Bambi has always been fascinated by politicians indulging in making extravagant promises during electoral campaigns. Today this phenomenon is even more fascinating given our worrisome public finances. If you have forgotten about the latter, here is a very thoughtful article by Mr. Mario Dumont published last Saturday in the Journal de Montreal.
The title of Mr. Dumont’s column says it all: “Yet this is not Monopoly money“. This journalist is right. Monopoly may be fun to play with our loved ones (perhaps even more so in lockdowns). However, our politicians have been spending, and/or talking about spending more, of REAL money… and it is OURS, collectively.
Below is a quick translation into English.
“The pandemic has radically damaged Canada’s public finances. Forget Justin Trudeau’s moderate deficits: the situation has turned into a debacle. However, in this campaign, this does not seem to worry anyone. Promises, billions, parties relaunching themselves to promise more than the other, it looks like we are talking about a country with a budget surplus.
I throw in some numbers.
A deficit of over $350 billion in a single year. To give an idea, the previous record was $55 billion after the 2008 financial crisis.
Canada’s debt has gone up sharply. The federal budget tabled in the spring projected an additional $700 billion by 2026.
Canada is a federation. Provincial loans must be included in order to have a complete picture. Over a short period of time, between 2000 and 2024, the federal government and the provinces will together add nearly $1 trillion to our debt.
The Parliamentary Budget Officer estimates that according to the current trajectory, a return to balanced budgets will not occur before… 2070 !!!
And guess what? All of these staggering numbers ignore the tens of billions of new pledges that were added during the current election campaign.
Too big to be tangible?
It seems to me that in a family that would have been hit by a financial disaster last year, we would have the wisdom to moderate ourselves, the time to get back on our feet, that is out from under that debt load. But not to the government! This campaign is seen as if the financial disaster caused by the pandemic never existed.
In fact, I have a feeling that a deficit in the hundreds of billions is so big it turns into Monopoly money. The same goes for a debt that is no longer in billions, but in trillions. Inordinate to our imagination, the numbers become unreal.
However, these amounts represent real money. Real CERB [Canada Emergency Response Benefit] checks and grants of all kinds, added up at the end of the year. And the reimbursement will be made with real money, with tax increases in the future (that we forget to mention during the electoral campaign).
The torrent of government spending
Anyone who finds this debate on public finances too theoretical should dwell on a few very mundane facts.
Deficits represent future taxes that you or your descendants will have to pay one day.
Interest on the debt must be paid annually. Interest rates cannot be lower, they can only go up in the years to come. Paying more interest on a debt means having more of our taxes that does not come back to us in the form of services.
And finally, we are seeing that governments that pour disproportionate money into the system are creating inflation. The rising cost of living is catching up with us.
Forgive me for this column, which does not make you dream.”