Canadian Politics Today
Federal Politics => Canadian Politics => Topic started by: JMT on May 31, 2017, 12:43:57 pm
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http://www.bnn.ca/canada-posts-21-85-billion-deficit-in-2016-17-1.762292
I know a lot of people still won't like this, but it's not really that bad considering it makes just over 1% of GDP. It causes the debt to go up by just over 3% while nominal GDP growth is looking to be closer to 4% this year (last year it was more like 2%).
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Anyone who understands the economy knows that deficit is fine as long as it's lower than growth. Very few people buy a house cash these days.
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Anyone who understands the economy knows that deficit is fine as long as it's lower than growth. Very few people buy a house cash these days.
Maybe. There is a difference between borrowing to buy an asset and borrowing to pay the bills.
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Re: Remember the $30B deficit? Well, it turns out that it's actually a $20B deficit.
Wasn't that a tactic that Chretien used to use? Over-inflate the deficit projections, then claim success when the real numbers came in at less than expected?
Yes, its a good thing that its closer to $20 billion instead of $30 billion. But, its still more than the $10 billion that had been promised. And, it should be noted, there are several rather significant spending obligations that are coming up that will impact their ability to reduce the deficit... most notably planned military spending.
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Anyone who understands the economy knows that deficit is fine as long as it's lower than growth. Very few people buy a house cash these days.
Not sure if that's actually a proper comparison.
Yes, growth can eventually make deficits easier to handle, but as another poster hinted at, a house actually has tangible value, while many of the things a government spends money on don't have long-standing value.
Plus, there are other issues, such as whether there are upcoming financial obligations that will need to be dealt with. We're undergoing a demographic shift... our population on average is getting older (meaning higher health care costs, more social assistance, and less taxes). All that might put a strain on our budgets in the future, and it might be a good idea to knock down as much of the deficit/debt NOW before these other obligations become an issue.
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Actually, we're starting to get into that situation with demographics right now - it very well might be the time to spend.
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Actually, we're starting to get into that situation with demographics right now - it very well might be the time to spend.
I think you might have that backwards.
If we're heading into a demographics crunch NOW, we'd be best to reign in spending as much as possible now, with the expectation that things will get worse in the future. If we spend now, we'll be increasing the debt even more, which will make it harder to deal with the debt in the future.
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I think you might have that backwards.
If we're heading into a demographics crunch NOW, we'd be best to reign in spending as much as possible now, with the expectation that things will get worse in the future. If we spend now, we'll be increasing the debt even more, which will make it harder to deal with the debt in the future.
I agree. I don't see how increasing the amount of revenue required to service debt now could help us with increased revenue requirements in the future, unless that increased debt is targeted specifically toward increasing future revenues. Unfortunately, with all spending coming out of the same big pot, governments can claim it is being used for anything they want, but the debt and its service costs remain the same regardless of their claims.
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If we're heading into a demographics crunch NOW, we'd be best to reign in spending as much as possible now, with the expectation that things will get worse in the future. If we spend now, we'll be increasing the debt even more, which will make it harder to deal with the debt in the future.
I disagree - we need to prepare things like the health and support systems for the coming crunch (over the next ~20 years) and we need to do that now. At the same time, we have to do things like improve our infrastructure and productivity to make up a gap in the total labour pool.
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I disagree - we need to prepare things like the health and support systems for the coming crunch (over the next ~20 years) and we need to do that now.
You seem to be assuming that the current increases in government spending are in large part going to things that will deal with health and support systems for the elderly. Unfortunately, many of the spending increases under trudeau (such as increases in child care benefits) aren't targeting infrastructure designed to help the elderly. (I could also point out other things the government spends money on that it doesn't need to.. for example the CBC.)
There is also the risk of spending money too soon. Yes, we will eventually need more medical resources to handle the elderly. But if we spend billions for that NOW, the stuff will probably just sit idle for a decade or 2 until its needed.
At the same time, we have to do things like improve our infrastructure
Infrastructure spending should be something that is done on a consistent basis.
(If the recent increase in the deficit was due to Trudeau deciding to give money to cities to fix roads or engage in similar public works, I would probably complain less. But little of the new budget deficit is targeted at that.
and productivity to make up a gap in the total labour pool.
Some might question why it is the responsibility of the government to drive productivity increases. Many might assume that it is the private sector itself that drives the majority of innovation and productivity increases.
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You seem to be assuming that the current increases in government spending are in large part going to things that will deal with health and support systems for the elderly. Unfortunately, many of the spending increases under trudeau (such as increases in child care benefits) aren't targeting infrastructure designed to help the elderly. (I could also point out other things the government spends money on that it doesn't need to.. for example the CBC.)
Actually, I'd have to disagree to an extent - a large amount of the new infrastructure money is going to social infrastructure. Much of that includes support systems that will be needed by seniors.
There is also the risk of spending money too soon. Yes, we will eventually need more medical resources to handle the elderly. But if we spend billions for that NOW, the stuff will probably just sit idle for a decade or 2 until its needed. Infrastructure spending should be something that is done on a consistent basis.
This isn't a far away issue. We actually have the first wave of boomers reaching retirement age now. We need to build the health and social infrastructure over the next decade, or we're going to be ill prepared. Also, I agree that infrastructure spending should have been consistent. Pre 2008, it really was lacking at the federal level.
(If the recent increase in the deficit was due to Trudeau deciding to give money to cities to fix roads or engage in similar public works, I would probably complain less. But little of the new budget deficit is targeted at that. Some might question why it is the responsibility of the government to drive productivity increases. Many might assume that it is the private sector itself that drives the majority of innovation and productivity increases.
A great deal of the budget deficit is related to infrastructure (around 50%). The other half comes from tax changes that were revenue negative, daycare spending, and spending on the Canada Child Benefit.
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There is also the risk of spending money too soon. Yes, we will eventually need more medical resources to handle the elderly. But if we spend billions for that NOW, the stuff will probably just sit idle for a decade or 2 until its needed.Infrastructure spending should be something that is done on a consistent basis.
This issue is already here. Not sure where you are, but in BC hospitals send dying people home, regardless of how much care there is or isn't available. No care? You can walk and speak so home you go - never mind that you can't figure out how to sign a form if someone hands you pen upside down, or that you no longer quite see the need for pants when you go to the grocery store, because after all, the adult diaper covers everything. In another case, a co-worker had to take almost a month off work because the hospital simply discharged her father one day. My partner also watched an old woman being sent home around 10 pm; people scurrying around to give her her belongings, call her a cab. She clearly had no idea what was going on.
We're already late on this spending to support health care services for seniors.
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Wasn't that a tactic that Chretien used to use? Over-inflate the deficit projections, then claim success when the real numbers came in at less than expected?
Weird. Conservatives were claiming Trudeau's deficit figures were under-estimated. Now the line of argument is that Trudeau is over-inflating estimates. Such silly partisanship.
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Weird. Conservatives were claiming Trudeau's deficit figures were under-estimated. Now the line of argument is that Trudeau is over-inflating estimates. Such silly partisanship.
I don't remember the conservatives making a claim that the deficit was under-estimated. (They might have, and if you have a link or reference to show that it was a major issue I would appreciate it.) To me I seem to remember the chief complaints being that 1) the deficit exists at all (after the Harper managed to more or less balance the books), 2) that Trudeau seemed to have no plan to actually reduce the deficit in the future, and 3) the initial $30 billion deficit was much higher than the $10 billion promised in the election.
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In fairness, the deficit does decrease after next year and decrease consistently after that. It's basically the same plan the Conservatives had, but with a gentler slope. Economic growth is also much higher than projected in budget 2017 - you should see numbers that are lower than projected with that.
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In fairness, the deficit does decrease after next year and decrease consistently after that.
Yes, the deficit is projected to decrease (and it may just do that). But that shouldn't necessarily excuse the Liberals over their budgets, if the deficits themselves were unnecessary, or if the budgets had examples of unnecessary spending.
Its like getting into a car accident, and claiming "I'm a good driver, I only smashed up half the car rather than the entire car".
It's basically the same plan the Conservatives had, but with a gentler slope.
I wouldn't say that. In fact, I'd say that the conservatives got criticized for the depth of some of their cuts (eliminating thousands of government jobs, cutting CBC funding, etc.) This is in contrast to the Liberal plan of "Increase spending and let growth handle the deficit".
https://en.wikipedia.org/wiki/2012_Canadian_federal_budget
Economic growth is also much higher than projected in budget 2017 - you should see numbers that are lower than projected with that.
The problem with relying on economic growth to reduce the budget is that, well, recessions happen. And with an incompetent racist orangutan as leader of the free world, you will never know when that sunny forecast of "strong growth" will be replaced by "recession caused by lack of regulations and bad trade policies."
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Yes, we must always budget based on recessionary assumptions so austerity can continue until morale improves!
Thank gawd the Liberals were elected to break this circle jerk of nonsense.
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Is it a coincidence that economic growth has improved markedly since they took over? It's really hard to tell - it's quite a coincidence though.
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Like reversion to the mean. 2015 was not very good. 2016 had challenges (fire I seem to recall).
Of course with oil still being in the dumpster and the possibility of higher interest rates there is a lot of risk to our economy.
Private sector debt is what concerns me rather than the Federal debt.
Assets prices can go down very quickly while the loan balances remain.
Lets hope Canadians do not find out what that feels like because it will hurt us all and will inevitably lead to higher government deficits trying to pick up the slack as the private sector fails (as happened in the US under pretty extreme circumstances).
Thankfully, Canada is a small country so even if our RE and private debt implodes, if the rest of the world grows then Canada will recover nicely over time.
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Yes, we must always budget based on recessionary assumptions so austerity can continue until morale improves!
Thank gawd the Liberals were elected to break this circle jerk of nonsense.
Uhh.. no.
In good economic times, we can use the improved tax base to address the deficit and cut into the existing debt. In bad economic times, the government can spend more (perhaps increasing the deficit), partly because they don't have a choice (e.g. tax base goes down), partly as a way to stimulate the economy. So no, the government doesn't always have to be concentrate on "austerity".
The problem with what the Liberals are doing is that currently, the economy is relatively strong. We weathered the recession with little difficulty, our GDP has continued to increase almost every quarter for the past half decade, and our unemployment rate has only been lower once in the past 3 decades. (I'm not saying things are perfect, but we aren't at the point where the economy needs any sort of big government-fueled stimulus.) It would be the perfect time to say "Things are ticking along quite nicely... lets deal a bit with our debt so we have more breathing room later". Instead, they've decided to spend more, adding to the debt and giving less flexibility in the future.
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Is it a coincidence that economic growth has improved markedly since they took over? It's really hard to tell - it's quite a coincidence though.
The GDP growth rate seems to fluctuate significantly... It is around 1% right now, but we had negative growth for a period in early 2016 (which, last time I checked, was during the Liberal's tenure), while it was even hire in late 2011 (when the conservatives were in power).
However, I do think that overall, many of these fluctuations are out of the control of the government. Our economy can easily be influenced by outside factors (global recessions, natural disasters, etc.) I don't think the government is powerless (they can crater the economy with something like radical protectionist trade measures), but in general many changes are out of their control.
That goes for both the Liberals (e.g. Chretien benefited by a strong global economy), and the Conservatives (who saw Canada weather the 2008 economy relatively unscathed, but who benefited by a strong resource sector).
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The GDP growth rate seems to fluctuate significantly... It is around 1% right now, but we had negative growth for a period in early 2016 (which, last time I checked, was during the Liberal's tenure), while it was even hire in late 2011 (when the conservatives were in power).
It's not anywhere close to 1% at the moment. Real GDP growth was 3.7% last quarter, and has averaged 3.5% over the last 3 quarters. 2016 saw real GDP growth of only ~1.3%.
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It's not anywhere close to 1% at the moment. Real GDP growth was 3.7% last quarter, and has averaged 3.5% over the last 3 quarters. 2016 saw real GDP growth of only ~1.3%.
The 1% figure I was quoting were for quarterly GDP growth rather than annual. (If you state it in annual terms, it is closer to 3.7%, but then it was even higher at times during the last conservative government.
My point still stands: never assume that economic success is due strictly to the activities of the government in power.
https://tradingeconomics.com/canada/gdp-growth
https://tradingeconomics.com/canada/gdp-growth-annualized
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I actually don't think that the Trudeau government is mostly responsible for higher growth - I'm just using it the same way everyone else does.
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Canada had its best 2nd quarter economic growth in 6 years at 4.5%.
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Canada had its best 2nd quarter economic growth in 6 years at 4.5%.
Then I guess we can stop borrowing and start paying down the deficit, right?
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Then I guess we can stop borrowing and start paying down the deficit, right?
My point is that the deficit will be much smaller than predicted at this point. If we had the GST revenue that we lost, there would barely be one right now.
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My point is that the deficit will be much smaller than predicted at this point. If we had the GST revenue that we lost, there would barely be one right now.
Or if Trudeau hadn't raised spending so much because he said the economy needed stimulus we wouldn't have one at all.
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Or if Trudeau hadn't raised spending so much because he said the economy needed stimulus we wouldn't have one at all.
Did you ever think that maybe it's the stimulus that's brought us here?
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Did you ever think that maybe it's the stimulus that's brought us here?
No. Do you? If it was that quick and easy then the much larger amount Harper spent would have had an immediate impact, not to mention the tens of billions the EU has spent.
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No. Do you? If it was that quick and easy then the much larger amount Harper spent would have had an immediate impact
Maybe it wasn't done as well? Things like the CCB and the GIS increase have had huge benefit.
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Maybe it wasn't done as well? Things like the CCB and the GIS increase have had huge benefit.
Yeah, you don't think it has much to do with the way oil prices stabilized and then rose in the first quarter, and commodity prices rose in the second - responding to Chinese demand?
Nawwwww.
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Yeah, you don't think it has much to do with the way oil prices stabilized and then rose in the first quarter, and commodity prices rose in the second - responding to Chinese demand?
Of course, that's part of it. Corporate investment has also improved. Everything is improving more than expected.
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Of course, that's part of it. Corporate investment has also improved. Everything is improving more than expected.
Corporate investment has improved? Because of the GIS and CCB?
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Corporate investment has improved? Because of the GIS and CCB?
No (well, retail investment may have something do with that) - I'm saying it's a variety of factors. Government programs are part of that.
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No (well, retail investment may have something do with that) - I'm saying it's a variety of factors. Government programs are part of that.
Uh huh. Well, if a small amount of extra money to the middle and lower classes was able to have such an immediate and noticeable impact on the economy it's a wonder no one else has done it or seen such changes when they did. Why, perhaps Trudeau is the world's greatest economic genius! If only the Europeans had him!
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Regardless, the economy is doing the exact opposite of the doom and gloom Conservatives like you predicted when Trudeau was elected.
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Regardless, the economy is doing the exact opposite of the doom and gloom Conservatives like you predicted when Trudeau was elected.
Did we say it would crash and burn immediately? My principal concern was rising debt levels. It takes time for that to rise to uncomfortable levels, for the yearly interest charges to start eating up more and more of the budget. Look at Ontario. They've been doing it for ten years and it's only really starting to bite now.
I continue to maintain that the higher taxes, including the new carbon taxes, in combination with expanding red tape blocking resource development is going to start driving businesses out of the country. We've already seen foreign investment fleeing the oil industry and all kinds of other resource projects on hold. As higher energy costs cut into manufacturing that's going to have an impact, too. And when the Republicans down south cut taxes - which they will eventually get around to doing, that's going to make it much worse.
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Harper ran deficits for 7 out of his last 8 years in office and the only reason one of them was a tiny, insignificant surplus is because he liquidated assets rather than creating a sustainable budget.
I don't recall you being as concerned then. Even more to the point our net debt is barely above what it was in 96-97 and that's after Harper added around $150 billion to it.
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Harper ran deficits for 7 out of his last 8 years in office and the only reason one of them was a tiny, insignificant surplus is because he liquidated assets rather than creating a sustainable budget.
I don't recall you being as concerned then. Even more to the point our net debt is barely above what it was in 96-97 and that's after Harper added around $150 billion to it.
Should Canada be running a large deficit?
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Harper ran deficits for 7 out of his last 8 years in office...
Yes he did. And the world was in the midst of a global recession. A deficit at such a time should be considered differently than a deficit at a time when the global economy is relatively stable.
...and the only reason one of them was a tiny, insignificant surplus is because he liquidated assets
No. Just, no.
There were a few things going on that helped eliminate the deficit.
- Economic growth increased revenues and decreased the need for spending (something that Harper wasn't responsible for).
- Some of the programs Harper had started during the recession were winding down (e.g. the energy retrofit program). This is exactly what you would expect... short term spending programs brought in to spur the economy end when they are no longer needed
- Spending was cut. e.g. millions were cut from the CBC budget. Military procurement was delayed (I agree with the CBC cuts, although I think the military cuts were a mistake)
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The projected deficits after this year will result in debt to GDP decreasing - they're not really a concern.
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The projected deficits after this year will result in debt to GDP decreasing - they're not really a concern.
Why should they not be a concern, they represent perpetual debt which must be serviced forever regardless of where interest rates go. They represent government generated inflation.
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Harper ran deficits for 7 out of his last 8 years in office and the only reason one of them was a tiny, insignificant surplus is because he liquidated assets rather than creating a sustainable budget.
I don't recall you being as concerned then. Even more to the point our net debt is barely above what it was in 96-97 and that's after Harper added around $150 billion to it.
I argued against the need for incentive spending. But remember there are two sides to a discussion. Since all three opposition parties were demanding it, and the Tories agreed to do it, what was the discussion to entail? I could only hope that as the recession eased they would move gradually towards a balanced budget, which they gave every sign of doing - not fast enough for me, but they were at least headed in that direction. And at least they had an excuse, the recession. There is no such excuse now.
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The projected deficits after this year will result in debt to GDP decreasing - they're not really a concern.
Will they be 'decreased' in the same way as the Ontario Liberals 'balanced' the budget this year? Ie, through accounting fraud?
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Will they be 'decreased' in the same way as the Ontario Liberals 'balanced' the budget this year? Ie, through accounting fraud?
It's not accounting fraud to book assets against expenses.
Debt to GDP in Ontario should begin to drop this year. It's too high at the moment.
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It's not accounting fraud to book assets against expenses.
If you tell me you've balanced the budget but are borrowing $30 billion to pay for stuff then you haven't balanced the bloody budget. Period.
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If you tell me you've balanced the budget but are borrowing $30 billion to pay for stuff then you haven't balanced the bloody budget. Period.
Yes, being able to continue borrowing is not balancing a budget. By that definition, a budget is balanced until people refuse to continue lending you money.
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Yes, being able to continue borrowing is not balancing a budget. By that definition, a budget is balanced until people refuse to continue lending you money.
Your interpretation of what I said seems odd. "Being able to borrow" or not is irrelevant to whether the budget is balanced. I am able to borrow money. I don't borrow money. Therefore, my own budget is balanced.
If you are spending more than you are earning your budget is not balanced. If you say otherwise you are a liar or an idiot or both.
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GAAP say you're wrong.
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Your interpretation of what I said seems odd. "Being able to borrow" or not is irrelevant to whether the budget is balanced. I am able to borrow money. I don't borrow money. Therefore, my own budget is balanced.
If you are spending more than you are earning your budget is not balanced. If you say otherwise you are a liar or an idiot or both.
What was odd about it? I was agreeing with you.
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GAAP say you're wrong.
I don't care what GAAP says. If you can't pay your bills with what you earn to the extent you have to borrow money then you're in a deficit. Any politicians who says otherwise should be instantly removed from office, tarred and feathered and permabanned from ever running again for anything.
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I don't care what GAAP says. If you can't pay your bills with what you earn to the extent you have to borrow money then you're in a deficit. Any politicians who says otherwise should be instantly removed from office, tarred and feathered and permabanned from ever running again for anything.
And here all along I thought you were a Harper supporter.
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GAAP say you're wrong.
So what? Government debt is debt that must be serviced forever by future generations, long past the time that debt provides them with any value. Government spending and debt is a major factor in the rate of inflation. Just because it meets GAAP doesn't mean it is a good practice.
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So what? Government debt is debt that must be serviced forever by future generations, long past the time that debt provides them with any value. Government spending and debt is a major factor in the rate of inflation. Just because it meets GAAP doesn't mean it is a good practice.
And Growth can make that debt completely insignificant, which is what happens when it falls below 25% of GDP (that level is in fact considered a healthy debt burden).
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I don't care what GAAP says. If you can't pay your bills with what you earn to the extent you have to borrow money then you're in a deficit. Any politicians who says otherwise should be instantly removed from office, tarred and feathered and permabanned from ever running again for anything.
It's a bit unrealistic target to only spend what you earn. There is nothing wrong with borrowing if implemented responsibly, and in fact, it can make really good sense depending on the investment and borrowing ratio. The problem (and this goes for people too), is some people just borrow without a proper analysis of how the debt will be paid back or what it will be used for.
I agree with jmt about GAAP principles because things like infrastructure shouldn't even be considered period costs since they are used for many years to come.
To expense them entirely in the year the expenditure takes place would be very unreasonable.
ETA if you are borrowing to pay for period costs, then yes, it doesn't make sense. But for long-term investments, debt is actually a better way to for it since the liabilities and assets are off-set by each other.
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Debt is debt, it doesn't matter what you borrowed it for if you never pay it back. You can say it is for infrastructure but if you can't pay the bills and build the infrastructure without borrowing, what was the debt for, infrastructure or to pay the bills?
I'm not saying there are never reasons to borrow but I take exception to the idea that we don't need to pay it back because raises in income will take care of us. Maybe it will from a financing point of view but it is a dumb philosophy. It's the same as buying a $30,000 car, financing the whole amount and just paying interest on the loan. The day comes when the car is worth nothing so you go out and buy another and do the same thing. With inflation, that car now costs $40,000 but with your increased income you can still make the payments. Problem is, you now owe $70,000 on a $40,000 car which will also eventually be worth nothing. The same goes when you borrow to buy a billion dollar bridge and don't pay any principal. When time comes to replace it, you now owe for two bridges, one of which no longer exits.
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Debt is debt
So you feel that say, mortgage debt, is the same as credit card debt?
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So you feel that say, mortgage debt, is the same as credit card debt?
Either one can bankrupt you. As I said before, how do you determine whether debt government incurs is for infrastructure or paying for services if you can't do both without borrowing? Even infrastructure doesn't last for ever. "I've got a bridge for sale" is just an expression because public infrastructure is rarely if ever sold, it just has to be replaced at tax payer expense. There is no capital gain so how is it different from credit card debt aside from the interest rate?
I've financed things in the past and paid off several mortgages. Paying down debt has always been a priority for us and we have gone without things that others had as a result. Now I pay interest on nothing, every after tax penny I get is mine to spend as I see fit and that doesn't include paying interest on things I no longer own.
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Public infrastructure deficits are also a real thing, and they also cost us (a great deal) of money. An economy like ours can afford reasonable debt into infinity. A person is different.
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Public infrastructure deficits are also a real thing, and they also cost us (a great deal) of money. An economy like ours can afford reasonable debt into infinity. A person is different.
It's only different in that you can't pass on you personal debt to your children and grandchildren like you can public debt. I'm not against borrowing to improve infrastructure but unless you are actually paying off that infrastructure, your borrowing is really just going into general revenue.
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The projected deficits after this year will result in debt to GDP decreasing - they're not really a concern.
I believe this argument has come up in this thread before, so I'll state the same thing as I said before:
While in theory a growing GDP can make a debt less significant/easier to manage, some of us have what I think are reasonable concerns.
We've got an incompetent president in the U.S. who could easily cause a trade war and a recession. We also have a population who is aging and the demographic shift may also affect the ability to handle the debt. I would much rather the government take the effort NOW to control spending and reduce the deficit/debt (when the economy is relatively strong) in order to give us some breathing room if/when problems arise.
Now, the issue of "infrastructure spending" has come up on occasion. Yes, there are certain basic functions that the government needs to provide (roads/bridges/etc.) If spending on those things was the cause of the deficit it might be less of an issue. But the Liberal government has been doing things like increasing CBC funding (i.e. not all of the increase in the deficit was due to "infrastructure spending")
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Some of it is also from a worse starting fiscal position. Some of it is from the CCB. The CBC isn't a major part of the deficit.
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Some of it is also from a worse starting fiscal position. Some of it is from the CCB. The CBC isn't a major part of the deficit.
The CBC receives approximately $1 billion/year from the federal government. Harper had cut that, but Trudeau has since gone and restored much of the funding.
The initial promises by the liberals were for a $10 billion deficit. Cutting funding to the CBC would have cut that by 10%. Is 10% a "major part"? Does seem rather significant to me.
Note that I'm signaling out the CBC because it is such an obvious case of government spending that 1) doesn't contribute to "infrastructure", 2) provides no functions that cannot be replicated by the private sector. I'm sure if I went through the entire budget I could find other things the government wastes money on. Simply saying "Program X isn't a major part of the deficit" ignores the problem, if the government is wasting money on a whole bunch of Program Xs (each one small, but combined are a problem.)
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I was speaking of the budget increase to the CBC, not the total CBC budget.
The current deficits of around $20B are not concerning at all to any reputable economist.
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provides no functions that cannot be replicated by the private sector.
The private sector is going to provide radio and TV to the North in indigenous languages as a public service?
Private broadcasting is interested in profit, not in providing cultural services to Canadians.
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And Growth can make that debt completely insignificant, which is what happens when it falls below 25% of GDP (that level is in fact considered a healthy debt burden).
So given our growth in the past forty years do you think the debt we inherited from Trudeau senior and Mulroney is 'completely insignificant' yet?
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So given our growth in the past forty years do you think the debt we inherited from Trudeau senior and Mulroney is 'completely insignificant' yet?
By 2006, at 29% of GDP, yes, it nearly was. Paul Martin aimed for 25%, as that is a level that most economists find to be healthy (anything below or above that is less desirable).
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By 2006, at 29% of GDP, yes, it nearly was. Paul Martin aimed for 25%, as that is a level that most economists find to be healthy (anything below or above that is less desirable).
The federal government spends over $30 billion a year just to service the debt. That number rises every year as we borrow more debt. That is hardly insignificant, regardless of what sort of accounting games you want to play.
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The federal government spends over $30 billion a year just to service the debt. That number rises every year as we borrow more debt. That is hardly insignificant, regardless of what sort of accounting games you want to play.
Actually, the amount has been decreasing pretty much every year. This year, it will be about $1.5B less than last year. Even at slightly higher interest rates, it will still go down, as much of our debt was locked in at much higher rates the first time. Our debt is probably the most secure of any country on the planet.
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Actually, the amount has been decreasing pretty much every year. This year, it will be about $1.5B less than last year. Even at slightly higher interest rates, it will still go down, as much of our debt was locked in at much higher rates the first time.
Ahh, the Kathleen Wynne rosy view of renegotiated debt. Sorry, I'm not buying the bullshit. Wynne renegotiated the debt on Ontario's ultilities to allow for temporarily lower rates at a future cost of $21 billion. Any renegotiation her spiritual soul brother Trudeau did will be of the same sort, and won't be enough to make up for tossing another $50 billion onto the debt pile. As interest rates continue to increase the payments will, too.
And btw, up until the last year the debt was always expressed in a dollar amount. Then after the Liberals decided to break their promise to only have a $10 billion debt they started using weasel words like "as a percentage of GDP. Their parrots have spread that around to the point people like you now spout it too. Well, it's bullshit. The debt is a significant amount and consumes a significant amount of our yearly spending, and it will grow as Trudeau continues to borrow.
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Ahh, the Kathleen Wynne rosy view of renegotiated debt.
It has nothing to do with that. Out debt is locked in for a certain number of years (much of it 10-30). After that, we reissue debt. The rates are far lower than what much of the debt was originally sold at.
And btw, up until the last year the debt was always expressed in a dollar amount. Then after the Liberals decided to break their promise to only have a $10 billion debt they started using weasel words like "as a percentage of GDP.
That's completely wrong. I've been following this for a long time. Debt to GDP was always a relevant figure. In fact, it's the most relevant figure. The total dollar value is meaningless.
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That's completely wrong. I've been following this for a long time. Debt to GDP was always a relevant figure. In fact, it's the most relevant figure. The total dollar value is meaningless.
I would say the most relevant figure is the amount of revenue required to service debt that provides no value to Canadians.
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I would say the most relevant figure is the amount of revenue required to service debt that provides no value to Canadians.
About 6% of the total budget. Slightly less than the USA. Still less than the UK's 8%.
By any measure, Canada is doing well compared with other countries.
And better now than with the previous government. Hopefully it continues.
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Should Canada be running a large deficit?
The answer is it depends, but that's too complicated for people who think politics is about wearing team colours.
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I don't care what GAAP says.
Thats a pretty big problem if you want to talk accounting practices.
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Thats a pretty big problem if you want to talk accounting practices.
We aren't, we're talking deficits.
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About 6% of the total budget. Slightly less than the USA. Still less than the UK's 8%.
By any measure, Canada is doing well compared with other countries.
And better now than with the previous government. Hopefully it continues.
So, Is the object to be the worst?
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So, Is the object to be the worst?
We're not even on track to be the worst. In fact, we're on track to remain the best for the foreseeable future.
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So, Is the object to be the worst?
No.... the lower the number is the less of the total budget is spent on debt servicing.... Canada's 6% is better than UK's 8%....
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No.... the lower the number is the less of the total budget is spent on debt servicing.... Canada's 6% is better than UK's 8%....
So, I don't know how pointing out that others are doing worse makes a case for borrowing money that will never be paid back. The bottom line is that you guys believe in that and I don't.
How much value are today's Canadians getting from the debt that Trudeau 1 and Mulroney incurred which we are still paying interest on?
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Harper added more to the debt than anyone.
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Harper added more to the debt than anyone.
Except Mulroney - doesn't matter though. Debt to GDP barely changed.
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Harper added more to the debt than anyone.
So? You can politicize it if you want but I'm just talking about the debt we are servicing, where it came from doesn't really matter. Whether it is necessary to borrow is a matter of opinion but the fact remains, if you never pay it back, you end up paying for something that gives you no value. Justifying it with debt to GDP and debt as a percentage of revenue are just weasel words. Just because you can do something doesn't mean it is a good idea to do it. GAAP just concern the ability to borrow and service debt, they have nothing to do with the wisdom of borrowing. We spend about the same servicing all government debt as we do on K to 12 education in this country. What are we getting for it? The amount of interest we are paying on federal debt is about the same this year as the amount the government is borrowing, so in fact, we are borrowing to pay interest on what we already owe.
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Thats a pretty big problem if you want to talk accounting practices.
Accounting practices only tell you if the games they play are illegal, and even then maybe not. Ontario's government, for example, claims the teachers pension fund as well as public service pension funds under 'assets' which it claims are fine according to accounting practices. The Auditor General and the Financial Accountability officer both disagree but nobody seems to care. Wynne keeps gleefully talking about how she's balanced the budget, while ignoring them.
And even that fails to take into consideration that Ontario, apparently legally under 'GAAP' shifted anything they could call 'capital spending' onto a whole other budget which they no longer count under the main budget. So they claim they balanced the budget even while borrowing tens of billions of dollars because, well, that doesn't count now.
So screw GAAP and any other accounting tricks. I want to know if the government is spending more than it's earning. If so, then how much is it borrowing. And I don't care under what budget it borrows it. I have to pay it back regardless.
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Harper added more to the debt than anyone.
Ah yes. That old lefty story again. The budget was in wonderful shape until that dastardly Harper decided, right out of the blue, to start bringing in huge deficits! Why, the NDP, Liberals and BQ tried desperately to stop him but were unsuccessful!
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I want to know if the government is spending more than it's earning.
Then you want the debt to GDP ratio like JMT keeps telling you.
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Then you want the debt to GDP ratio like JMT keeps telling you.
If you are borrowing you are spending more than you are earning. Grade three arithmetic.
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Accounting practices only tell you if the games they play are illegal, and even then maybe not. Ontario's government, for example, claims the teachers pension fund as well as public service pension funds under 'assets' which it claims are fine according to accounting practices. The Auditor General and the Financial Accountability officer both disagree but nobody seems to care. Wynne keeps gleefully talking about how she's balanced the budget, while ignoring them.
And even that fails to take into consideration that Ontario, apparently legally under 'GAAP' shifted anything they could call 'capital spending' onto a whole other budget which they no longer count under the main budget. So they claim they balanced the budget even while borrowing tens of billions of dollars because, well, that doesn't count now.
So screw GAAP and any other accounting tricks. I want to know if the government is spending more than it's earning. If so, then how much is it borrowing. And I don't care under what budget it borrows it. I have to pay it back regardless.
There is no 'trickery' here, accounting is often shades of gray and differences of opinion happen all the time.
I didn't know much about the pension fund dispute but I looked it up. It's printed in The Star so I'm sure you'll try and deny it based on the publication source, but it seems like a group of accomplished panelists disagree with the auditor general:
The panelists are: Tricia O’Malley, chair of the Canadian Actuarial Standards Oversight Council; Murray Gold, of Koskie Minsky LLP, a law and pension consulting firm; Uros Karadzic, a partner at Ernst and Young, and Paul Martin, a controller with the government of New Brunswick and a former partner at accounting giant Grant Thornton LLP.
Also:
The practice of counting the pension surplus as a government asset dates to the previous Progressive Conservative government.
So this is not about Wynne trying to smudge the financial statements, it's standard practice by the sounds of it.
And finally, GAAP certainly does play a role in the books of the government. That's why there are auditors who have to sign off in the first place and why there are disputes from time to time.
ETA: source: https://www.thestar.com/news/queenspark/2017/02/07/wynne-welcomes-report-saying-pension-surplus-counts-toward-provinces-bottom-line.html
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If you are borrowing you are spending more than you are earning. Grade three arithmetic.
Grade 3, yes....
But understanding grade 3 math does not make you an economist. Maybe you could shoot for high school math...
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Grade 3, yes....
But understanding grade 3 math does not make you an economist. Maybe you could shoot for high school math...
Maybe you should shoot for grade three? Why are you borrowing if you already have the money? I don't have a big problem with borrowing as long as there is a schedule for paying it back. If you borrow to build a bridge, have a schedule to pay back the principal before you have to tear it down and end up paying interest on two bridges, then three, ad infinitum, the way governments currently handle debt.
If you have to borrow just to pay day to day expenses, you are living beyond your means and that can only end badly.
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Maybe you should shoot for grade three? Why aw you borrowing if yo already have the money? I don't have a big problem with borrowing as long as there is a schedule for paying it back. If you borrow to build a bridge, have a schedule to pay back the principal before you have to tear it down and end up paying interest on two bridges, then three, ad infinitude, the way governments currently handle debt.
Corporations borrow when they have 'the money' because in the long run, it's better to pay the interest than to lose the capital. For example, if they used their capital to expand their operations, they'd expand much more slowly and be at more risk of bankruptcy. Instead, they borrow the money they need, expand their operations and make more money and create more jobs.
Personal finances isn't the same as either business finance or nation finance and trying to compare the two is like comparing apples and oranges.
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There is no 'trickery' here, accounting is often shades of gray and differences of opinion happen all the time.
I understand that. It's like law. Law doesn't necessarily have anything to do with justice. It's practices are often arcane and understood only by its practitioners - and sometimes not even them. In the same way, accounting practices are not understood by anyone but experts, and often not by them. That's why the government is using them to obfuscate about the budget. They're able to claim to have balanced the books even while borrowing $30 billion a year.
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Corporations borrow when they have 'the money' because in the long run, it's better to pay the interest than to lose the capital.
A big factor in why corporations borrow, however, is that they can write off the interest payments on their taxes. So the effective cost of borrowing is minimal. There is no such benefit to government. We pay the full freight.
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Corporations borrow when they have 'the money' because in the long run, it's better to pay the interest than to lose the capital. For example, if they used their capital to expand their operations, they'd expand much more slowly and be at more risk of bankruptcy. Instead, they borrow the money they need, expand their operations and make more money and create more jobs.
Personal finances isn't the same as either business finance or nation finance and trying to compare the two is like comparing apples and oranges.
Corporations also pay down debt and buy back shares when they can. What "capital" do governments have? Debt has to be serviced whatever you are and servicing costs have to come out of whatever revenues you have. As I said before, the only difference is that individuals can't pass their debt on to future generations.
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Then you want the debt to GDP ratio like JMT keeps telling you.
No, I want a dollar figure, a number. I want exactly how much you borrowed this year for any reason.
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I've never heard of a corporation going bankrupt for carrying too little debt. Millions have gone under for carrying too much.
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No, I want a dollar figure, a number. I want exactly how much you borrowed this year for any reason.
Why? That's a far less meaningful number. What you borrowed as a percentage of GDP is far more important.
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Why? That's a far less meaningful number. What you borrowed as a percentage of GDP is far more important.
The percentage of government revenue going to service government debt is far more important. As well as restricting governments ability to do anything new, every dollar used to service debt has to be either subtracted from existing programs or borrowed to maintain them.
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Why? That's a far less meaningful number. What you borrowed as a percentage of GDP is far more important.
It's harder to lie about it and it's more easily understandable to ordinary Canadians. Borrowing money in the absence of some crisis means you're a failure as a politician. Which is why they do so like to lie about it.
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The percentage of government revenue going to service government debt is far more important. As well as restricting governments ability to do anything new, every dollar used to service debt has to be either subtracted from existing programs or borrowed to maintain them.
Okay, and that amount is decreasing, so?
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Okay, and that amount is decreasing, so?
Well we can't have that can we.
If the debt is increasing, the only way debt financing charges can go down is for interest rates to go down enough to compensate. There is no other way to increase debt and not increase financing charges.
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Well we can't have that can we.
If the debt is increasing, the only way debt financing charges can go down is for interest rates to go down enough to compensate. There is no other way to increase debt and not increase financing charges.
Playing accounting games would help with that.
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Playing accounting games would help with that.
Accountants can only tell you how much you can borrow and your ability to finance it. They give information that can help you with making decisions. The wisdom of borrowing is on you.
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Well we can't have that can we.
If the debt is increasing, the only way debt financing charges can go down is for interest rates to go down enough to compensate. There is no other way to increase debt and not increase financing charges.
Much of our debt is 30 year debt, and was locked in at much higher rates. Canada's credit is far better now. The bond markets don't follow normal rates.
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Much of our debt is 30 year debt, and was locked in at much higher rates. Canada's credit is far better now. The bond markets don't follow normal rates.
It's forever debt because government has no plans to ever pay it off.
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If you are borrowing you are spending more than you are earning. Grade three arithmetic.
Coke on, man.
If someone making $60,000/year takes a loan for a $35,000 car, then here spending more than they make?
If someone making $150,000/year uses a credit card at all, they're spending more than they make?
Nobody should get a mortgage then? You should pay $450,000 out of pocket on a house?
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Why? That's a far less meaningful number. What you borrowed as a percentage of GDP is far more important.
So meaningful that this is how banks determine whether to lend you money or not. Your income and assets against your debts. Having $30,000 of debt when you make $250,000 per year is a hell of a lot different than $30,000 of debt when you make $20,000 per year. Debt to GDP shows the country's ability to SERVICE the debt and that's the most important point, especially when the debt is going towards infrastructures and programs meant to further the GDP and increase the government's ability to pay. Wilber is acting like this is a zero sum game with his unfortunate "third grade arithmetic" comment. Uszing his logic, a business wouldn't be able to borrow to build new production facilities or to expand product lines or to stock their shelves. His arguments are completely missing the point.
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So meaningful that this is how banks determine whether to lend you money or not. Your income and assets against your debts. Having $30,000 of debt when you make $250,000 per year is a hell of a lot different than $30,000 of debt when you make $20,000 per year. Debt to GDP shows the country's ability to SERVICE the debt and that's the most important point, especially when the debt is going towards infrastructures and programs meant to further the GDP and increase the government's ability to pay. Wilber is acting like this is a zero sum game with his unfortunate "third grade arithmetic" comment. Uszing his logic, a business wouldn't be able to borrow to build new production facilities or to expand product lines or to stock their shelves. His arguments are completely missing the point.
Just because you can borrow money is no excuse to do it. I'm not saying there is never any need to borrow, I am saying I'm not OK with paying perpetual interest on perpetual debt that will end up costing my descendants while providing zero value to them. Apparently you are fine with that. Borrow the money for infrastructure by all means but pay it off before you have to bulldoze the goddam thing so your kids and their kids won't have to pay for something they get nothing out of.
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I disagree entirely with your premise that "it provides zero value." It pays for all the services run by the federal government. I don't know about you, but I like having food safety inspections, border security, a military, guaranteed income supplements for the elderly, free trade agreemenus, pharmaceutical safety standards, mail delivery, etc.
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I disagree entirely with your premise that "it provides zero value." It pays for all the services run by the federal government. I don't know about you, but I like having food safety inspections, border security, a military, guaranteed income supplements for the elderly, free trade agreemenus, pharmaceutical safety standards, mail delivery, etc.
How does money borrowed and spent 50 years ago but you still owe for and pay interest on give you value? How does infrastructure that no longer exists but you still owe for and pay interest on give you value?
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Take the new Port Mann Bridge in BC which supposedly cost 4.5 billion dollars. If you borrowed all the money at an average of 5% interest and didn't pay any of he principal, after 70 years you would have paid 15.75 billion in interest and still owe the original 4.5 billion. Now you have to tear it down and borrow to build a new one that now costs another 15 billion in 2087 dollars. Does that make sense?
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Do I really need to explain the operation of the federal government to you? I hope not.
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Do I really need to explain the operation of the federal government to you? I hope not.
I know how government treats debt. That's the problem. All they think about is the ability to service it. They don't give a damn about what it actually costs over the long term.
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I know how government treats debt. That's the problem. All they think about is the ability to service it. They don't give a damn about what it actually costs over the long term.
You have to factor in the economic opportunity cost for something like the Port Mann.
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You have to factor in the economic opportunity cost for something like the Port Mann.
Of course we need infrastructure for our economy to stay healthy and grow but there seems to be a real disconnect here when it comes to the actual cost of debt that is never paid off. Our 600 billion in federal debt carried at 5% for 100 years will cost 3 trillion in interest. That's 3 trillion that has to come out of government revenues without retiring one dime of debt. But it's worse than that, the combined federal and provincial debt is 1.3 trillion. That means 6.5 trillion in interest without paying off any principal.
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Of course we need infrastructure for our economy to stay healthy and grow but there seems to be a real disconnect here when it comes to the actual cost of debt that is never paid off.
That's what I'm trying to tell you - it's not a zero sum game.
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That's what I'm trying to tell you - it's not a zero sum game.
No, I'm talking about real numbers, actual money, not bullshit.
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No, I'm talking about real numbers, actual money, not bullshit.
Economic growth is also actual money.
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Economic growth is also actual money.
So you are saying economic growth is impossible without growing public debt at the same time. That isn't really growth, it's living on credit.
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So you are saying economic growth is impossible without growing public debt at the same time. That isn't really growth, it's living on credit.
I'm saying sometimes the benefits outweigh the costs. That's why infrastructure is different.
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I'm saying sometimes the benefits outweigh the costs. That's why infrastructure is different.
It's not different if you never pay it off, eventually it just becomes debt that has no value. All debt does if you leave it long enough because anything you can buy with it has a limited lifespan.
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It's not different if you never pay it off, eventually it just becomes debt that has no value. All debt does if you leave it long enough because anything you can buy with it has a limited lifespan.
That depends - if it caused more economic growth than it costs over that time (economic growth is exponential), it's not a net cost to the economy.
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That depends - if it caused more economic growth than it costs over that time (economic growth is exponential), it's not a net cost to the economy.
If debt caused economic growth the US would be growing by leaps and bounds.
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Coke on, man.
If someone making $60,000/year takes a loan for a $35,000 car, then here spending more than they make?
You know that's not what we're talking about. Borrowing money to buy a car is fine. Borrowing money because you can't afford to pay the bills is something entirely different. We're not borrowing money to build stuff. We're borrowing money to pay for the day to day operations of government.
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If debt caused economic growth the US would be growing by leaps and bounds.
Not all debt is the same. Not all spending is the same. Infrastructure and money in the hands of the poorest is the most efficient way to grow. Infrastructure spending causes continuous exponential growth.
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Not all debt is the same. Not all spending is the same. Infrastructure and money in the hands of the poorest is the most efficient way to grow. Infrastructure spending causes continuous exponential growth.
Maybe your party should do some of that, then. Oh wait! I forgot. Anything the Liberals spend money on is infrastructure! Sometimes it's just, er, social infrastructure or uhm, environmental infrastructure, or cultural infrastructure or ah, something.
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That depends - if it caused more economic growth than it costs over that time (economic growth is exponential), it's not a net cost to the economy.
Of course it does because if you never pay it back, eventually it becomes a cost to government and tax payers that is giving no value.
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Maybe your party should do some of that, then. Oh wait! I forgot. Anything the Liberals spend money on is infrastructure! Sometimes it's just, er, social infrastructure or uhm, environmental infrastructure, or cultural infrastructure or ah, something.
I don't know what world you live in where social spending related to housing, hospitals, and prisons; or green spending related to power plants, transmission lines, and energy retrofit isn't infrastructure.
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I don't know what world you live in where social spending related to housing, hospitals, and prisons; or green spending related to power plants, transmission lines, and energy retrofit isn't infrastructure.
That is not what the Liberals are spending money on.
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That is not what the Liberals are spending money on.
Evidence?
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Evidence?
That's the trouble with government, they just borrow and say it is for whatever they want because it all goes into the same pot which pays for everything. Mind you, if they have no intention of or schedule to ever pay it back, it really doesn't matter, it just becomes the same as all the other debt they carry.
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Evidence?
Where is all this spending going? Not on social transfers to the provinces: they’re actually projected to be slightly lower than the Conservatives had planned. And for all the hype, only a fraction — less than a third — is for infrastructure, even by the Liberals’ exceedingly loose definition of the word. The rest is current consumption: things like enhanced child benefits that, splendid policies though they are, are not the sorts of things you should pay for with borrowed funds.
http://nationalpost.com/opinion/andrew-coyne-a-liberal-spending-spree-because-they-want-to (http://nationalpost.com/opinion/andrew-coyne-a-liberal-spending-spree-because-they-want-to)
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Where is all this spending going? Not on social transfers to the provinces: they’re actually projected to be slightly lower than the Conservatives had planned. And for all the hype, only a fraction — less than a third — is for infrastructure, even by the Liberals’ exceedingly loose definition of the word. The rest is current consumption: things like enhanced child benefits that, splendid policies though they are, are not the sorts of things you should pay for with borrowed funds.
http://nationalpost.com/opinion/andrew-coyne-a-liberal-spending-spree-because-they-want-to (http://nationalpost.com/opinion/andrew-coyne-a-liberal-spending-spree-because-they-want-to)
The 2017 budget increased infrastructure spending significantly from the 2016 budget. It went beyond the 3 focus areas of green, social, and transit and expanded to other areas. All of it is also on top of the New Building Canada Plan and Gas Tax Transfer Fund that were set up by the Conservatives. All told, we're talking about somewhere in the range of $10B per year.
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Where is all this spending going? Not on social transfers to the provinces: they’re actually projected to be slightly lower than the Conservatives had planned. And for all the hype, only a fraction — less than a third — is for infrastructure, even by the Liberals’ exceedingly loose definition of the word. The rest is current consumption: things like enhanced child benefits that, splendid policies though they are, are not the sorts of things you should pay for with borrowed funds.
http://nationalpost.com/opinion/andrew-coyne-a-liberal-spending-spree-because-they-want-to (http://nationalpost.com/opinion/andrew-coyne-a-liberal-spending-spree-because-they-want-to)
Except those child benefits are being spent by low income families and when people spend money it grows the economy, making the debt load less of an issue.
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Except those child benefits are being spent by low income families and when people spend money it grows the economy, making the debt load less of an issue.
Redistributing wealth is not growing the economy, you are just transferring debt from individuals to the state. Enhanced child benefits are fine but not if you have to borrow to provide them.
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Redistributing wealth is not growing the economy, you are just transferring debt from individuals to the state. Enhanced child benefits are fine but not if you have to borrow to provide them.
Well.... at a certain point redistribution does help the economy doesn't it ? There are economic tensions that push efficiency (eg. automation removing money from workers and increasing ROI) but at a certain point there are no people to buy goods. So you have to find ways for people to add value.
I don't pretend to understand everything about the economy but it seems to me having the government pay people to do something is roughly the same as having private industry do it, leaving aside the effect of the invisible hand.
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Well.... at a certain point redistribution does help the economy doesn't it ? There are economic tensions that push efficiency (eg. automation removing money from workers and increasing ROI) but at a certain point there are no people to buy goods. So you have to find ways for people to add value.
Does it if you are borrowing the money? Who's wealth are you redistributing then? When you borrow to spend you have to cut back on something else to service the debt and if you keep borrowing without paying back any principal you become just another junky addicted to debt.
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Does it if you are borrowing the money? Who's wealth are you redistributing then? When you borrow to spend you have to cut back on something else to service the debt and if you keep borrowing without paying back any principal you become just another junky addicted to debt.
'Borrowing the money' to fund ongoing operations doesn't make sense to me. I think borrowing to fund projects is ok.
But the deficit is kind of a separate discussion to how the government manages overall economic well-being of the citizens.
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'Borrowing the money' to fund ongoing operations doesn't make sense to me. I think borrowing to fund projects is ok.
Except civil servants have become adept at exploiting this loophole by cutting back on required maintenance on capital assets in order to fund salaries and pensions. When the lack of maintenance creates a crisis, they claim the governments should borrow money for 'infrastructure'. For that reason, you cannot cleanly separate funding ongoing operations from infrastructure projects.
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I'm going to defend Trudeau gov for one second here: it's probably really cheap to borrow even for the gov right now. If they spend it properly and quickly pay those specific debts back when rates start to climb higher it could possibly be a net boon for Canada. I don't have any faith they'll do that though, so they're likely just robbing Peter (our grandkids) to pay Paul (us), meanwhile Peter will have to pay all that interest back too.
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'Borrowing the money' to fund ongoing operations doesn't make sense to me. I think borrowing to fund projects is ok.
But the deficit is kind of a separate discussion to how the government manages overall economic well-being of the citizens.
Agreed. Long-term liabilities should be used to fund capital assets and liquid assets should be used for expenditure. Time value of money considered, it's actually bad practice to use liquid assets to fund capital assets.
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I'm going to defend Trudeau gov for one second here: it's probably really cheap to borrow even for the gov right now. If they spend it properly and quickly pay those specific debts back when rates start to climb higher it could possibly be a net boon for Canada. I don't have any faith they'll do that though, so they're likely just robbing Peter (our grandkids) to pay Paul (us), meanwhile Peter will have to pay all that interest back too.
Between the 90s and now, we shrunk our debt to GDP from 75% to 30%. We did that while paying almost none of it back. The same debt we had then that was a problem then isn't one now, all because of growth.
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Between the 90s and now, we shrunk our debt to GDP from 75% to 30%. We did that while paying almost none of it back. The same debt we had then that was a problem then isn't one now, all because of growth.
And in the 90s GDP growth was 5% per year. Today 2.5% is good year. Debt accumulated in a slow growth environment does not shrink as quickly. More importantly, the deficit must be less than tax revenue growth over averaged over the business cycle. This invariably requires surpluses when the economy is good to balance the deficits when the economy shrinks.
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And in the 90s GDP growth was 5% per year. Today 2.5% is good year. Debt accumulated in a slow growth environment does not shrink as quickly. More importantly, the deficit must be less than tax revenue growth over averaged over the business cycle. This invariably requires surpluses when the economy is good to balance the deficits when the economy shrinks.
Right now, our deficit is only about 1% of GDP. That's considered sustainable, even if it's less desirable.
Canada's GDP growth was also far from a consistent 5% in the 90s. That was something like 1 year.
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Right now, our deficit is only about 1% of GDP
Deficit is 1%
Debt ratio?
Two different things.
I agree that borrowing to fund capital projects is the smart thing to do - borrow at low rates and amortize. Don't know too many people that paid cash for their house..... That being said, borrowing to fund ongoing operations is beyond stupid - regardless of who is in government.
If you know someone that's paying their power bill with their credit card, ask them how their finances are doing....honestly.
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Deficit is 1%
Debt ratio?
Somewhere just north of 30%, where it's been for about a decade.
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Somewhere just north of 30%, where it's been for about a decade.
And what happens when we run into the next huge financial crisis and recession?
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And what happens when we run into the next huge financial crisis and recession?
Then it'll probably go up a bit, just as it did during the last one. As it stands, the ratio will begin to fall again after this year.
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If we had surpluses to pay down the debt Conservatives would complain that the government is overtaxing just like they did under Chrétien.
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If we had surpluses to pay down the debt Conservatives would complain that the government is overtaxing just like they did under Chrétien.
I wouldn't. I never called for a tax cut. I was perfectly happy to see the debt being paid down.
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You may not have, but others did.
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You may not have, but others did.
The Reform Party certainly did, the economic illiterates that they were.
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http://www.bnn.ca/canada-posts-17-8-billion-federal-deficit-in-2016-17-1.860399
So, it's actually an $18B deficit. And oh look - the Liberals were right about being on a worse fiscal footing. Revenues were actually lower than the year before by more than 0.5%.
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So over two years it's only 30 billion more than they promised they would borrow, and 50 billion total during a time when we aren't in recession and have no major reason to borrow, but hey, it does allow those libs to spread some cash around, though im sure it won't help them in any way. Liberal voters are far to conscientious to be bought with borrowed money, that they lied about borrowing, that they complained the other guys borrowed to much of, during a recession, after they also demanded they borrow even more. It would be funny if it wasn't so sad that so many seem willing to go along with whatever these liars do and call it good.
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So over two years it's only 30 billion more than they promised they would borrow, and 50 billion total during a time when we aren't in recession and have no major reason to borrow, but hey, it does allow those libs to spread some cash around, though im sure it won't help them in any way. Liberal voters are far to conscientious to be bought with borrowed money, that they lied about borrowing, that they complained the other guys borrowed to much of, during a recession, after they also demanded they borrow even more. It would be funny if it wasn't so sad that so many seem willing to go along with whatever these liars do and call it good.
I hate to bring in a country comparison here, but your last statement reminds me of my own country. There seems to be this attitude down here "so-and-so is a bastard, but he's OUR bastard" and that goes for whoever is in the White House. It seems to be a human trait to refuse to admit one is wrong. Americans have the same problem, and it doesn't surprise me that Canadians would too. Follow the leader, all for one and one for all, my party right or wrong.....etc.
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With all the jobs being created and economic growth, I really want Harper back.
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With all the jobs being created and economic growth, I really want Harper back.
On the business channel this morning the economist there was warning this is a trailing indicator, and that there are so many drags on the economy ahead that he expects a big slowdown in the next year, and that the dollar will fall a considerable distance.
And you have yet to show a single thing Trudeau has done which should let you give him credit for this.
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With all the jobs being created and economic growth, I really want Harper back.
But he was such a “steady hand on the economy”. ::)
Conservatives want it both ways of course... only Conservatives can manage the economy and if it goes up under the Liberals, then it’s something else doing it.
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What's driving this job growth? Is it construction and housing?
That's great, of course, but I have a sense that it's a bubble built on Canadians' indebtedness, and Canadians are already among the world leaders in indebtedness.
-k
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What's driving this job growth? Is it construction and housing?
That's great, of course, but I have a sense that it's a bubble built on Canadians' indebtedness, and Canadians are already among the world leaders in indebtedness.
-k
Mostly it was a resurgence in world oil and commodity prices. But they're not likely to surge much higher any time soon. And housing is going to take a hit from the new taxes and new mortgage rules that come into effect end of this month. Carbon taxing starts next year, too, as do higher minimum wage salaries in various jurisdictions. We are not among the world leaders in debt, we ARE the world leaders in debt, and interest rates are expected to continue to rise next year.
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This is nonsense of course.... do you just make **** up to suit your narrative, or do you actually believe what you write?
https://en.m.wikipedia.org/wiki/List_of_countries_by_external_debt
I think that over the course of time I've been posting here and on that other site I've proven that everything I claim has a strong basis in fact and can be supported by citations. I don't get why you desperately indignant social justice warriors keep trying to claim otherwise. I guess the mere presence of someone who doesn't share your ideology infuriates you.
http://business.financialpost.com/personal-finance/debt/canadians-are-the-most-indebted-in-the-world-oecd-says-as-it-warns-on-rising-debt-risk
https://thetyee.ca/News/2017/07/27/Increase-in-Foreign-Workers-Still-a-Problem/
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I think that over the course of time I've been posting here and on that other site I've proven that everything I claim has a strong basis in fact and can be supported by citations. I don't get why you desperately indignant social justice warriors keep trying to claim otherwise. I guess the mere presence of someone who doesn't share your ideology infuriates you.
http://business.financialpost.com/personal-finance/debt/canadians-are-the-most-indebted-in-the-world-oecd-says-as-it-warns-on-rising-debt-risk
https://thetyee.ca/News/2017/07/27/Increase-in-Foreign-Workers-Still-a-Problem/
Mea culpa.... I thought you meant government debt, which is what the thread is about. My post is deleted.
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Mea culpa.... I thought you meant government debt, which is what the thread is about. My post is deleted.
Cybercoma made the same accusation on another thread earlier so I was more irritable than usual.
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Cybercoma made the same accusation on another thread earlier so I was more irritable than usual.
Well, I did thrown an insult in there too ... ;)
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Since we're talking about the economy and all those great jobs I thought I'd get on one of my hobby horses again - inspired by this.
https://www.msn.com/en-ca/money/topstories/stingy-canadian-employers-face-%e2%80%98workforce-crisis%e2%80%99-in-2018-report/ar-BBG6Uny?li=AAadgLE&ocid=spartanntp
It seems Canadian employers are being stingy and don't want to give raises out even though the available pool of workers is shrinking. This, of course, is an unsustainable attitude, and they'll have to start raising wages - unless of course, the friendly Liberal government decides to help them out by, oh, I dunno, increasing immigration and increasing the number of temporary foreign workers.
But of course, that won't happen! This is the government that is concerned with the welfare of the 'middle class' and the great protector of the poor.
Just like Donald Trump!
Oh wait...
https://thetyee.ca/News/2017/07/27/Increase-in-Foreign-Workers-Still-a-Problem/
https://www.thestar.com/news/immigration/2017/11/01/canadian-government-to-raise-annual-immigrant-intake-by-13-by-2020.html
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With all the jobs being created and economic growth, I really want Harper back.
I assume you're being sarcastic.
If so, keep in mind that even if the economy is growing, it may not necessarily be as a result of current government policy. We live in a global economy, with goods being imported/exported around the world. Its certainly possible that even the best financial manager will see growth problems if the global economy tanks, whereas even a horrible manager will see good economic growth if the rest of the world is in the middle of an economic boom.
Lets look at a few other countries for comparison:
In 2016, Canada had a GDP growth rate of 1.5%. Yah! Economic expansion! Yet the Global GDP growth rate was 2.4%. We were outpaced by the U.S. (1.6%) and Europe (1.8%), as well as emerging markets like China and India.
How about the stock market? Its certainly been rising over the past little while. But Canada's markets have been outpaced by those in the U.S., Europe, china and India.
https://data.worldbank.org/indicator/NY.GDP.MKTP.KD.ZG
So, you will have to excuse some of us for not getting too excited about GDP growth that lags behind most of the rest of the world.
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It’s hard to argue that 2016 growth was Trudeau policy era growth. 2017, on the other hand, is 1.5-2 years in, with solid growth that has been the best in decades.
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It’s hard to argue that 2016 growth was Trudeau policy era growth. 2017, on the other hand, is 1.5-2 years in, with solid growth that has been the best in decades.
Which of Trudeau's policies caused the world price of oil and metals to rise?
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It’s hard to argue that 2016 growth was Trudeau policy era growth. 2017, on the other hand, is 1.5-2 years in, with solid growth that has been the best in decades.
I pointed to the 2016 data because 1) it was the latest year we had full data for, and 2) Trudeau was in power the whole year.
And while it is true that the first part of a leader's tenure involves leftover effects from the previous government, Trudeau gained power in 2015, and managed to pass a budget early in 2016.
ETA: And since you seem to think that we need more recent data:
Projected growth rate for 2017:
Canada: 3.1% (https://www.bankofcanada.ca/2017/10/mpr-2017-10-25/)
U.S.: around 3.2%-3.3% (Around https://www.bea.gov/newsreleases/glance.htm)
Now, Canada is beating the EU in terms of growth, but given the fact that they are dealing with BREXIT that's not too surprising.
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And while it is true that the first part of a leader's tenure involves leftover effects from the previous government, Trudeau gained power in 2015, and managed to pass a budget early in 2016.
official date was Nov 4 - Trudeau and 30 cabinet members were sworn in... now, considering the breadth of transition requirements and that the House of Commons only sat for 7 days after the summer recess (Dec 3-to-Dec 11), your "gained power in 2015" is a somewhat dubious implication.
Now, Canada is beating the EU in terms of growth, but given the fact that they are dealing with BREXIT that's not too surprising.
perhaps moot in lieu of serious considerations building for a Brexit vote do-over (given Russian meddling in the initial vote)... https://www.nytimes.com/2017/11/15/world/europe/russia-brexit-twitter-facebook.html (https://www.nytimes.com/2017/11/15/world/europe/russia-brexit-twitter-facebook.html)
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And while it is true that the first part of a leader's tenure involves leftover effects from the previous government, Trudeau gained power in 2015, and managed to pass a budget early in 2016.
official date was Nov 4 - Trudeau and 30 cabinet members were sworn in... now, considering the breadth of transition requirements and that the House of Commons only sat for 7 days after the summer recess (Dec 3-to-Dec 11), your "gained power in 2015" is a somewhat dubious implication.
First of all, in our westminster system, the prime minister and cabinet have significant power, even when the house isn't sitting.
And you seem to have overlooked the point I made where the first budget was early in 2016. While the effects of a budget many not be immediate, we should have started feeling the effects of it by the middle of last year.
perhaps moot in lieu of serious considerations building for a Brexit vote do-over (given Russian meddling in the initial vote)
Even if Brexit is reversed, the controversy and uncertainty (will they leave or won't they? Under what terms?) would serve as a drag for economic growth. (Same would happen if Quebec were gearing up for a referendum)
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Here's what I know - the Liberals launched several initiatives that the Bank of Canada says were large boosts to the economy (CCP, GIS increase, infrastructure plan, middle class tax cut). They were such a boon that we've created hundreds of thousands of new jobs, and in the first two quarters of 2017 had the best annualized growth rate in almost 20 years. True, the full year won't be quite as good, but the pace of growth wasn't sustainable anyway.
Maybe drawing a hard line on spending isn't always a good idea, even if I thought it was at the time.
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Maybe drawing a hard line on spending isn't always a good idea, even if I thought it was at the time.
I do not disagree that sometimes increased spending/increased deficits are probably a good option.
However, there are other issues to be considered:
- Was it necessary (at this time) to do so.
- Where will the extra spending go
- Does it fit with election promises
- Will the increased deficits be worth it in the long run
For example, if we were in the middle of a recession, spending on things like infrastructure (building roads/bridges) or training programs makes sense... it helps stimulate the economy and provides widespread benefits. The problem with what the liberals are doing is that:
- Such economic stimulation may not have been needed at this time. (Our economy wasn't facing any significant problems)
- While some spending is on training/infrastructure (which I don't have a major concern with) Some of the extra spending is for stuff I consider a luxury (i.e. spending on CBC)
- It remains to be seen if the increased budget deficits will be worth it in the long run.
Remember, Trump and the republicans down south have been touting "Economic growth will handle the deficit". Do you really want to thrown your intellectual hat in the ring with a president who has a track record of failed businesses?
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You have to take into account that when the Liberals came to power, Canada was undergoing its most anemic growth outside of a recession in decades. That, to me, says that the deficits were not a bad idea.
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Here's what I know - the Liberals launched several initiatives that the Bank of Canada says were large boosts to the economy (CCP, GIS increase, infrastructure plan, middle class tax cut). They were such a boon that we've created hundreds of thousands of new jobs, and in the first two quarters of 2017 had the best annualized growth rate in almost 20 years. True, the full year won't be quite as good, but the pace of growth wasn't sustainable anyway.
Maybe drawing a hard line on spending isn't always a good idea, even if I thought it was at the time.
Got a cite for that Bank of Canada report? You do know they're controlled by the government, right?
It would be interesting to see how these measures - all taken with borrowed money - would have impacted the economy if the world price of oil and commodities hadn't picked up, and the US economy hadn't resulted in greater exports to them. I have a sneaking suspicion the impact would have been similar to the impact on the US economy of their recently passed budget.
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You have to take into account that when the Liberals came to power, Canada was undergoing its most anemic growth outside of a recession in decades. That, to me, says that the deficits were not a bad idea.
It was in the midst of a sudden deep plunge in oil prices. Nothing whatsoever to do with government policies.
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Got a cite for that Bank of Canada report? You do know they're controlled by the government, right?
So you're questioning the impartiality of the Stephen Harper appointed Bank of Canada governor?
http://www.ctvnews.ca/politics/bank-governor-credits-liberal-stimulus-with-stronger-economy-1.3500252
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So you're questioning the impartiality of the Stephen Harper appointed Bank of Canada governor?
http://www.ctvnews.ca/politics/bank-governor-credits-liberal-stimulus-with-stronger-economy-1.3500252
Poloz was justifying raising interest rates. His rosy view of the economy didn't take long to diminish, and further rate hikes have been postponed.
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So you're questioning the impartiality of the Stephen Harper appointed Bank of Canada governor?
http://www.ctvnews.ca/politics/bank-governor-credits-liberal-stimulus-with-stronger-economy-1.3500252
Only if it disagrees with a predetermined opinion....
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Only if it disagrees with a predetermined opinion....
It's not my opinion. You guys should read the business papers more, and watch the business news.
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Poloz was justifying raising interest rates. His rosy view of the economy didn't take long to diminish, and further rate hikes have been postponed.
Poloz is actually quite happy with the way raising rates reduced growth. 4% was great, but wasn't sustainable long term.
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You have to take into account that when the Liberals came to power, Canada was undergoing its most anemic growth outside of a recession in decades.
Anemic growth is still growth, and given the fact that we had come out of the recession relatively unscathed we didn't really need to grow quickly to catch up to the rest of the world.
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Here's what I know - the Liberals launched several initiatives that the Bank of Canada says were large boosts to the economy (CCP, GIS increase, infrastructure plan, middle class tax cut).
Yeah, but who are you going to believe, the Bank of Canada's opinion on the economy or Argus's?
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Poloz was justifying raising interest rates. His rosy view of the economy didn't take long to diminish, and further rate hikes have been postponed.
What would be the Bank of Canada's reason for raising the interest rates if it wasn't actually needed? Especially considering it's run by a Governor appointed by Harper, who has been in the position for quite awhile without raising the rates.
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Anemic growth is still growth, and given the fact that we had come out of the recession relatively unscathed we didn't really need to grow quickly to catch up to the rest of the world.
Are you actually complaining about economic growth?
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Anemic growth is still growth, and given the fact that we had come out of the recession relatively unscathed we didn't really need to grow quickly to catch up to the rest of the world.
Are you actually complaining about economic growth?
Uhh.... no. I like growth. My issue was that running up the deficit to stimulate growth more than it was may not have been a good idea.
Stimulated growth now at the cost of problems later down the road (as the government has to deal with increased debt) can be a problem.
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What would be the Bank of Canada's reason for raising the interest rates if it wasn't actually needed? Especially considering it's run by a Governor appointed by Harper, who has been in the position for quite awhile without raising the rates.
Most of the discussion I've seen on the business news says they screwed up, got too eager based on US rate increases.
Coming up next month, tighter mortgage rules, plus the rate increases and their impact on housing, plus carbon taxes and their impact on industry and consumer spending.
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And that deficit just keeps getting smaller and smaller:
https://ca.reuters.com/article/topNews/idCAKBN1EG253-OCATP
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And that deficit just keeps getting smaller and smaller:
https://ca.reuters.com/article/topNews/idCAKBN1EG253-OCATP
I'm sorry, but I'm confused. Are you puffing out your chest as a proud Liberal by citing a paper which says we'll run deficits for another 28 years? Is that what I'm seeing here? Revenues are on track for what the Conservatives predicted. Never mind that they're ahead of what the Liberals predicted. That means without Liberals we'd be in balance. Instead, every year we add tens of billions to the debt. As interest rates rise. Every year, the payment on the debt takes up that much more of our revenues. Yet you're sounding really happy about this, about running deficits forever just... cuz. No need to. It's not like our economy needs stimulus. But hey, cuz. It's not like we'll EVER be in a recession where revenues will plunge or that interest rates will ever rise high again. No need to worry about stuff like that. Let's just spend like there's no tomorrow! Why not? It's not like there are any consequences to that.
And hey, didn't your shallow, asshat of a leader promise three years of modest, $10b deficits, then back to surplus? What happened to that? Do you think if he ran on "We want to run about 30 years of deficits" he'd have gotten so many votes?
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That report projects that debt to GDP will continue to shrink - the deficit as it currently stands is meaningless, and actually leaves us in a better fiscal position every year.
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I'm sorry, but I'm confused. Are you puffing out your chest as a proud Liberal by citing a paper which says we'll run deficits for another 28 years? Is that what I'm seeing here? Revenues are on track for what the Conservatives predicted. Never mind that they're ahead of what the Liberals predicted. That means without Liberals we'd be in balance. Instead, every year we add tens of billions to the debt. As interest rates rise. Every year, the payment on the debt takes up that much more of our revenues. Yet you're sounding really happy about this, about running deficits forever just... cuz. No need to. It's not like our economy needs stimulus. But hey, cuz. It's not like we'll EVER be in a recession where revenues will plunge or that interest rates will ever rise high again. No need to worry about stuff like that. Let's just spend like there's no tomorrow! Why not? It's not like there are any consequences to that.
And hey, didn't your shallow, asshat of a leader promise three years of modest, $10b deficits, then back to surplus? What happened to that? Do you think if he ran on "We want to run about 30 years of deficits" he'd have gotten so many votes?
Well your shallow asshat of a leader added 150 billion during his stay and then robbed the "contingency fund" in a desperate attempt to try and show a balance at least once before he got the boot.
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Let's be fair to Harper, though. He was leading the country a recession. It would have been easy for a Conservative to continue austerity but that didn't happen. We are now booming and yet running a deficit.
It's the flip side of Trump taking credit for Obama's economic stewardship.
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That report projects that debt to GDP will continue to shrink - the deficit as it currently stands is meaningless, and actually leaves us in a better fiscal position every year.
It's funny how this position has become universally adopted by Liberals since the Great Leader took over. All they had to do was blithely say it was no big deal and all good Liberals accepted it without question. The amount no longer matters! Now it's only debt to gdp that matters!
Black is white. Down is up. And the more we owe the better our fiscal position! That's life when you're a style-over-substance lover.
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That report projects that debt to GDP will continue to shrink - the deficit as it currently stands is meaningless, and actually leaves us in a better fiscal position every year.
And once again the sheeple that worship Justin Trudeau's hair prattle on about how Harper ran a deficit during a recession - which their own party leaders demanded, tried to take over when he resisted, and constantly complained wasn't large enough.
Now times are booming and it's time... to run huge whopping deficits! Just because who wants to pay for the **** we're using up!? Leave that to the kids! They'll appreciate all that extra debt load! Hey, the bigger the debt, the better our fiscal position!
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Let's be fair to Harper, though. He was leading the country a recession. It would have been easy for a Conservative to continue austerity but that didn't happen. We are now booming and yet running a deficit.
It's the flip side of Trump taking credit for Obama's economic stewardship.
Trump is a senile ****. Running huge deficits in good times leaves you in a poor position to respond when the bad times roll around. Which they will!
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Deficits small enough to allow your debt to GDP to shrink actually leave you in a better position the same way that surpluses do.
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Deficits small enough to allow your debt to GDP to shrink actually leave you in a better position the same way that surpluses do.
But how can you get outraged at programs that help people if you accept that premise?
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Deficits small enough to allow your debt to GDP to shrink actually leave you in a better position the same way that surpluses do.
No they don't, not the same.
The point of "good debt" is that it's an investment that will eventually be paid back. Running defecits during a strong economy & bull markets tells me the Liberals have no intention of paying it back, because when another defecit hits they're not going to start running surpluses.
The bank of Canada is creating an economic bubble by running such low borrowing rates for so long. The housing markets have been an example. Speculative borrowing has been nutty. This is an unsustainable strategy that will hit the wall some day, like the US mortgage crisis. Short term gains at what longterm cost. Interest payments also compound debt i believe.
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No they don't, not the same.
The point of "good debt" is that it's an investment that will eventually be paid back. Running defecits during a strong economy & bull markets tells me the Liberals have no intention of paying it back, because when another defecit hits they're not going to start running surpluses.
There's actually no reason to ever plan to pay it back. The country's balance street can get stronger while the country takes on more debt - just not too much.
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There's actually no reason to ever plan to pay it back. The country's balance street can get stronger while the country takes on more debt - just not too much.
How does it get stronger to accrue debt with interest payments which makes the debt compound & expand exponentially?
The whole point of Keynesian economics is to lower interest rates & spend money in bad times to simulate the economy & then in the good times raise interest rates again & pay it back.
We have all this cheap credit, the economy is growing at record levels based on spending of money people don't have. It's a mirage. This has caused people to borrow cheap, which means everyone can afford higher bids on houses, causing housing prices to rocket, causing over-speculation. The exact same thing is happening to stock investors using cheap borrowed credit. The low rates mean if a recession does happen again there's very little room to lower rates to simulate. The government defecit is part of this machine.
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How does it get stronger to accrue debt with interest payments which makes the debt compound & expand exponentially?
Government debt doesn't work that way, especially when economies grow pretty much continuously.
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The point of "good debt" is that it's an investment that will eventually be paid back. Running defecits during a strong economy & bull markets tells me the Liberals have no intention of paying it back, because when another defecit hits they're not going to start running surpluses.
The bank of Canada is creating an economic bubble by running such low borrowing rates for so long. The housing markets have been an example. Speculative borrowing has been nutty. This is an unsustainable strategy that will hit the wall some day, like the US mortgage crisis. Short term gains at what longterm cost. Interest payments also compound debt i believe.
wonder who wrote the following just a short while ago:
Nobody here is a climate scientist an economist as far as i know so i literally don't give a **** about anyone's half-informed opinion.
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Government debt doesn't work that way, especially when economies grow pretty much continuously.
And what happens to that trillion dollar debt when GPD stops growing and starts shrinking, when government revenues shrink and interest rates rise? Greece.
Oh but we'll never have double digit inflation and interest rates again, right? You need only look at how the Trudeau debt exploded during that time to realize how much our considerably large debt would be impacted by such a situation again.
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And what happens to that trillion dollar debt when GPD stops growing and starts shrinking, when government revenues shrink and interest rates rise? Greece.
We're going to start using the Euro?
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wonder who wrote the following just a short while ago:
Government debt is infinitely less complex than climate science.
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Government debt doesn't work that way, especially when economies grow pretty much continuously.
The debt isn't near Greece or Japan levels or Canada in 1995, but it's still concerning especially if there's another recession. This article that was in the globe and mail repeats much that I've been saying: http://www.conferenceboard.ca/press/speech_oped/17-05-26/Canada_s_debt_levels_are_relatively_healthy_but_some_provinces_are_worrisome.aspx
Canada’s debt is still manageable, but we’re in poorer health than a decade ago, and some of the provinces have flashing warning signs.
...
Economic history teaches that countries and jurisdictions face increased health risks when their debt-to-GDP ratio rises beyond 80 per cent of GDP. Debt service payments eat up a significant share of the national budget, pushing governments to undertake fiscal austerity through budget cuts and tax increases.
At the federal level, Canada has no material concerns, especially with debt financed at low nominal interest rates. A fiscal policy that maintains the debt-GDP ratio stable in the mid-30s is acceptable for now, if considered on its own. Ideally, the Conference Board would prefer to see a federal debt-GDP ratio of around 30 per cent and declining, as was the case in the mid-2000s. A lower and falling federal debt ratio creates room to add significant federal stimulus in a deep recession without concerns about managing future debt, as happened in response to the 2008–09 recession.
It’s worth emphasizing that continuing federal debt accumulation and rising debt service have a material opportunity cost. Annual interest payments on federal debt represent real money that is not available for other national priorities. The recent federal budget projected debt service of $25-billion in 2017–18, rising to $33-billion over five years. That amount is roughly half the annual federal health and social transfers to the provinces, or comparable with the annual defence budget.
In Canada, provinces can borrow in their own name, so taxpayers get to pay for both federal and provincial/territorial debt. Thus, the relevant debt burden here is best determined by assessing the combined federal and provincial debt ratio for each province.
...
What is the outcome of Canada’s debt health check-up? Most provinces and the country as a whole are in better shape that many other industrial economies. However, debt levels have risen federally and in all provinces over the past decade, and things are not going to get any easier in a slow-growth economy.
Sure everything looks ok now. But if you stack up the federal debt, provincial debt, and the very concerning Canadian personal debts which are the highest in the developed world, we have significant and concerning risk factors. The record level high personal debt means rising interest rates by the fed could easily lead to problems for Canadians in paying back loans/mortgages. But if the fed doesn't raise interest rates more (as it should have done years ago), if there's another recession the gov will be limited in what they can do to stimulate the economy, it can't get much lower than 1% as it is now! We have a healthy economy right now in terms of growth and spending, which means we don't need to stimulate it like we have been with gov debt spending and very low interest rates, so all we're doing is creating an economic bubble & speculative housing & stock market based on the spending of money we don't have. It's a mirage.
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What that article says is true - (some of) the provinces are in real trouble. Ottawa is doing well, and is actually doing about the same as a decade ago, not worse, as overall, the economy has grown at about the same speed as the debt.
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Government debt is infinitely less complex than climate science.
I don't know that I could make such a comment so breezily. You can predict what global temperature averages will be in 5 years a lot more easily than what the economy will be in 5 years. But anyway....
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The record level high personal debt means rising interest rates by the fed could easily lead to problems for Canadians in paying back loans/mortgages.
And this reminds me of the general response when Obama started Quantitative Easing: "interest rates will rise !". It didn't happen, but with Trump's magical economics is there not a chance it can happen soon ?
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All of this economic growth is really starting to get annoying.
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America's S&P 500 and Dow Jones continue to hit all-time record highs in a very long bull market. In 2008 the US markets hit the **** & so did Canada's. Trudeau gov has had a pretty modest effect at best. But credit for not screwing it up.
What I am glad to see is cooling real estate markets back to sanity.
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JMT, if you give credit to Trudeau for the Canadian economic growth, that means you would give Trump the same credit for the US record economic growth (also based on defecit spending) since he took office, right? ;)
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And yet the US is now expected to the first sustained increase to its net debt since the GFC (2007-2009) despite the good times: https://www.wsj.com/articles/treasury-plans-to-increase-size-of-debt-auctions-1517408688
Check out Kansas State to see what happens when Republicans get in charge and start implementing the voodoo economics.
The Republicans are going to squander the good times - just watch them.
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JMT, if you give credit to Trudeau for the Canadian economic growth, that means you would give Trump the same credit for the US record economic growth (also based on defecit spending) since he took office, right? ;)
I definitely give him some credit, though, he's been there for less time.
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Reading David Rosenberg this morning who says (to parapharse): what country would not be growing at $1 trillion in additonal debt when the unemployment rate is near 4%? In fact, the treasurery is looking at $441 billion of additional debt in this quarter alone.
I wonder, if Trudeau came out with a deficit target of, say, $90 billion, how many would support that?
$20 billion is a rounding error and can be sustained. 90 would definitely be a concern at this point in the economic cycle.
There is nuance here for those who want to see it.
I also wonder where are the US deficit hawks, what the heck is the US “spending” their debt on, and when will the US start to see real inflation?
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According to economist Kevin Milligan the US is now projecting a defict of 5.6% of GDP for 2019.
This would imply a deficit of $122 billion if Canada were to follow the Republican’s lead.
That is 6 times higher than our current deficit.
Again, why is the US running deficits this high?
Again, whatTF are deficit hawks in Canada complaining about?
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Again, whatTF are deficit hawks in Canada complaining about?
Cuz Trudeau was a school teacher.
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According to economist Kevin Milligan the US is now projecting a defict of 5.6% of GDP for 2019.
This would imply a deficit of $122 billion if Canada were to follow the Republican’s lead.
That is 6 times higher than our current deficit.
Again, why is the US running deficits this high?
Again, whatTF are deficit hawks in Canada complaining about?
So you're saying because the US is bad we should ignore what happens in Canada?
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That seems to be the argument, yes.
But can we take a moment to consider how laughably bad the US figure is? That's hilarious! It's astounding. It's stunning. For the past 8 years these idiots have been crying "Obama is spending muh grandchildren's future :( :( :( " and so on... and now that they're in charge their fiscal ineptitude makes Obama look like Ebenezer Scrooge by comparison. Holy ****, what a bunch of clowns.
-k
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So you're saying because the US is bad we should ignore what happens in Canada?
No - the point is that the Canadian totals are fiscally sound. The US totals aren’t even close.
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No - the point is that the Canadian totals are fiscally sound. The US totals aren’t even close.
And Canadian totals are heading in the same direction, which is the real point.
You run deficits when you need to, not just because you want to bribe people with their own kids' money.
"Don't worry, we'll only run deficits for thirty years' was NOT the Liberals' campaign promise.
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And Canadian totals are heading in the same direction, which is the real point.
You run deficits when you need to, not just because you want to bribe people with their own kids' money.
"Don't worry, we'll only run deficits for thirty years' was NOT the Liberals' campaign promise.
You fix infrastructure when you need to fix infrastructure. You've maybe heard of the old adage about "pay ne now or pay me later"?. The Canadian economy is chugging along pretty well and spending on only help it along and of course more jobs create more taxes to help refill the government coffers.
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That seems to be the argument, yes.
No, I am clearly on the record stating that Canada’s deficit is a rounding error. We could run 15 to 20 billion deficits forever and have no fiscal crisis.
It is a rounding error so long as it stays below at this level or below for the next several years.
Countries go on forever and countries own infrastructure that lasts for decades (even centuries) so for most people they attribute, wrongly, their household finances to how governments should be run. But that is for another thread....
But can we take a moment to consider how laughably bad the US figure is? That's hilarious! It's astounding. It's stunning. For the past 8 years these idiots have been crying "Obama is spending muh grandchildren's future :( :( :( " and so on... and now that they're in charge their fiscal ineptitude makes Obama look like Ebenezer Scrooge by comparison. Holy ****, what a bunch of clowns.
-k
Fully agree here.
Canada needs to be careful because we now face a risk of higher inflation in the US which can bring higher interest rates which can sink our debt/property bubble quickly (granted, we deserve this to happen but that too is for another thread).
Canada also faces trade risk with the latest attack on NAFTA so that also could be a problem for us.
Both, or one or the other, could certainly lead to a recession in Canada which would inflate our deficit as revenues declined and stabilizing mechanisms (EI for example) kicked in.
That is a good argument for why Canada should be closer to a $0 deficit right now in preparation for the bad times that could be around the corner.
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You fix infrastructure when you need to fix infrastructure. You've maybe heard of the old adage about "pay ne now or pay me later"?. The Canadian economy is chugging along pretty well and spending on only help it along and of course more jobs create more taxes to help refill the government coffers.
I have no issue with fixing infrastructure. That isn't what we have a deficit for. We have a deficit for program costs not capital expenditures, of which there are few enough anyway. Most of the Liberals so-called infrastructure spending isn't even on infrastructure.