Freeland defends raising debt ceiling despite pushback from economists

Fraser Institute economists note Budget 2024 purported fairness as its aim, especially for younger generations. But saddling them with hundreds of billions in added debt is ‘unfair,’ contend the economists, calling it a ‘glaring contradiction.’

Freeland defends raising debt ceiling despite pushback from economists
The Canadian Press / Adrian Wyld
Remove Ads

The Department of Finance claims it had no choice in raising the debt ceiling, but economists contend that isn’t the case.

“In the foreword of the Trudeau government’s recent budget, Finance Minister Chrystia Freeland declared that, ‘it would be irresponsible and unfair to pass on more debt to the next generations,’ reads a Fraser Institute blog post. 

“Minister Freeland is absolutely right — if only she had listened to her own advice,” argued its authors, Grady Munro and Jake Fuss.

Earlier this year, Finance Minister Chrystia Freeland raised the debt ceiling from $1.83 trillion to $2.13 trillion in amendments tabled to the Borrowing Authority Act. That marks a trillion dollar increase over the previous three years.

The debt limit in 2021 was as low as $1.168 trillion, reports Blacklock’s Reporter.

“The increase … is a result of total borrowing approaching the $1.83 trillion number,” Alexander Bonnyman, director of debt management, told the House of Commons finance committee.

The economists note Budget 2024 purported fairness as its aim, particularly for younger generations. But saddling future generations with hundreds of billions in added debt is “unfair,” they contend, calling it a “glaring contradiction.”

One study estimates Canadians aged 16 can expect to pay the equivalent of $29,663 over their lifetime in additional personal income taxes as a consequence of rising federal debt.

“Debt accumulated today must ultimately be paid for by future generations, again in the form of higher taxes,” writes Munro and Fuss.

By fiscal year 2027/28, the Trudeau government is expected to add $395.6 billion in federal debt — $180 billion more than anticipated in estimates last spring. 

“Much of this added debt stems from the introduction of new programs, which have caused federal program spending over the next four years to be an expected $77.2 billion higher than was forecasted last spring,” the blog reads.

In fiscal year 2024/25, the federal government is expected to pay $54.1 billion in debt interest — $2.0 billion more than it plans to spend on health-care transfers to provinces.

“These interest payments represent taxpayer dollars that don’t go towards any programs or services for Canadians, and have grown to impose a significant burden on federal finances,” Munro and Fuss say.

The study, Pandemic Outlook And Recovery, identified the cost of living as a primary concern for Canadians. Of 2,000 respondents surveyed, 36% acknowledged they may be worse off financially than their parents.

“Any new spending has to be targeted,” Minister Freeland earlier told reporters. “We know that one of the most important things the federal government can do to help Canadians today is […] not to pour fuel on the fire of inflation.”

The country's annual inflation rate peaked last summer at 8.1% and slowly fell to 6.8% in November. However, the average inflation rate in 2022 topped a four-decade high at 6.8% and doubled that of the previous year.

Statistics Canada unveiled in January that grocery prices soared precipitously year over year, rising 9.8%, marking the fastest pace since 1981.

Consumers also paid 28.5% more for gasoline in 2022 annually.

On raising the debt ceiling, Minister Freeland has yet to explain the increase, but contends spending is under control.

“We are saying this is the upper limit to which the government may borrow,” said Freeland in 2021 testimony at the finance committee. “But we are not saying the government will undertake those borrowings, nor are we saying anything about government spending,” she added.

“Why should you receive effectively a blank cheque?” asked Conservative MP Ed Fast. “The increase in the borrowing authority is in no way a blank cheque,” replied Freeland. “The characterization of the borrowing authority limit as a blank cheque is simply false.”

Minister Freeland in a 2020 speech at the Toronto Global Forum said cabinet would have to cut spending at some point but did not clarify a spending limit.

“There are no free lunches,” she said at the time. “Our fiscally expansive approach to fighting the coronavirus cannot and will not be infinite.”

The federal government has not balanced the budget since 2007. 

Remove Ads
Remove Ads

Don't Get Censored

Big Tech is censoring us. Sign up so we can always stay in touch.

Remove Ads