Warning: The following column is for mature audiences only. It contains many offensive words and phrases.
Such as: “You know, Canada’s fiscal position is actually pretty good.” And: “Compared to the rest of the G7, we’re in solid fiscal shape.” Or how about: “Data don’t lie; Canadian governments have low debt service costs.” And even: “A lot of things in Canada are broken, but the budget isn’t one of them.”
I recognize this is strong language for a family newspaper.
Yes, a lot of things in Canada are broken. You’ve got a list, and so do I. It’s more than just a feeling.
Housing is unaffordable. The military is broken. Canada Post is broken. The immigration system is broken. Ottawa’s Phoenix payroll software, after burning through $3.5-billion dollars, is still broken, so it’s finally being scrapped.
Ontario Premier Doug Ford this week rolled out an online tool to help people quickly find a place to buy booze. No word on an app to find a family doctor for the millions of Canadians without one.
Gross domestic product per capita has declined for two years, which is unheard of outside a recession.
And if you leave your car in the driveway tonight, there’s a non-zero chance it could be in a shipping container headed overseas before you wake up. Even the Justice Minister’s car has been stolen – three times.
There’s lots broken all around. What isn’t particularly busted is the country’s fiscal position.
According to the International Monetary Fund’s 2024 Fiscal Monitor, released in April, Canada’s all-government budget deficit (the combined budgets of federal, provincial and local governments) is the lowest in the G7. It’s low in relative terms and in absolute terms. A shortfall of 1.1 per cent of GDP may not be perfection, but it is as far from a crisis as Brandon is from getting an NHL team.
Back in 1995, when Canada was in a fiscal jam, nearly 6 per cent of GDP went to interest on debt. Three decades later, net interest costs 0.6 per cent of GDP, and the IMF expects that to go lower by the end of the decade.
That’s even though Canada’s gross public debt is relatively larger than in 1995. What gives?
Interest rates have fallen steadily and surprisingly since the 1980s, and show no signs of returning to levels of previous decades. That’s true across the globe, and most noticeably in Japan. It has the G7′s biggest gross debt, yet it will spend just 0.1 per cent of GDP on net debt service costs this year. Savers have long been willing to lend to Japan at low or even negative interest rates.
More fiscal good news: Canada has been prudent about saving for the future. Gross public debt is 105 per cent of GDP, but trillions of dollars have also been socked away in the Canada Pension Plan Investment Board and public-sector pension plans such as the Ontario Teachers’ Pension Plan. As a result, Canada’s net debt is just 13 per cent, by far the lowest in the G7.
Governments obviously can’t use pension monies to pay their debts. But those funds mean tomorrow’s obligations to retirees are being saved for, today. Most countries aren’t doing that. We have funded future liabilities. They’ve got unfunded future liabilities.
When it comes to taxes and spending, Canada is a middle-of-the-road nation. Our governments tax and spend less (and thus offer, ahem, weaker public services) than Europeans, but more than Americans.
However, some countries are pairing lower taxes with higher spending. Japan’s government revenues this year will be 35.8 per cent of GDP, or more than five percentage points less than Canada. Yet Japan’s spending will be 42.3 per cent of GDP, which is slightly more than Canada.
British government revenues this year will be 39.5 per cent of GDP, or 1.6 percentage points less than Canada. But spending will be two percentage points higher than Canada.
U.S. taxes and other government revenues as a share of the economy are more than 10 percentage points lower than Canada. The spending gap, however, is only half as large.
How are other countries performing this magic? With a trick that is unlikely to be sustainable: They’re running very big deficits. They’re spending more by borrowing more. Canada mostly isn’t.