Editorial Cartoon by Graeme MacKay, The Hamilton Spectator – Thursday November 23, 2023
Growing Debt, Shrinking Priorities: The Trudeau Government’s Balancing Act
The Finance Minister, Chrystia Freeland, has tabled a fall economic statement revealing a stark reality: servicing the considerable federal debt will consume a larger share of Ottawa’s revenue than in recent years. This ominous financial forecast comes as Canada grapples with the aftermath of the COVID-19 pandemic, with economic growth expected to stall, unemployment set to rise, and tens of thousands of jobs at risk.
Freeland proposes additional spending of $20.8 billion over the next six years, emphasizing it as a modest increase compared to previous years and a display of fiscal prudence. However, the lion’s share of this new spending is allocated to housing initiatives and climate-friendly projects, diverting attention and resources away from crucial areas such as defense, social programs, infrastructure, innovation, and healthcare.
The Trudeau government has consistently run deficits since its election, exacerbated by the pandemic’s economic fallout. The interest rates, now at a 20-year high, have inflated the cost of borrowing from $20.3 billion in 2020-21 to a staggering $46.5 billion in the current fiscal year. Debt servicing charges are projected to soar to $60.7 billion in 2028-29, making it one of the most burdensome items in the federal budget.
To contextualize the impact, debt service charges for this year alone surpass spending on the Canadian Armed Forces by $18 billion and exceed the allocated funds for the Canada Child Benefit by $20 billion. This rise in debt interest charges limits the government’s fiscal flexibility to address critical issues such as the housing supply crunch.
Kevin Page, former parliamentary budget officer, warns that the substantial increase in debt during the pandemic will now have repercussions. The federal debt has doubled since 2015-16, reaching $1.2 trillion last year and projected to climb to $1.4 trillion by 2028-29. As debt interest charges consume more fiscal space, the government’s ability to tackle pressing issues diminishes.
Despite lower new spending in the economic statement compared to previous budgets, the fiscal outlook remains grim. The deficit for this year stands at $40 billion, and with a forecasted economic growth of only 0.4%, the unemployment rate is expected to rise to 6.5%. Projected deficits for the coming years have been revised upwards, indicating a challenging fiscal path ahead.
Freeland’s focus on housing measures, while important, raises concerns about the government’s ability to address a broad spectrum of issues. The proposed new spending measures, though aimed at addressing the housing crisis, may not be sufficient to meet the urgency of Canadians’ needs, as emphasized by opposition leaders.
As the government deviates from its traditional fiscal anchor, allowing the net debt-to-GDP ratio to rise, questions arise about the sustainability of Canada’s finances. Freeland introduces a new fiscal anchor, aiming to keep deficits below 1% of GDP in future years, asserting that this strategy will ensure continued investments in Canadians.
In the face of rising debt and constrained fiscal options, the Trudeau government must carefully navigate its spending priorities to address the multifaceted challenges facing the nation. Balancing economic recovery with essential program funding is a delicate task, one that demands strategic decision-making to safeguard Canada’s financial stability and the well-being of its citizens. (AI)
From sketch to finish, see the current way Graeme completes an editorial cartoon using an iPencil, the Procreate app, and a couple of cheats on an iPad Pro. If you’re creative, give illustration a try: