Kevin O’Leary’s black holes

Kevin O’Leary began his 2,500-word speech introducing his economic policies to Toronto’s Empire Club with fully 500 words telling the tragic story of how his mother used up her and her second-husband’s savings fleeing from her first husband, Kevin’s father.

This taught the young Kevin that financial freedom is the most valuable thing of all. The personal is political, they say. But the personal isn’t obviously policy-relevant. The connection O’Leary draws, which is a bit of a reach, is that all Canadians should have financial freedom, which is not possible “under our current disaster of a government” since Canada itself “doesn’t have the financial freedom it needs to fund the things that we as a country care about — our environment, health care, and the military. Instead, our country is stuck in a black hole of debt that is spiralling further and further below the red line every day.” Under current trends, our federal debt could be $1.5 trillion by 2055.

Before you get distracted by the idea of a black hole with a red line, let’s focus on the $1.5 trillion. It’s a big number best avoided. But 2055 is a long way away. If we get one-per-cent nominal growth per year between now and then, $1.5 trillion will be 51 per cent of GDP; with two-per-cent nominal growth, it will be 35 per cent of GDP; three per cent nominal growth: 24 per cent of GDP. A debt equal to zero per cent of GDP would be better. But federal debt at 24 per cent of GDP wouldn’t really be a black hole.