Study
| EST. READ TIME 1 MIN.Ottawa’s additional spending pre-COVID led to $160 billion in debt
Ottawa’s Pattern of Excessive Spending and Persistent Deficits
Main Conclusions
- While the federal government significantly increased its debt in 2020 and 2021, the pandemic exacerbated Canada’s pre-existing fiscal challenges rather than created them.
- Between 2015/16 and 2019/20, the federal government ran five consecutive deficits, causing nominal federal net debt to rise by $112.2 billion.
- During this period, growth in federal program spending was far more rapid than growth in revenues. In fact, the Trudeau government boosted nominal federal program spending by 36.1%, from $248.7 billion in 2014/15 to $338.5 billion in 2019/20.
- Average annual growth in federal program spending over this five-year period (6.4%) outpaced both the average annual rate of nominal GDP growth (3.0%) and also inflation plus population growth (2.9%). This led to persistent budget deficits and debt accumulation before COVID-19.
- If the growth of federal program spending had been moderately restrained to match either inflation plus population growth or nominal GDP growth from 2015/16 to 2019/20, the federal government would have recorded surpluses nearly every year over the period and avoided taking on approximately $150 billion to $160 billion in debt.
- Holding growth in spending to either the rate of nominal GDP growth or inflation plus population growth would have put federal finances on stronger footing to take on the additional fiscal burden stemming from COVID-19. Even under conservative estimates, our analysis shows the federal net debt-to-GDP ratio would be between 45.6% to 46.0% in 2021/22 rather than the projected 52.1%.
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Jake Fuss
Director, Fiscal Studies, Fraser Institute
Jake Fuss is Director of Fiscal Studies for the Fraser Institute. He holds a Bachelor of Commerce and a Master’s Degree inPublic Policy from the University of Calgary. Mr. Fuss has written commentaries appearing in major Canadian newspapers including the Globe and Mail, Toronto Sun, and National Post. His research covers a wide range of policy issues including government spending, debt, taxation, labour policy, and charitable giving.… Read more Read Less… -
Tegan Hill
Director, Alberta Policy, Fraser InstituteTegan Hill is Director, Alberta Policy at the Fraser Institute. She holds a Bachelor of Economics and a Master’s Degree inPublic Policy from the University of Calgary. Ms. Hill’s articles have appeared in major Canadian newspapers including the Globe and Mail, National Post, and Ottawa Citizen. She specializes in government spending, taxation, and debt.… Read more Read Less…
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