Buried Government Report Reveals Looming Fiscal Crisis for Canada

Son of a gunslinger

anthony furey, Toronto Sun

Prime Minister Justin Trudeau is pictured while making a stop in Edmonton in March 2016. (THE CANADIAN PRESS)

As President Obama rides off into the sunset, the son of the gunslinger, Pierre Trudeau, is emerging as the western world's most leftist leader. Like his father, Justin is charismatic and engaging and in some respects fairly intelligent, and he genuinely thinks he is doing the right things. But like his dad, he is attracted to Keynesian economics which works wonderfully as long as the economy is booming, otherwise, not so much.

Canadians rejected the fiscally conservative Stephen Harper, more because of his personal short-comings, and elected an idealistic and unrealistic younger man with nicer hair. Short term pain for long-term gain - he sold us as he promised a deficit for a couple years. Now, reality is beginning to rear its ugly head and it appears that long term pain will last until 2055, which, for many of us means the rest of our lives. And even then we will have a national debt that is 2.5 times greater than it is now. With fewer people in the marketplace, it means we cannot possibly ever fully recover.

Pierre Trudeau in one of his gunslinger poses & son of a gunslinger Justin

A shocking new report quietly released by the federal government admits that their finances could collapse in the coming decades if politicians don’t make responsible choices.

Two days before Christmas, when most politicians and their staffers had long left their offices for the holiday break, the finance department released — without fanfare or wide notice — a surprising update on long-term economic and fiscal projections.

The report warns that lower than expected growth combined with higher program spending “would be sufficient to put at risk the fiscal sustainability of the federal government.”

Ian Lee, who teaches at the Sprott School of Business at Carleton University, says Canadians should certainly be worried about these numbers.

“I’m old enough to remember when Pierre Elliott Trudeau first took us into deficits, which were much smaller ones than they are today,” Lee told the Toronto Sun in a telephone interview. “Everybody back then said ‘What’s the big deal?’ But the problem is that debt started to snowball and get out of control. It’s so difficult for politicians to say no and to make hard, difficult choices.”

The forecast also assumes that the budget won’t be balanced until 2055. Projections show it peaking at $38.8 billion in 2035.

This goes against a key Liberal campaign promise.

During the 2015 election, Justin Trudeau pledged to balance the budget before the next election, in 2019. Yet, in the fall fiscal update announced this past November, Trudeau’s Liberal government pushed the goal posts back and projected deficits until 2021 and beyond.

These new assumptions from the finance department now call all of the Liberal government’s numbers into question.

This is not the only alarming figure revealed.

Another key fiscal promise of the prime minister’s campaign was to bring down the debt-to-GDP ratio to 27% by 2019. Yet the finance report also places this accomplishment out of reach.

It instead projects the debt ratio consistently hovering around 31% for the next few years, then dropping to 30.4% by 2021.

Federal debt is also assumed to cross the $1 trillion mark around 2031. It is currently $635 billion.

“The report is very concerning, but it’s not surprising,” Conservative finance critic Gerard Deltell told the Sun. “We already know that Justin Trudeau’s tax-and-spend plan has failed. Full-time jobs are disappearing, taxes higher, and the only solution the Liberals have to offer is more of the same.”

These alarming forecasts are the result of the report’s authors factoring in Canada’s ageing population into its financial outlook. Over the coming decades, an increasing number of baby boomers will move into retirement while relying on fewer workers in younger cohorts to bankroll government services.

“What really concerns me is that they’re borrowing for current spending,” adds Lee. “It’s one thing to borrow to buy a house. It’s another thing to borrow to buy groceries. They’re borrowing to finance consumption instead of long-term assets. I don’t think it’s going to end well.”

The report is not all doom and gloom, though. It acknowledges there are upsides should growth improve and points out that government could make financially-sound choices to send the numbers in more optimistic directions.

“While no single initiative can guarantee sustainable growth in our prosperity, the potential payoff from acting now in a broad range of policy areas is very large, as measures tend to reinforce themselves over time,” the document advises.

•Returning to surplus

Trudeau’s campaign promise: 2019

Finance department’s forecast: 2055

•Reducing the debt ratio

Trudeau’s campaign promise: down to 27% by 2019

Finance department’s forecast: still up at 30.4% by 2021

•Still not balancing itself

“The commitment needs to be a commitment to grow the economy and the budget will balance itself.”

— Liberal leader Justin Trudeau, 2014

•Gloomy future

“I don’t think it’s going to end well.”

— Ian Lee, Carleton University

•Federal debt projections

-2017: $635 billion

-2021: $746 billion

-2030: $992 billion

-2045: $1.5 trillion

Look-out Canada, Tomorrow's Going to be Different Than Today

Election Day in Canada (Democracy in action, or Trudeaumania 2.0)

National party leaders (today). Left to right: Stephen Harper, Conservative;
Elizabeth May, Green; Justin Trudeau, Liberal; Tom Mulcair, NDP

A marathon 11 week federal election campaign ended yesterday as Canadians vote for a new government today. 11 weeks is twice the normal duration for an election; Prime Minister Stephen Harper gambled that his two main opponents would shoot themselves in the foot somewhere along the way, however, both emerged with all toes still wiggling. Harper also thought he had an advantage because the Conservative election vault was much more full than those of his opponents. That 'advantage' hasn't really materialized in any noticeable form, nor has it resulted in tipping the polls.


Change (Doesn't matter if it's good or bad)

The theme for this election campaign has been 'change'. Both the Liberals and the NDP convinced Canadians that change was needed. They had the assistance in this endeavour of the CBC - Conservative Bashing Corporation - Canada's public broadcaster whose budget was frequently a victim of Conservative budget cuts. But it wasn't just the CBC who were tired of Harper, Canada's 2 other national TV networks also wearied of the distance Harper put between them and himself, making it difficult to get interviews or inside information. Harper deemed this necessary to control the message, but it certainly did not win him any friends in the national broadcasters.

There are, at least, a dozen other areas where Stephen Harper could be soundly and justifiably criticized, and perhaps twice that many. So 'change' would certainly be a good thing in the minds of most Canadians. The environment, indigenous missing women, smothering scientific research by government researchers, First Nations, etc., etc., are all areas where it would not be difficult to improve on Stephen Harper's record. And while these are all important issues, are they worth 'change' in other areas?


Canada survives 2 global downturns

Canada survived the 2008 economic crash better than any major economy. We were the envy of the G7 and received many accolades because of it. It may have been Stephen Harper's destiny that the crash in oil prices happened when it did. The resultant downturn in employment and investment in the oil fields threw Canada into a brief and very limited recession from which it is already emerging.

The Liberals and the NDP, however, blame Harper for every aspect of that downturn, as if he controlled global oil prices. They also blamed him for all the effects of the 2008 downturn caused completely by American recklessness in mortgage and banking areas. I thank God a Liberal or NDP government was not in control for either of those downturns or this country would have been bankrupt long ago.

So prudent financing, if it were to suffer change would become reckless spending resulting in increased taxes. Canadians pay fewer taxes than we have for many years, but that is also liable to 'change'. A Liberal government would leave us at the mercy of foreign whims and failures even more so than now.


Election results 3 possible scenarios (none of which are good)

The most likely scenario for election results is a minority Liberal government. The Liberals and the NDP are both left-leaning parties and should have little difficulty working together for a couple years. A Harper minority is also possible. That would be an interesting situation since all the other political parties are left-leaning, so it would be a great challenge for Harper to work with any of them. In that case, either another election would be called, or the Governor General may turn to one of the other leaders and ask him to try and form a government.


Trudeaumania 2.0 (God save us)

There is also the possibility of a Liberal majority government. In spite of polls have all three major parties in nearly a statistical dead-heat for most of the campaign, the Liberals and their leader, Justin Trudeau, have been surging in the past two weeks to move very clearly ahead of the others. The surge is almost completely based on the popularity of Trudeau. This, should it continue today, could be called Trudeaumania 2.0.

Being old enough to remember Trudeaumania 1.0, I have to tell you that this is very disconcerting. TM 1.0 was the wave that Justin's father, Pierre Elliot Trudeau, rode to become Prime Minister, some 50 years ago. He was, almost certainly, Canada's first rock star. He became more popular than the Beatles. 


Keynesian lunacy (or loonacy)

Trudeau, the senior, however, was a disaster for Canada. His Keynesian economics has left Canada in a position where it may never be able to pay off the debt he incurred. Canada's national debt is nearly $613 billion dollars and increases by 2 million dollars per day. Why is it increasing if the budget has been balanced? Because we are paying $86 million per day in interest on the debt. That's $31 billion per year. What a spectacular waste of money, and Trudeau wants to increase that considerably over the next 3 years, by the end of which we will likely be paying $100 million per day in interest. What could we do with an extra $36.5 billion dollars in our yearly budget?

Trudeau, the junior, seems to have adopted his father's economic philosophy. Keynesian economics is basically spending the money you expect to make next year because of the growing economy. It's kind of like running out and buying a new truck on payments because you are expecting to get a raise. It's all good if the raise come through, but if it doesn't, you're in trouble. You could end up selling the truck at a loss because you can't afford the payments, and then have to make payment on a debt with no truck to show for it.


NEP (Father of the Reform Party)

Keynesian economics makes no provision for possible downturns in the economy. The raise has to come through or our debt just gets bigger and bigger. Trudeau, the senior, used this same idiotic logic when he sent Marc Lalonde, his right-hand man, to negotiate the National Energy Program with Alberta. The policy laid out how much Ottawa would get out of the Alberta oil revenues. The amount was set on an ever-increasing scale with no provision for a drop in oil prices. Astonishing stupidity! So when oil prices dropped, Ottawa was collecting most of the profits from Alberta oil. It was estimated that the program cost Alberta between 50 and 100 billion dollars in the 6 years that it ran.


Vote

So, go out and vote Canada. But please, vote with your head, not your heart. Selecting a Prime Minister is not a romantic adventure, nor is it an entry-level job. God bless, and help, Canada.