It’s funny how perspective changes.
The numbers, if numbers are your thing, are staggering: a $343 billion federal deficit for the current fiscal year alone, compared to pre-COVID-19 projections of a $28.1-billion deficit. A whopping $1.2 trillion in debt — the largest federal debt ever.
The culprit for the rising deficit and debt numbers? The cost of reacting to the effects of the global pandemic, including $228 million in direct spending and tax measures to offset the virtual shutdown of parts of the Canadian economy, and a further $71 million decline in tax revenues.
This, while before the pandemic hit, some opposition members, media pundits and outside think tanks were already warning that the federal government was borrowing against the future.
One can only imagine what those same critics would have said if, back then, someone had whispered in their ear about where we’d find ourselves now, and the size of the current deficit.
This isn’t to say that the federal spending — and provincial spending, for that matter — hasn’t been necessary in pretty much unprecedented times. It has been necessary to prevent the economy from simply crashing, and most Canadians recognize that.
And if there is a silver lining, it’s that interest rates are so low that the federal government wants to keep them for as long as possible, borrowing money on long-term deals stretching out decades into the future.
The culprit for the rising deficit and debt numbers? The cost of reacting to the effects of the global pandemic, including $228 million in direct spending and tax measures to offset the virtual shutdown of parts of the Canadian economy, and a further $71 million decline in tax revenues.
“We’re significantly increasing our longer-term debt to manage the situation at a time where the cost of debt is particularly low,” federal Finance Minister Bill Morneau said on Wednesday. “It’s remarkable that we’ve issued this much debt, yet our actual debt charges this year are going to be $4-billion less than we even thought they were going to be a year ago. …So the cost of that debt is manageable. Now, we need to think about how we grow and create opportunities so that we can have long-term, sustainable management of this shock to our system.”
That’s the thing about getting a shock to your system — sometimes, it changes your entire world view. Sometimes, it makes you look at what you thought the best route forward was, and suddenly you’re open to a range of new ideas, new opportunities and new policies.
At the end, though, there is one immutable fact — when you borrow money, you eventually have to pay it back, and you have to pay the interest you’ve agreed to as well.
As we’ve said before, this is an opportunity to tilt things on their heads, but only if we also maintain enough fiscal leeway to be able to borrow if we need to, and to reasonably and effectively pay what we owe.
You have to be able to pay the piper if you want to choose your own tune.
