Prime Minister Mark Carney during a visit to the Vector Institute at the Schwartz Reisman Innovation Campus Toronto on June 4. (Credit: Peter Power/Postmedia)
According to Prime Minister Mark Carney, the Canadian economy is slowing because of a decline in immigration and his government’s spending reductions.
Here’s what he said: “We see some weakness, in part because of clear decisions by the government. … We have taken back control of immigration, that’s meant the population growth has flattened, in fact it’s slowed or it’s been negative for the last two quarters. We reined in government spending. It had been growing close to 10 per cent and it’s growing less than two per cent now.”
Then Carney promised a better future: “The foundations (are) coming into place, settling in, for that stronger, more resilient economy,” a growing economy his government insists is on the horizon.
Whether Carney has his recession economics right is open to question. Did the GDP slip into negative territory because of immigration policies and a marginal decline in government spending? On spending, for example, total budgetary spending for 2026-7 is estimated to hit $503 billion (half a trillion), down marginally from $510 billion. Sounds like progress, except that the spending total is up 60 per cent from $300 billion in 2020. And on Thursday, the PBO predicted the federal deficit will have doubled from $36.3 billion to $72 billion in the past fiscal year. In other words, the Carney Liberal budget machine is still running on the Trudeau-COVID deficit track.
As Carney continues the explosive Liberal legacy of deficit spending, total federal debt is set to hit $1.4 trillion this year. Add in the $1 trillion combined debt of all the provinces, and Canadians are sitting on $2.4 trillion in government debt.
Such boring big-number fiscal data means next to nothing for those of us who are not steeped in fiscal economics. After all, what the hell is a trillion of anything? But as Jack Mintz wrote in FP Comment last week, while the size of government debts today are problematic in themselves, their continued growth in coming years poses a risk of a serious future crisis. Without deficit discipline today the effect, said Mintz, “may well be to trigger a sovereign debt crisis.”
The $2.4 trillion in government debts may register more clearly if the mega numbers can be reduced to the level of individual finance.
The rough math is simple enough. There are about 40.5 million Canadians carrying $2.4 trillion in government debts, which breaks down to close to $60,000 per person. The number is known in fiscal circles as “net debt per capita” although in rough general terms it can be seen as the total government credit card debt carried by every Canadian. If a family of four including two teenagers is sitting around the kitchen table and one of them asks how much government debt they are carrying as a family, and the answer would be about $240,000.
Obviously that does not mean that Mom and Dad and the kids are directly responsible for paying down $240,000 or picking up the interest charges. But the number is a good indicator of the scale of risk that is being built by Ottawa and the provinces.
It is possible, perhaps, that the Carney Canada Strong spending machine will produce economic growth that will generate income and wealth that will increase the size of the economy and boost government revenues.
In the meantime, however, the annual debt costs are eating away at government revenues. In its latest review of federal spending, the office of the Parliamentary Budget Officer noted that interest and other charges on Ottawa’s debt will take 13.2 per cent of federal government revenue by 2030-31 — or about $80.9 billion — more than double the debt charges of six per cent in 2020-21 (see graph).
If interest rates should rise more than expected then the risks would rise and, as Jack Mintz suggested, Canada could face a sovereign debt crisis. Explain that to the family.
• Email: tcorcoran@postmedia.com