When speaking to random voters you begin to realize how little they know about the federal deficit and how it affects them as Canadians in their everyday life.
To understand how it affects you, you first need to know how does the deficit appear on the federal balance books.
Define: Budget deficit
A deficit occurs when the spending is out pacing the income. In the federal budget case, the government is spending more money than it’s bringing in from taxes.
Don’t get this mistaken with federal debt though. I know you might be thinking you were just going to learn about the deficit but it affects the national debt as well and that is where it starts to impact you.
So what is national debt? It is defined as the an accumulation of deficits year over year, meaning the government did not pay off all the money it borrowed from taxes payers before the end of the calendar year and carries over to the next.
In simpler terms, it’s debt, just like you might have a credit card or an overdraft on your bank account. This allows you to spend more money than you actually earn putting you in to a deficit. If you don’t pay your loan off in that calendar year it rolls over in to the next causing you to have a debt.
What does this mean for me?
When the spending starts uncontrollably out pacing the earnings you are in a revolving door of debt and you will never get it paid off. You might think, what ever that’s the governments problem. What does the governments deficit and debt have to do with me?
Well you should care about the governments spending and you should care a lot. The government spending could help Canadians or it could even put them in to poor living conditions; it all depends where the money is being spent.
Every time you use the city streets you are walking or driving on government money. Our postal system is funding by the government and Canadian Healthcare. National defense to ensure our national security. We all use these basic things provided to us by the government but that can start to dry up and be more difficult when there is no money to pump back in to the Canadian economy. This can cause longer line ups at the walk-in clinics and hospitals when you get sick or injured and even allow another country or invade our land because we don’t have the money to defend ourselves. It can cause lack of supplies or workers because there is not enough funding. If the government wants to keep spending more and more the only choice they have to recoup that money is by increasing the taxes. This could be GST, Income tax, Carbon tax etc. Increasing taxes is usually a unpopular choice so they try to steer clear from that. So where is this money going to come from to fund our much needed government programs? Loans, lots and lots of borrowing money that they don’t intend on paying back anytime soon.
What is the difference between me borrowing money and the government borrowing money?
The difference is you have a term in which you need to pay off your debt, the government is multigenerational. The government is expected to borrow money but it needs to be done wisely and not allowed to become an unsustainable amount. The government borrows money for a credit rating and to get better interest rates on amounts borrowed. The more they borrow the lower the interest rates and this can also help boots the GDP.
WOW! boosting the GDP that sounds great. Hold on though. Awesome GDP doesn’t automatically mean better quality of life for the people living in that country. Just like a corporation can be worth trillions of dollars but the employees are still suffer because of low wages or lack of healthcare benefits.
Now is it chart time YAY! it’s always nice to be able to see numbers in a visual bar graph to give perspective.
This first chart we have is a 25 year historic view of the Canadian debt provided by trading economics
Government Debt in Canada increased to 721.36 CAD Billion in 2020 from 685.45 CAD Billion in 2019.source: Department of Finance Canada
It doesn’t take a rocket scientist to see that over the past 10 years the national debt has more than doubled.
From 1993 to 2003 we had Jean Chrétien (Liberal party) as our Prime Minister. As we can see in the end years of his term as PM we began to see a downward trend in our national debt. Right after we had Paul Martin (Liberal party) continue with that trend to balance the debt. Stephen Harper Conservative Party) then came to power and was PM from 2006 to 2015 and managed to bring in a surplus for the country.
For 2015–2016, the federal government projected a $1.4-billion surplus. Following the 2015 federal election and a change in government, the 2015 fiscal year ended in a $1 billion deficit instead. In 2010, Canada had the lowest debt-to-GDP ratio in the G7 economies. The Economist magazine stated that Canada had come out the recession stronger than any other rich country in the G7https://en.wikipedia.org/wiki/Stephen_Harper#Prime_minister_(2006%E2%80%932015)
- 2020-21—$354.2 billion
- 2021-22—$154.7 billion
The deficit in 2019-2020 was $39.4 billion. The previous largest deficit in Canadian history was $55 billion in 2009, a result of the 2008 financial crisis. No timeline was included for balancing the budget.
- Federal debt—$1,079 billion (projected to be $1,233.8 billion in March 2022)
- Federal debt as a percentage of GDP—49% (projected to be 51.2% in March 2022)
Now with an election looking to be called soon there is added promises from the Liberal government that will put the total at $1.7 Trillion by 2024
Should the government focus on balancing the deficit before we reach the point of no return or keep going to see how long this can ride out before we fall in to economic turmoil?