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The national debt — a ticking time bomb for future generations

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Most of us won’t see the damage that our growing debt will cause in the future, but our children and grandchildren will

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Canada keeps digging itself deeper and deeper into debt thanks to out-of-control government spending and the increased interest we have to pay on that ballooning debt.

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Warren Buffett once said that, “The most important thing to do if you find yourself in a hole is to stop digging.” But most Canadian governments have not heeded that sound advice. They just keep on digging.

According to the International Monetary Fund, the ratio between Canada’s public debt and its gross domestic product is 105 per cent. In plain English, this means that as a country, we now owe more money than the total value of all the goods and services we produce in a year. If Canada were a person or a business, the bank would have already called in the loan.

To put the problem into perspective, we now have a higher debt-to-GDP ratio than Cyprus, Egypt, Ghana and Zimbabwe.

Government debt has soared over the past few years due to the pandemic. But the truth is that the debt has been steadily rising for more than a decade now. A report by the Fraser Institute published earlier this year found that federal and provincial debt almost doubled in the past 15 years, and the majority of the increase was racked up before the pandemic.

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Last month, I proposed the creation of a new national movement of patriotic Canadians who would back the implementation of seven core policies to restore our country’s economy and boost our living standards. One of those policies was to reduce our national debt by five per cent per year for 20 years, with the goal of becoming debt-free within two decades.

Federal debt stands at around $1.225 trillion and is growing at a rate of approximately $145 million per day — or about $4 billion per month. According to the Fraser Institute, the federal and provincial governments will spend a combined $69 billion on debt payments this year. That’s up nearly $19 billion from two years ago.

The fact is that governments have to make interest payments on the debt much the same way that households have to pay interest on mortgages, lines of credit and car loans. The bigger the debt, the higher the interest payments.

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In the 2023 budget, the federal government indicated that it will spend $44 billion this year on debt charges, which is about nine per cent of the total budget expenditures. That’s almost as much as the federal government spends on health transfers.

Imagine what the government could do with that extra $44 billion per year. It could beef up health-care spending, invest billions into new highways, airports and bridges, or top up the amount of money it gives to seniors through Old Age Security.

Alternatively, the government could substantially cut taxes paid by individuals and businesses, which would stimulate consumer spending and generate greater investment and economic growth. The key point is that if the debt were manageable, the government would have more policy options at its disposal.

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Unless we get a firm handle our growing debt problem, we’ll be looking at spending more and more each year on interest payments, which will eat up a bigger slice of the annual budget. That will mean less money for programs in general, and it will tie the hands of future governments, giving them much less room in which to maneuver.

Debt nearly destroyed my company many years ago. Debt can also cripple and destroy countries, as well. Its cancerous effects are numerous. For one, it often fans the flames of inflation, much like what we see happening today in Canada and the United States, which are both saddled with record-high levels of debt. Mounting debt also puts the brake on economic growth, and destroys confidence in a nation’s currency.

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Most of us won’t see the damage that our growing debt will cause in the future, but our children and grandchildren will. That’s why we need to come up with a realistic plan to pay down the debt.

If we made an iron-clad commitment to reduce the national debt by five per cent per year over a period of 20 years, we could slowly and gradually eliminate the debt while shoring up our country’s financial foundation. If we don’t, we’ll be leaving behind a ticking time bomb for future generations.

National Postfstronachpost@gmail.com

Frank Stronach is the founder of Magna International Inc., one of Canada’s largest global companies, and an inductee in the Automotive Hall of Fame.

The Canadian Taxpayers Federation’s national debt clock, which displays the federal government’s $1-trillion debt increasing in real time, is seen in Saskatoon on March 25, 2022.

Frank Stronach: A ‘day of reckoning’ is coming over our ever-ballooning national debt

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Frank Stronach: Out-of-control government spending hurts average Canadians

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