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The net direct debt of all three levels of
government in Canada fell from $832.7 billion to $798.4 billion
between 1999/2000 and 2003/2004. This is a small drop compared to
the growth since 1990/1991 when net debt was $533 billion. There
are several reasons that even a small reduction in debt is good
news. First, governments have begun to balance their books and
some have started paying down their debt. Second, continued
economic growth will help reduce the ratio of debt to gross
domestic product (GDP), currently at 65.6%. Third, a constant or
declining debt stock will demand a smaller portion of government
revenues. As a result, some of the 10.7% of revenues currently
being spent on interest charges can be used for further debt
relief or tax cuts.
The bad news is that the $34.3 billion drop in debt was more than
offset by increases in other liabilities such as program
obligations, which grew significantly from 1999 to 2003. The net
increase in total liabilities over this period was $259.4
billion. The growth in obligations under programs such as the
Canada and Quebec Pension Plans, the Old Age Security, and the
Medicare system has been a focus of this debt study for many
years. Specifically, the concern lies in the size of these
obligations and what this implies for the future health of these
programs. Largely due to increases in program obligations, in
2003/2004 federal, provincial, and local liabilities added up to
$171,032 for each Canadian taxpayer or $85,525 for each Canadian
citizen.
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