Author Topic: Government Day-to-Day  (Read 13996 times)

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Offline Gorgeous Graham

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Re: Government Day-to-Day
« Reply #195 on: February 10, 2020, 05:06:44 pm »
However, as has been mentioned to you numerous times before, even in household finances, what's more important than your absolute debt is your ability to service your debt. If someone has millions of dollars tied up in assets, a $100,000 loan is nothing. When someone makes $25,000 per year, a $100,000 loan is massive.

When it comes to debt $1 is not the same as another $1.

You're right about that yes of course.

Our government's position is that what really matters is debt-to-GDP, therefore since Canada's nominal GDP is going up right now and we have a moderate deficit and debt-to-GDP is actually going down it means our debt is in good shape, which allows us to run deficits in a decently good economy.  Ok I agree it's good that we're not going to default on our loans and debt-to-GDP is going down.

The problem with their logic is that nominal GDP over the longterm is always rising, and since nominal GDP is especially always rising during good economic times that means they will always have an excuse to run deficits as long as debt growth doesn't outstrip GDP growth.  If the Liberals run into a recession they will run even higher deficits to stimulate the economy as virtually every modern western country does, as they should.  Therefore they will be running deficits during both good and bad economic times.  So when exactly do we EVER pay off/pay down our debt?  Under this Liberal plan, the answer is never.  This is an unsustainable economic plan, and it's also very wasteful since we will be paying more and more money towards interest payments, which will also compound over time & incur more & more waste.

What the Liberals should be doing is using these times of decent growth to run surpluses as Chretien/Martin did to pay down our debt, and during bad economic times run deficits to stimulate the economy, then rinse and repeat.  This is sustainable.  The real reason the Trudeau gov doesn't want to do this is political.  They want to give away money and fund all sorts of projects in order to buy votes.  They don't need to be sustainable in the longterm and can pass the debt to future generations because they can, all that matters is keeping their jobs, which is unethical.  And they trot out all this debt-to-GDP stuff to convince people they're actually being fiscally responsible.  They certainly don't want to raise taxes to actually pay for their projects since that would be political suicide.  The voters who support all this BS are equally or more to blame.
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