Canadians in every province will pay more than $1,300 per person in 2022/23 on government interest costs, finds a new study published by the Fraser Institute.
"Interest must be paid on government debt, and the more money governments spend on interest payments, the less money is available for the programs and services that matter to Canadians," said Jake Fuss, associate director of fiscal studies at the Fraser Institute and author of Federal and Provincial Debt Interest Costs for Canadians, 2023 edition.
In recent years, deficit spending and growing government debt have become a trend for many Canadian governments.
Even before the COVID pandemic and recession, Fuss claimed governments across Canada and in Ottawa racked up large debts.
Since 2007/08, combined federal and provincial net debt (inflation-adjusted) has roughly doubled from $1.1 trillion to a projected $2.1 trillion in 2022/23, imposing actual costs on Canadian taxpayers through interest payments.
"While some emergency spending for COVID was necessary, the significant increase in federal debt in recent years means more tax dollars will go towards paying interest, and future generations are on the hook for today's spending," said Fuss.
In August, the Fraser Institute uncovered that total federal spending rose 27% this year compared to 2019/20.
While COVID pandemic expenditures partly increased federal spending by 73% to $644.2 billion in 2020/21 before declining by 21% to an estimated $508 billion in 2021/22, much of the uptick in federal spending remained independent of the pandemic.
During the economic downturn, the federal government collected less revenue and spent more as incomes declined and Canadians drew more on services such as Employment Insurance. These downturns contributed significantly to federal debt accumulation but are out of the direct control of prime ministers.
But, like households, governments must pay interest on their debt.
The Fraser Institute study found that taxpayers across Canada will pay $68.6 billion in interest payments for federal and provincial debts in 2022.
The federal government will spend $34.7 billion on debt servicing charges in 2022/23, more than the government expects to spend on childcare benefits ($29.4 billion) and employment insurance benefits ($24.8 billion).
"Interest payments across the country are substantial, taking money away from other important priorities," continued Fuss.
Ontarians are projected to spend $27.0 billion on combined federal and provincial interest costs in 2022/23, nearly equivalent to the amount the province will spend on hospitals this year.
In British Columbia, the costs ($7.4 billion) are almost equivalent to what it expects to spend on its social services this year.
"It's important for Canadians to understand the magnitude of the country's combined government debt because deficits and debt today result in higher taxes in the future," added Fuss.
On a per-person basis, the combined provincial and federal debt this fiscal year ranges from $42,915 in Alberta to $64,579 in Newfoundland & Labrador. Ontarians have the second-highest combined debt per person ($59,773).
Nationally, Newfoundland and Labrador's combined federal and provincial interest costs are the highest at $2,727 per person. Quebec, Canada's second most populous province, is the next highest at $2,110 per person.
Meanwhile, the total expenditure on interest costs for Albertans ($6.7 billion) is more than what the province will spend on physicians this year.
Alberta went from the only province in a net financial asset position in 2007/08 — meaning it had more assets than debt — to the province with the fastest-growing provincial debt burden nationwide during the 2010s.
But thanks to successive budgetary surpluses, Alberta's provincial debt (inflation-adjusted) is projected to decrease from $65.7 billion to $46.0 billion from 2020/21 to 2022/23 — a 30.0% drop.
"Alberta is back to enjoying the lowest debt burden of any province, but the provincial government must restrain spending and continue balancing budgets in the years ahead to avoid another surge in debt," said Fuss.
Canada's 23 prime ministers have each left a legacy, and each of those legacies affects all Canadians. One element critical to analyzing each prime minister is whether they left the federal government more or less indebted than when first taking office.
Each prime minister's debt level can be compared throughout Canada's history by accounting for population growth, inflation, and historical context.
For instance, global conflicts such as World War I and World War II and multiple economic downturns contributed significantly to the substantial growth in debt per person that occurred during the tenures of Sir Robert Borden (188.1%) and William Lyon Mackenzie King (145.2%).
In 2022, federal per-person debt was projected to be $47,070, the third-highest amount in Canadian history (behind only 2020 and 2021). This is more than 25% higher than per-person debt before COVID in 2019.
During Prime Minister Justin Trudeau's tenure, federal per-person debt increased by 35.3 percent between 2015 and 2022, increasing national debt per Canadian from $34,791 to $47,070 (inflation-adjusted).
The national debt per Canadian has risen by over 25% from before COVID in 2019 until 2022.
Compare that to post-World War II prime ministers who experienced recessions: only Pierre Trudeau (58.8%) and Brian Mulroney (42.5%) increased the per-person debt more than the current government.
Prime Ministers Harper and Diefenbaker experienced recessions during their tenures. Still, they increased per-person debt at a much lower rate than Justin Trudeau, at 11.4% and 5.5%, respectively.
"The federal government should pay more attention to its debt accumulation, particularly as interest rates are expected to continue rising," said Fuss.