How Does A Country Of Just 33 Million People Run Up A $614 BILLION Federal Government Debt and $1.1 TRILLION Debt With Provincial Debt Added?


I should start off today’s blog by sharing my perspective on the difference between the nation’s “Deficit” and the nation’s “Debt“.

Our (yes it is yours and mine) “deficit” is “the amount by which government spending exceeds its revenues in any given year“.

Our “public debt” is “the total of all past deficits and surpluses since Confederation“.

My research has shown that Canada’s federal debt now totals approximately “$614 billion Dollars” and when we add our Provincial and federal debt together, it totals around $1.1 trillion.

Now, debt is not a one pony show!  There is “Marketable Debt“, or market debt, which is debt issued by the Government of Canada and sold via public tender or syndication. These issues can be traded between investors while outstanding.

Then there is “Non-Market Debt” referred frequently to as the government’s internal debt, which is, federal public sector pension liabilities and the government’s current liabilities (accounts payable, accrued liabilities, interest payments and payments of matured debt).

The term “Crowding out” is an economic term used to describe what happens when a big borrower (such as the government) borrows massive amounts of money from the banking system.

Massive government borrowing tends to increase the demand for loanable funds, which in turn creates upward pressure on interest rates. The higher interest rates tends to discourage private borrowing. Thus private borrowers tend to be “crowded out” of the loanable funds market.

So my research suggests that  massive public borrowing tends to make it more difficult for private businesses and consumers to borrow funds.

So, my question today is, “with a federal and provincial deficit surpassing $1.1 Trillion Dollars, how is it that our government just dropped interest rates again by 0.5% this month”?

What all of this says to me is that we as a society are living off of credit for which future generations are going to be held accountable!

So, to put it mildly, we have a situation where the people borrowing the money don’t have to pay it back, they can leave that for their kids to do or their kid’s kids!

And if I got this right, “Government debt is owed and paid by all Canadian taxpayers“.  The thing that catches me off guard here is that “only those Canadians who actually hold government bonds and treasury bills receive interest and principal payments on this debt“.  So, we’re all on the hook but don’t have any shot at satisfaction without coughing up our own additional “after tax dollars” to speculate on treasury bills and/or government bonds!

Does anyone else, other than me, find this ludicrous!

I don’t believe in debt!  I don’t have any of my own yet I’m caught on the horns of a dilemma not of my own making simply by being a taxpayer of Canada!

My research took me back to 2009 when, then Finance Minister Jim Flaherty, said “the annual deficit in 2015 will be only be about $5-billion, a very modest number to deal with.

So, today (2015) we see Mr. Flaherty was only off on his projections by $609 Billion Dollars ($614 Billion today minus Flaherty’s forecast of $5 Billion) and, apparently, no-one else is suspicious like I am as to why we bestow our confidence in these elected officials at all!

And, back in 2006, Mr. Flaherty touted his government’s commitment to “eliminate Canada’s total net government debt“.  His projected target date was 2021 (5 years from today).

And I discovered a receipt government report, warning that “the net debt of the country’s provinces, territories and municipalities is on an unsustainable path with health spending“!

It seems obvious to me that our “$1.1 Trillion Dollar Deficit forecast” does not even include or factor into this rather dyer warning!

The parliamentary budget office estimates “the net debt of these subnational governments will climb above 200 per cent of the gross domestic product“.

What all of this suggests to me is that were are on a unsustainable financial path in this country and regardless of how much we are all taxed, we are on a treadmill of self devastation that one day is going to hit us like a ton of bricks.

The scary thing is that all these highly educated elected officials know this but are doing nothing to resolve it!

What or where is the point that “unsustainable” introduces “urgency“!

It seems abundantly clear, at least to me, that we have the wrong people working for us.  Our elected officials are obviously ill-equipped to keep our national house in order.

As a business man and entrepreneur I am expected to keep myself and my house in good financial order yet our country continues to dig its into an economic quagmire while our officials mislead us with announcement about “balancing our budgets” and “cutting spending” while all the while they go on unabated!

The parliamentary budget office is on record at estimating that our “net debt of these subnational governments will climb above 200 per cent of the gross domestic product” .

The federal budget watchdog says by contrast, “Ottawa’s books are on a sustainable path and that its net debt is set to be eliminated in 35 years“.

Talk is cheap and government talk is really all just about “talk“.

So, last week Ottawa announced that “Next year’s federal budget surplus will be $1.9 billion“, according to the Finance Department.  That’s $4.5 billion less than forecasted!

I have to remind you that the governments own surplus projections in February (this year!) was $6.4-(see February Budget)!

So, are these people actually academically challenged and/or incompetent or are they misleading us with projections confident that no-one is actually watching (or has anything that they can do about it if they are)?

I’m Charles

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