Definition: Deficit - the annual difference between ‘revenue in’ and ‘revenue out,’ and we had quite the federal deficit in 2009, i.e., almost $60 billion, to push our overall debt well above $500 billion for the first time in 6 years.
In Dangers of Debt Part 3, I mentioned a few perceived dangers from the Canadian Taxpayers Federation’s (CTF’s) perspective, i.e., the country will spiral into prolonged deficits, crowd out private investment, permanently increase the size of government and ultimately increase taxes to pay for it all.
I don’t agree with everything CTF says or worries about (I don’t think I take as dim a view on taxes as they do) but their ideas are worth putting on the table.
Another viewpoint about the dangers of debt comes from Federal MP Glen Pearson from London.
In an online article, posted at The Parallel Parliament, he writes the following related to the recent federal budget:
Every group will have something to say about this budget, its pros and cons, its winners and losers. The awful truth though is that while there well be some winners, all of us will be losers with this budget. Why? Because it never took four oncoming tsunamis seriously.
(He says tsunami, I say avalanche. He says tomato...)
The first is the inevitable tidal wave of retirements on the horizon as the baby boomers pass into their senior years. We’re having trouble right now dealing with pensions; how are we supposed to deal with the millions who will be placing pressure on senior incomes, hospital coverage, health insurance, wait times, etc.? Demographers and prophetic economists have been telling us this for years. This budget was the time to acknowledge it – it didn’t.
Recent controversy aside, the environmental cataclysm looming over us is frightening. Somehow, the vast majority of us know this but this budget never lifts its head long enough to see what’s coming. Where is the investment in alternative energies, or the carbon tax? How will we deal with steadily rising fuel prices that will also drive up the cost of the products we acquire? Don’t look for hope in this budget; it’s not there.
["Is the money out there to help?"]
Slightly over 300,000 jobs have been lost in this recession, but the government says that over 100,000 have been reclaimed. Many debate these numbers, but what we need to know is what are the jobs of tomorrow and how do we invest in them? The budget is silent, with only empty symbols thrown in.
The final tsunami, and clearly the most imminent, is the economic wreck coming in our direction. Consider these figures. Right now, public debt is approximately $500 billion, but private debt is almost triple that. Slightly over $100 billion dollars has been added to our cumulative debt in the last two years alone. That’s $3000 for every Canadian! The deficit accumulated in the last year is almost $60 billion – another $2000 per Canadian. That means our individual portion of the current debt/deficit is $5000 per person, not including our private debt. This budget never tackled that problem. The independent Parliamentary Budget Officer and more economists than we can count are saying we are now in a “structural” deficit. In other words, it’s here to stay until we treat this problem seriously.
["Is this a suitable budget strategy?"]
Does enormous debt, especially a structural one, make us less able to respond to upcoming needs related to seniors, the environment, energy, future job markets?
I would say yes, and that we’re placing ourselves as a nation in a very vulnerable position, painting ourselves into a corner, so to speak.
Even paying off the debt becomes more difficult as it grows because debt charges alone (currently at about 13%) erode revenues even further.
Are we doomed to debt?
Are there ways out?
***
Are there other dangers associated with high debt?
Please click here to read Part 5, conclusion.
Are there ways to resolve the issue of growing debt?
(Please see Series of Significance, side margin, to link to ‘National debt is a silent, deadly avalanche’).
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