Opinion: Soon every penny collected from GST will go toward servicing Ottawa's debt
Re-Printed without permission. This needs to be saved.
Franco Terrazzano: The problem with Trudeau's money-saving message is there's no saving
Franco Terrazzano, Special to Financial Post
Published Dec 05, 2023 • 3 minute read
There’s only one problem with the federal government’s shiny new messaging about saving money: the feds aren’t actually saving money.
“The foundation of our Fall Economic Statement is our responsible fiscal plan,” said Finance Minister Chrystia Freeland. But the mid-year budget update shows the government increasing spending by $15 billion this year. A far cry from Freeland’s March promise to find “savings of $15.4 billion over the next five years.”
Next year, the government will increase spending by $30 billion. And that comes on top of an already ballooned baseline. The feds spent all-time highs before the pandemic. That is correct: “all-time.” After accounting for inflation and population growth, the Liberals were spending more before the pandemic than 1940s Liberals spent during any single year of the Second World War.
Finance Minister Freeland is trying to put Canadians’ minds at ease by claiming her deficits are “modest.” Canadians have heard this word before. In the 2015 election campaign, the Trudeau Liberals promised to run a few “modest” deficits (i.e., less than $10 billion) before balancing the budget in 2019. They ended up blowing that balanced budget promise by a “modest” $20 billion.
This year’s deficit is projected to hit $40 billion. Deficits in 2024 and 2025 are both projected to be $38 billion. Is $40 billion the new modest? Four times larger than the “modest” initial deficits candidate Trudeau promised?
The mid-year budget update proves this government has no idea how to balance the budget. In fact, in Ottawa the only mention of the concept comes from the Parliamentary Budget Officer, who forecasts the next balanced budget will happen in 2035. But that assumes the economy grows every year, interest rates are relatively low and, the most fantastical assumption of all, there is no new spending.
The government not balancing the budget means Canadians are paying dearly just to service the federal debt. This year’s interest charges will cost taxpayers more than $46 billion. That’s more than $1000 per Canadian that can’t go toward improved services or lower taxes. Next year, Ottawa will spend more on interest than it sends the provinces in health transfers. Soon every penny collected from the GST will go toward servicing the debt.
As bad as the budget situation is, the government could keep the ship from sinking with only relatively modest spending restraint. It could balance the budget next year by using its own projected program spending from just two budget updates ago. Instead of a $38-billion deficit next year, there would be a $1-billion surplus had Freeland simply stuck to the spending plan she outlined in 2021.
Her failure to do so unearths the root of the government’s spending problem — the ratchet effect. Almost every budget document this government releases drastically increases spending.
The fall fiscal update of 2019, which wasn’t actually delivered until December 16th of that year, first projected 2024 spending at $421 billion. This year’s budget update shows the government will spend $519 billion in 2024. The government’s fiscal responsibility muscle has clearly atrophied.
MPs from all political parties apparently can’t help themselves when it comes to taking a pay raise every year — regardless of the struggles their constituents are going through. The prime minister can’t help but spend $61,000 on Manhattan hotel rooms during a two-day anti-poverty summit. Nor is he or anyone else in government willing to end hundreds of millions of dollars in bureaucratic bonuses, despite departments consistently meeting less than half their own performance targets.
The Liberals are also unwilling to take the air out of the ballooning bureaucracy, which has increased by 98,000 employees since they took power in 2015. That’s almost 40 per cent more federal employees. The bureaucracy currently consumes half of every tax dollar used in day-to-day spending.
Nor is the government — or any party in the House of Commons, for that matter — willing to oppose the more than $43 billion that taxpayers are being forced to give profitable corporate behemoths to build battery plants.
This government hasn’t shown one iota of fiscal restraint. In fact, it appears to be doing its level best to run up the red ink. Fortunately for taxpayers, it would only take modest spending restraint for a serious government to bring the books back into the black.
Franco Terrazzano is federal director of the Canadian Taxpayers Federation.