Canadian governments enacted Keynesian-inspired fiscal stimulus plans in 2009. These plans were to be a temporary response to the global economic recession. The stimulus spending was to be withdrawn after two years and program spending was then to be brought under control and returned to pre-stimulus trends.
However, Canadian governments did not withdraw their stimulus spending as quickly as promised and as a result have run budgetary deficits for longer and accumulated more public debt than they would otherwise have.
This research, which focuses on the post-stimulus spending trends for the federal government, Alberta, British Columbia, and Ontario, finds that these governments have delayed withdrawing their stimulus spending and pushed back initial projections for eliminating their budgetary deficits by at least two years.
These four governments have run larger and more protracted budgetary deficits than they would have if they withdrew stimulus spending and returned to pre-stimulus spending trends. The result is $63.5 billion in higher cumulative deficits and $2.9 billion in additional annual debt service costs that could have been avoided.
