The big scary headline yesterday was that Canada’s market debt had reached $1 trillion. OH NOES! screamed the commentators, and the Conservatives most especially (albeit not in Question Period, but at committee). Part of the problem with this figure, however, is how it’s being reported, and most especially, being compared to things like a household mortgage, which it is absolutely nothing like. For starters, the “market debt” figure being reported there adds a great many things into it – things like the debts of Crown Corporations like CMHC, the Business Development Bank of Canada, or Export Development Canada. These may have federal backstops, but with BDC and EDC, for example, these are important vehicles for entrepreneurs and exporters to expand their businesses, which is generally good for the economy. And you can bet that the “fiscal hawks” out there are disingenuously bundling this into the federal government’s net debt, or sub-national government debt, and giving themselves the vapours to prove a point, which isn’t necessarily helpful.
https://twitter.com/MikePMoffatt/status/978405748253212672
And as much as the Conservatives are snarking at Bill Morneau over this figure, ignoring how much they added to the national debt in the wake of the financial crisis of 2008 (much of the spending coming too late as the recovery had already started when they spent the money, which was also not necessarily spent efficiently) or the fact that when the Liberals took office in 2015, there was a $70 billion hole in GDP because of the mini-recession that happened in part due to the drop in oil prices. That $70 billion is largely where their increased deficit figures come from, not that they communicate this very effectively. But despite Kevin Page’s warning that interest on debt is the fastest growing line item in the federal budget, debt-to-GDP is going down, and the deficit is shrinking faster than initially reported because the economy has been growing faster than expected. Current PBO figures show that there is no debt bomb – federal figures are in a downward trajectory sustainably. I’m not sure that tearing our hair out over this $1 trillion figure is helpful, particularly because it bundles in a lot of things, and the reporting on that isn’t making it clear. It’s just a big number that people are supposed to get upset over, which helps nobody understand the true fiscal situation, of the levers that governments have to deal with it.