Freeland looks to take the federal debt to infinity and beyond

Third, just because the government needs to spend on pandemic priorities, doesn’t mean it can’t save money elsewhere. A prudent government would look at lower priority areas and show some restraint. Something as obvious as rolling back the bureaucracy to the size it was in 2017 – two full years after Justin Trudeau came to office – would help save taxpayers at least $13 billion. It would also have the added benefit of demonstrating that those in government are willing to share the burden being borne by the millions of Canadians who have seen their jobs wiped out or their small businesses go bankrupt.

Finally, just because interest rates are low now doesn’t mean they will stay low forever, and it would be foolish to bet Canada’s fiscal house on this sweeping assumption. Even a one per cent increase in the effective interest rate would mean an additional $10 billion per year in interest costs. In spite of this, Freeland did not bother imposing any fiscal “guardrails” on spending or debt, suggesting that this could wait until after the economy had recovered. But that rather defeats the purpose of having fiscal guardrails in the first place: the time you need them most is when you’re at risk of going over a cliff, not when there are no longer any cliffs in sight.

The fall economic statement should worry anyone concerned with Canada’s long-term economic future. Freeland needs to produce a full budget in early 2021 that contains real fiscal targets and a plan to get the deficit under control. If she does not and the current debt trajectory continues, our country will eventually face a fiscal reckoning that will make the painful cuts of the 1990s look like a walk in the park by comparison.