Report Points to Risks in Canada’s Finances

A couple of days before the last federal election, (former premier) Stephen Harper said the economic plan Justin Trudeau was pitching to the electorate was “all unicorns and rainbows.” While it can take decades to learn the long-term ramifications of economic decisions made today, a recent paper by the federal department of finance has given weight to the former prime minister’s assessment a year and a half ago.

The report says our debt is on track to hit $1 trillion within 15 years. It says the budget won’t be balanced until 2055. It says the important debt-to-GDP ratio won’t be going down as the Trudeau said it would, AAP reported.

This contradicts key promises Prime Minister Trudeau made during the election campaign and calls all of his numbers into question.

The government paper was released two days before Christmas, at a time when hardly any politician, staffer or media were around to notice it.

After reading its shocking contents, it can be seen why the Liberal government wanted to bury it.

It arrives at its long-term economic projections using the fiscal trends Trudeau’s Liberal government has put in place.

After its authors added into the mix Canada’s aging population and the fact fewer workers will be supporting the services upon which upcoming retirees rely, they concluded Canada’s finances are on shaky ground.

They write that if growth is lower than expected—which happens all the time—and if program spending goes up by more than a minimal amount—which also happens regularly—this “would be sufficient to put at risk the fiscal sustainability of the federal government.”

This doesn’t mean the government’s going to go bankrupt. As Carleton University business professor Ian Lee said, as a sovereign state, “we can print our own money to get ourselves out of financial troubles even as large as this”. But, he added, “we’ll pay a price if it gets to that point. We’ll turn into a country like Greece, where taxes will need to be raised at the same time as entitlements are cut. Whoever buys our bonds will demand a steep rate of return to make up for the fact we can’t be trusted to pay our bills. It’ll be a mess.”

During the last campaign, Trudeau got the electorate on board with the idea it was good practice to run what he called “modest” deficits when we’re not in a recession.

The bigger problem is that Trudeau’s promised “modest” deficits have already grown to be far from modest. “We’re now looking at close to $30 billion for just one fiscal year. It’s exactly what this report, by Trudeau’s own finance department, cautions against.”

The pressure is now on for the government to alter their fiscal path and steer clear of unicorns and rainbows.