This is an “Executive Report” on Canadian Government Debt, as of 2014, prepared by The Fraser Institute of Vancouver.
This Report is highly instructive, both to Canadians who have to live with the consequences, and to non-Canadians curious to see the all but hidden, and seldom discussed, price that must always eventually be paid for living beyond one’s means – even in a country that is too often admired for its great self-management.
The report reveals the scandal all too typical of Gov’t debt-financing, which places an undue burden on all taxpayers. And because all government debt is in effect, deferred taxation, the deepest moral scandal is the imposition of this burden on future generations not here to defend themselves against our present appetite for more public benefits, security, and pleasures than we are actually paying for. Shame on us!
Here is the full report.
And here is the Executive Summary [with a few of my own comments in brackets]. The Bold and Italics are also mine.
The Big Picture
With Canadian governments having returned to deficit-financed spending [which was the worst ever under Pierre Trudeau, father of our present Prime Minister] the growth in direct government debt has re-emerged as a serious public policy issue in Canada.
Consider that the net direct debt of all three levels of government increased from $872.2 billion to $1.2 trillion between 2007/08 and 2011/12.*
As a percentage of gross domestic product (GDP), the total net direct debt burden increased to 68.0 percent from 55.7 percent over this period. With the federal and provincial governments planning ongoing deficits for the foreseeable future, a further expansion in direct debt may still come.
While discussions about government indebtedness typically focus on direct debt, this narrow approach misses a large portion of total government liabilities. A more complete picture of the state of government indebtedness must not only consider direct debt but also debt guarantees, contingent liabilities and contractual commitments, and unfunded program obligations [These latter are the most invisible – like the part of the debt iceberg that is underwater].
Debt guarantees are issued by governments on behalf of privately held companies and government business enterprises (Crown corporations). Contingent liabilities are potential claims, which may become actual depending on the outcome of uncertain future events, while contractual commitments are the government’s legally-binding contracts to pay for future services rendered, or for goods provided. Unfunded liabilities include programs that provide future benefits, such as Old Age Security, the Canada and Quebec Pension Plans, and Medicare, which governments have committed to providing but which are currently not fully funded.
- Net debt is gross debt (the total stock of securitized liabilities owed by a government) minus financial assets. Net debt is the appropriate focus for analysis because it measures liabilities that have been adjusted for the financial resources that a government holds.
The size and growth of total liabilities
When liabilities other than direct debt are included, the total liability of Canadian governments (federal, provincial, and local) increases dramatically. In 2011/12 (the latest year for which an estimate is possible), the total liability summed to $4.1 trillion, up 20.9 percent from $3.4 trillion in 2007/08. Total government liabilities of $4.1 trillion translate into $117,948 for every Canadian citizen, $243,476 for each income-taxpayer, or 230.2 percent of GDP.
This report is something to think deeply about – and to protest!
Not long ago, the reigning public philosophy was that individuals and nations should pay their debts, and that short-term financing is okay as long as it is paid off by the individuals, families, or the generation doing the borrowing.
The ethic was that each generation ought to strive to leave something better for the next generation than we ourselves have enjoyed, whether that be infrastructure like roads and bridges, or public services.
That “ethic” – and I can’t help saying this is a consequence of the libertarian-socialist regimes we have so mindlessly and selfishly created – is now the reverse.
We think it is okay to live off the backs of unborn children, and their children, in effect creating a situation where they will all be paying a lot of their income to support US!
Shame! as I say …