Government Debt

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Government Debt and what I means by the numbers.

When people talk about government debt they tend not to think of the cost to service the debt. They are just looking at the number as a total. I see the waste that debt represents in the form of Interest payments.


The Fraser Institute predicts that in 2016 the combined federal and provincial debt of Canada will exceed 1.3 trillion dollars. That represents a value of $35,000 dollars for every man woman and child in this country. This number seems smaller when it is broken down like that. $35,000 per person seems manageable. And I am sure it is.

The problem is the wasted money in servicing these debts. Local, provincial and federal governments combined pay over $60 billion a year to service their debts. This is money that could be better spent elsewhere. To put this into perspective, the federal government spent $23.9 billion last year on national defense.  Ontario spends about $11 billion on its entire welfare system. Quebec spends about $5.3 billion on post-secondary education. BC spends 1.26 billion on childcare each year.

The national defense, the Ontario welfare system, Quebec’s post-secondary spending and BC’s childcare combined is still 20 billion short of those interest payments. Getting the bigger picture now?

Sixty Billion dollars is a lot of money every year wasted. Its $1653 dollars per man woman and child in this country going to banks and lenders just to service debt.

The worst part is the debts continue to grow for all levels of government. And with the growth of debt comes the increased cost of interest payments.

The Federal debt is $616 billion dollars. That would require nearly $70 billion a year to reduce this to zero.  The 2015 budget for the federal government was 290 Billion. We need to raise enough taxes to account for $35 billion and we need to reduce spending on current budgets by another $35 billion. This would create 10 years of hardship. But the gains afterwards would absolutely make it worthwhile.

After all that federal debt is paid off imagine how much that extra 25 billion a year would pay for after returning to current budget and taxation levels. Imagine what the 60 billion a year extra would do for the country if all the provinces and other levels of government did the same thing. Increasing the GST from 5% to 10% would come close to the $35 billion a year needed for the extra tax revenue. Making 35% worth of cuts would be more painful. If it was drawn out for 20 years instead it would only require the raising of taxes.

My biggest fear is the continued growth of debt with it the interest to service this debt. Eventually we will need to raise taxes just to maintain spending levels and to take care of the ever increasing debt making it even harder and more painful to get out of later.

The solution really starts with us, the individuals. We need to really decide on what we need as services. And what we can do to reduce waste of services. Would a $50.00 user fee charged to those of a high enough income to support it really impact the health care of Canadians. The fear is people would avoid going to the hospital to save the $50.00 risking lives and possibly causing more expensive care later. Would making classroom sizes go from an average of 21 students per class to 28 really cause that large of an impact on the education children receive.

No answer is easy, everything results in a struggle. But we should take care of this now while the struggle is manageable.

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