The 1990's is no excuse to ignore the deficit

With the federal budget out today, Canada is looking at 5 years of multi-billion dollar deficits still to come, going from a whopping 50 Billion this fiscal year to $27 billion next year to 17.5 billion the year after that and so on. To fight this ballooning debt, the Conservatives have sought to freeze departmental budgets and make some moves to tighten the fiscal belt, with much harder measures to come in following years. The reaction from the Liberals and NDP to this belt-tightening? They want to unbutton their pants and reach for seconds! The NDP is not supporting the budget because they want more spending on personal transfers, more spending on the environment, more spending on public sector wages, and the like. The Liberal leader, Michael Ignatieff, keeps insisting that there really is no deficit problem. After all, he notes, the ratio of debt to GDP is lower now than it was in the 1990's when the deficits were really bad. What Mr. Ignatieff fails to mention is that Canada had no choice but to tackle our deficits in the 1990's because Canada was about to have its bond rating reduced by international rating agencies. A lower bond rating means it would have been harder for us to get money to cover our deficits and we would have to offer higher interest payments to our lenders. We do not want to wait until we are back in that position before we start bringing the federal deficits and debt under control. We already spend over $30 billion a year servicing our public debt. That's money flushed away to our debt-holders that could go to any number of other programs. If we keep piling on billions to the debt just as interest rates rise from record lows, that debt servicing cost will rise. That's the real shame here as it literally forces future generations to pay for our spending. The Liberals and NDP should stop pushing for more spending and support the modest attempts to bring our deficits under control.