PBO says Ottawa may balance the budget in 2035, incurring $487 billion in debt interest charges

Between now and a balanced budget in 2035, the federal government will rack up $487 billion in debt interest charges on the national debt alone — equivalent to their expenditures ($491 billion) this fiscal year.

PBO says Ottawa may balance the budget in 2035, incurring $487 billion in debt interest charges
THE CANADIAN PRESS/Adrian Wyld
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The federal government keeps moving the goalpost for when it hopes to balance the budget, according to data from the Parliamentary Budget Office (PBO).

Between now and a balanced budget in 2035, the federal government will rack up $487 billion in debt interest charges on the national debt alone — equivalent to their expenditures ($491 billion) this fiscal year.

The Canadian Taxpayers Federation (CTF) again urged the federal government to reduce spending after learning they won't balance the budget until 2035. 

"By the time the government finally balances the budget, taxpayers will have paid $487 billion in debt interest charges, which is currently what the government spends in an entire year," said Franco Terrazzano, CTF Federal Director.

"Prime Minister Justin Trudeau needs to stop wasting so much money and balance the books because sending hundreds of billions of dollars to bond fund managers is unacceptable."

The PBO's most recent estimate in its Fiscal Sustainability Report assumes economic growth every year, an average interest rate of 2.8% and no new spending beyond the allocation of funds in Budget 2023. 

"Waiting until 2035 to balance the budget is too long, and the feds won't even hit that target if interest rates rise higher, the economy doesn't grow every year, or politicians can't find the willpower to say no to new spending," said Terrazzano. 

"This government has given taxpayers every reason to believe it will never balance the budget," he added. Parliament has not balanced a budget since 2007.

According to Budget 2023, federal debt servicing charges rose 80% this fiscal year from pre-pandemic levels in 2020, costing $43.9 billion this year — up $19.5 billion. National debt will total $1.2 trillion by the end of 2023. 

By 2027, debt servicing charges will reach $50 billion, totalling $235 billion over the next five years.

Terrazzano promptly accused the feds of not caring about "fiscal prudence or helping taxpayers."

The federal deficit is expected to reach $40 billion in 2023 — nearly $10 billion higher than forecast in the fiscal update last fall.

While that update projected a $4.5 billion surplus for 2027, Budget 2023 now forecasts a $14 billion deficit that year.

In the 2022 Fall Economic Statement, Finance Minister Chrystia Freeland said she would balance the budget in 2027. This marked an amendment to Prime Minister Justin Trudeau's campaign promise in 2015 of a balanced budget four years later. 

According to the Taxpayers Federation, the feds overspent Budget 2022 by $18 billion. "The government promises to find $3.95 billion in savings in 2023, but total spending is increasing by another $20 billion in 2023 to $490.5 billion," they said.

On March 28, Opposition leader Pierre Poilievre called Freeland "the Minister of Inflation" and said taxpayers would face higher costs. 

"A year ago, she said we're determined that the debt-to-GDP ratio must continue to decline — it's going up," he said at the Commons.

"Our pandemic deficits are and must continue to be reduced — they're going up."

In a recent letter penned by the finance department for the PBO, they concluded that budget forecasts "should not be viewed as a prediction of the future."

The Fraser Institute uncovered that total federal spending increased 27% in 2022/2023 compared to 2019/20 — an average annual increase of 9%. 

Cabinet's last pre-pandemic budget in 2020 totalled $373.5 billion. 

The COVID pandemic expenditures increased federal spending to $644.2 billion in 2020/21 before declining to an estimated $508 billion in 2021/22. 

A Fraser Institute study suggested that the wasteful federal spending on COVID — money either poorly targeted or sent to ineligible recipients — will eclipse $110 billion by 2032/33, partly due to higher debt interest costs.

"Taxpayers will bear the costs of Ottawa's wasteful COVID spending for years in the form of higher debt and interest costs," said Jake Fuss, associate director of fiscal policy studies at the Institute.

They said Canada's $359.7 billion in federal COVID spending added $8.3 billion to present-day interest costs on the national debt. Of the $8.3 billion in debt servicing costs, $2.1 billion can be attributed to wasteful spending. 

Over the next decade, the total cost of wasteful COVID spending will be $111.0 billion, including $89.9 billion in wasteful spending and $21.1 billion in ongoing debt servicing costs from such wasteful expenditures.

According to the Institute, much of the increased federal spending remained independent of the pandemic, "representing a permanent long-term ramping up of federal expenditure."

This year's federal spending is projected at $496.6 billion, with several half-trillion budgets forecast in future years.

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