There is one thing all students dislike: debt.
Student debt crushes people mentally and people are very wary to take on more debt, but why do we not feel the same way about government debt?
To date, Canada is $694 billion in debt, according to the Government of Canada. This works out to an individual share of about $18,000 per person. Canadians are paying $29.5 billion per year to service the interest on our debt, and this works out to about 11 per cent of the federal government’s total revenue.
Just imagine for every dollar paid to the government about 11 cents goes towards interest payments on our debt rather than funding our much-needed social services and government programs.
In 2015, Prime Minister Justin Trudeau promised to run “modest” deficits to the tune of 10 billion per year.
The 2015 Liberal Party platform states, “We will run modest short-term deficits of less than $10 billion in each of the next two fiscal years to fund historic investments in infrastructure and our middle class. After the next two fiscal years, the deficit will decline and our investment plan will return Canada to a balanced budget in 2019.”
As we head into the 2019 election, we see Trudeau not only broke his promise to balance the budget by 2019 but ran deficits much larger than promised every year for the last four years, and on top of that has no plan to balance the budget.
Government debt is bad for students. The province of Ontario is the world’s most indebted sub-sovereign borrower. In Ontario’s provincial budget, interest payments on debt is the fifth-largest item, coming before the post-secondary and training sector.
As a student, this statistic is particularly concerning, considering that more provincial tax dollars are going towards interest payments on our debt than towards our post-secondary institutions across the province.
Students should be concerned with government deficits and what that means for our generation. People often point out the amount of debt the Stephen Harper government piled on in its early years as an argument.
Conservatives are no better than Liberals when it comes to deficits. However, it is important to account for external factors. The Harper government ran large deficits when the American housing market crashed in 2008 causing a worldwide recession.
Government deficits powered Canada through those bad times, and the Conservatives brought Canada back to a nearly balanced budget by 2015.
Conservatives argue from the perspective of Keynesian economics: that permitting the deficits in harsh times provides the economy with an automatic stabilizer and budget deficits provide fiscal stimulus in lean times.
Keynesian economics do not advocate for fiscal stimulus when the existing government debt is already significant and the economy is already performing well.
Contrary to the Liberals–who have no plan to balance the budget until the year 2040–leader Andrew Scheer and the Conservatives first promised to balance the budget within the first two years of taking office.
However, they have since dropped that promise, with Scheer stating: “In the last three years, Trudeau has made an even bigger mess of the budget than I thought possible.”
The Conservatives have dropped the pledge to balance the budget within the first two years of taking office so that no drastic cuts have to be made to balance the budget in a short time frame.
Instead, Scheer has said the Conservatives will balance the budget in a quarter of the time the Liberals would. This means returning to a balance in five years rather than 20, the time frame the Liberals are on track for as of the last fiscal update.
It is important to return Canada to a balanced budget so interest payments on our debt stop growing exponentially with our government debt.
Would you rack up loads of personal debt and leave yourself responsible for paying it off in the future? If not, why should the government rack up loads of debt and leave it to the next generation to pay off?
Feature image from file.
