My parents were immigrants to Canada after the Second World War. One of the values they instilled in our family was to not go into debt. "Neither a lender nor borrower be" was a maxim in our house.
It is perhaps not surprising then that I have a strong aversion to the continued increase in both federal and provincial debt. Over the past ten years, with right wing governments in both Ottawa and Victoria, our debt has soared.
Beginning in 2008, the Conservatives added about $154 billion to our debt. Our provincial debt, according to the B.C. Liberals, will be $67.7 billion for fiscal 2016/17. These are staggering numbers. A significant portion of our taxes are now spent servicing debt and not providing programs.
However, there is a caveat I need to insert. Not all debt is created equal. Capital expenditures are often worthwhile. Debt incurred to build a new hospital or school, refurbish a bridge, or build a clean water supply make some sense. At the end we have a tangible asset with a life span which can serve taxpayers.
On the other hand, there is debt incurred to meet operating expenses. This sort of debt gets us through a period of time in which revenues do not meet expenses but it is the dangerous sort of debt. It is maxing out the credit card to pay rent.
In household financing most of us can distinguish between the two forms of debt, although last week's column by Barb Yaffe would seem to say there are a significant number of people who can't.
In our household finances, carrying a mortgage and a car loan might seem reasonable but overspending on the credit card for a dinner out would seem to be foolhardy. Then again, maybe it wouldn't be for some people. We all have our own level of comfort when it comes to handling debt.
Today, the federal Liberals under Justin Trudeau will table their first budget. When the Liberals were running for election last fall they told us they intended to address the infrastructure deficit in the country by running deficits of $10 billion per year in the first three budgets.
We voted the Liberals into power, giving them a majority government, and they rightly assumed this was affirmation of their strategy with regard to the budget. And let's face it - the federal government under the Conservatives had been woefully deficient in dealing with a multi-billion dollar infrastructure deficit in this country.
The Conservatives were like the tenant who didn't seem to think cleaning up, mowing the lawn, or washing the floor was their responsibility. They let a lot of important initiatives lapse saying they would get around to them when the economy improved.
Maybe they would have eventually but Mr. Trudeau and his party promised to do something about it now.
Unfortunately, that was October and the economy was doing better than now. No one at the time was predicting a perpetual slide in the price of oil. Indeed, economists assured everyone the price would rebound by the end of 2015. It hasn't.
Kevin Page, the former Parliamentary Budget Officer of Canada, noted in a column recently that Canada's GDP will be around $2 trillion this coming year which is a $100 billion decrease over last year. That translates to a shortfall of $15 billion in tax revenue.
Add to this the increased portion of the federal budget which is now spent on debt servicing -- approximately $30 billion or 10 per cent of the budget -- and it is perhaps not surprising the finance ministry has hinted at a larger deficit for this coming year.
The prediction is for an $18 billion operating deficit along with the $10 billion in capital or infrastructure debt. The total will see our national debt grow by something close to $30 billion.
This is not really surprising. The last time we had a Conservative government in power for any length of time, the debt almost doubled and it took three or four years for the Liberal government to wrestle the deficit under control. Fiscal momentum is difficult to deal with and doubly so when the country is facing an economic downturn.
The difference this time is we have engaged in free trade agreements such as NAFTA and the impending TPP which have gutted our manufacturing sector to a large degree. We have become a country with an economy based primarily on the export of raw materials. We don't control the price of those commodities -- the world market does.
Today's budget will likely be deemed "bad news." A deficit budget will be a signal which will not help improve our economy. And the real irony is the Conservatives will chastise the Liberals for running deficits and their poor economic performance when it is their policies which got us into this mess in the first place.
