadian Energy Centre
By Will Gibson
Cando Rail & Terminals to invest $200 million to support Dow’s Path2Zero petrochemical complex
A major rail hub in Alberta’s Industrial Heartland will double in size to support a new carbon-neutral plastic production facility, turning the terminal into the largest of its kind in the country.
Cando Rail & Terminals will invest $200 million at its Sturgeon Terminal after securing Dow Chemical as an anchor tenant for its expanded terminal, which will support the planned $8.9 billion Path2Zero petrochemical complex being built in the region northeast of Edmonton.
“Half of the terminal expansion will be dedicated to the Dow project and handle the products produced at the Path2Zero complex,” says Steve Bromley, Cando’s chief commercial officer.
Steve Bromley, chief commercial officer with Cando Rail & Terminals.
By incorporating carbon capture and storage, the complex, which began construction this spring, is expected to be the world’s first to produce polyethylene with net zero scope 1 and 2 emissions.
The widely used plastic’s journey to global markets will begin by rail.
“Dow stores their polyethylene in covered railcars while waiting to sell it,” Bromley says.
“When buyers purchase it, we will build unit trains and those cars will go to the Port of Prince Rupert and eventually be shipped to their customers in Asia.”
A “unit train” is a single train where all the cars carry the same commodity to the same destination.
The expanded Cando terminal will have the capacity to prepare 12,000-foot unit trains – or trains that are more than three-and-a-half kilometers long.
Construction will start on the expansion in 2025 at a 320-acre site west of Cando’s existing terminal, which 20 industrial customers use to stage and store railcars as well as assemble unit trains.
Bromley, a former CP Rail executive who joined Cando in 2013, says the other half of the terminal’s capacity not used by the Dow facility will be sold to other major projects in the region.
The announcement is the latest in a series of investments for Cando to grow its operations in Alberta that will see the company spend more than $500 million by 2027.
The company, which is majority owned by the Alberta Investment Management Corporation previously spent $100 million to acquire a 1,700-railcar facility in Lethbridge along with $150 million to build its existing Sturgeon terminal.
Cando Rail’s existing Sturgeon Terminal near Edmonton, Alberta. Photo courtesy Cando Rail & Terminals
“Alberta is important to us – we have 300 active employees in this province and handle 900,000 railcars annually here,” Bromley says.
“But we are looking for opportunities across North America, both in Canada and the United States as well.”
Cando released the news of the Sturgeon Terminal expansion at the Alberta Industrial Heartland Association’s annual conference on Sept. 19.
“This is an investment in critical infrastructure that underpins additional growth in the region,” says Mark Plamondon, the association’s executive director.
The announcement came as the association marked its 25th anniversary at the event, which Plamondon saw as fitting.
“Dow’s Path2Zero came to the region because of the competitive advantages gained by clustering heavy industry. Competitive advantages are built from infrastructure that’s already here, such as the Alberta Carbon Trunk Line, which transports and stores carbon dioxide for industry,” he says.
“Having that level of integration can turn inputs into one operation into outputs for another. Competitive advantages for one become advantages for others. Cando’s investment will attract others just as Dow’s Path2Zero was a pull for additional investment.”
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