It’s another big-spending Liberal budget..Fiscally responsible people have lots to worry about Canada’s deepening debt, and the attached interest service cost (dead lost money) required to carry it into the next generation. Revenue directed to interest payments means that there will be less money available for tax cuts or government programs such as health care, education, and social services. It's the ‘crowding out’ problem. Government has no money of its own; just yours that they take..The 2023 Budget announced $67.3 billion in new spending and $11.6 billion in new taxes over the next five years. We can only hope this doesn't happen, and Trudeau will be gone and saner heads can soon repair Canada. The Liberals continue to reveal themselves for who they truly are with this tax-and-spend budget. They are misguided ideologues who are not competent to govern..The budget is a spending plan rather than a wise management plan. There is a host of new spending based on a faulty environmental religion which is dear to the Liberal-NDP ‘environ-heads’. They threw away any pretense of fiscal restraint, while lying about the same..For voter support in the short term, the Liberals used inflation as an excuse to spend, ignoring ways they are contributing to the high cost of living. The doubled GST tax credit is being extended for another year, though it’s now politically labelled as a ‘grocery rebate for Canadians.’ Who do they expect to fool on that one?.The big mistake is based on erroneous beliefs and faulty reasoning over their climate change obsession. For example, they failed to deliver much-needed support for our outdated Armed Forces to defend our borders against hostile enemies or support our democratic alliances. However, they managed to weave in a portion of ‘NATO Climate Change and Security Centre of Excellence,’ to analyze new climate change-driven security challenges. It reflects the notion global warming is a bigger threat than aggressive Russia, a nuclear-armed Iran, or the China juggernaut..They will increase net federal debt to nearly $1.5 trillion by 2027, and it will cost us more than $50 billion a year just to service that debt. Trudeau will see his green agenda to fruition and Finance Minister Freeland will be able to hand out goodies to every climate purveyor lobbyist..The 2023 budget abandons any pretense to address or acknowledge the extent of Canada’s housing affordability crisis. The budget contains no new policies to increase the supply of Canadian housing, while record-high immigration places pressure on home and rental prices. Of the handful of housing programs even mentioned in the statement, most will likely make the housing issue worse. The budget essentially ignores the housing crisis..There were no proposals to free up federal lands or holdings for housing, or even tax credits on building materials. The only construction-specific federal monies approved in the new budget was $925 million released as part of the Housing Accelerator Fund which is a program from last year’s budget. This is the time to give a huge new mandate with resources to the Canadian Mortgage and Housing Corporation (CMHC). However, looking at the numbers, the Liberals have a heartless perspective concerning our current housing crisis..Canadian housing affordability has long stood as the worst among G7 countries, and has spiraled as costs became ever more detached from average incomes. In December, estimates from RBC showed the mortgage payments on an average Vancouver home represented 95.8 percent of the city's average income. The main reason for that is an acute shortage of Canadian homes for sale or rent. According to CMHC, to have any chance of restoring reasonableness, Canada will need to build an extra 3.5 million homes in the next five years. To further add sour ingredients to the cauldron, Trudeau unwisely boosted immigration to the highest levels in Canadian history. In 2022, Canada added more than a million new residents, which is the equivalent of adding a new Nova Scotia in just 12 months. This failing recipe is tepid on housing, and the influx of new arrivals guarantees to worsen basic affordability..Concerning the carbon tax, if one adds up the rebates and benefits for middle-income taxpayers, they are cancelled out by hikes to the federal carbon tax which will go up to $847 this year. In contrast, the Conservatives have a detailed plan to junk this unproductive penalty tax..Canada's debt-to-GDP ratio is expected to rise in 2023-24 to 43.5 percent, then decline to 39.9 percent in 2027-28. The federal government’s fiscal decisions are supposed to be guided by its fiscal anchor, which is a declining debt-to-GDP ratio in the medium term. This is merely wishful thinking and not based on financial history or normal expectation variances. The budget does not support their wishful chart projections..Despite verbal allusions to restraint, the budget is not in any way fiscally restrained. Given the uncertainty of the economic outlook around the world, the government could have limited spending to the basics. In contrast, the pomposity of the budget speech stretches all credibility. The government myth-making goes like this: “while preserving Canada’s long-term fiscal sustainability, Canada’s enviable fiscal position — the lowest net debt and deficit as a share of gross domestic product (GDP) in the G7 — means we can afford to make these essential investments. Over time, the growing returns of these essential investments will further enhance Canada’s economic prospects.”.They had to admit the debt-to-GDP ratio is rising, but they ‘whistle in the dark’ all will be OK because, in their fairy-tale story, the critical ratio will eventually decline — someday. In their published range of possibilities, which is pure conjecture, they admit higher deficits and weaker nominal GDP growth, and the hurtful federal debt-to-GDP ratio will rise to 44.4% by 2024-25. But they hope it will decline to 41.5% by 2027-28..Nevertheless, everyone knows keeping the federal debt-to-GDP ratio on a downward trend will ensure future generations are not burdened with excessive debt payments and there will be fiscal room to face future challenges that are not known, such as new pandemics, geopolitical risks of war and economic meltdowns..Economic ‘crowding out’ refers to where increased government borrowing and spending leads to a reduction in private investment and consumption. This happens when the Liberals keep running a budget deficit, meaning it spends more than it collects in revenue, and then must finance the deficit by borrowing from the private sector or issuing bonds..When the government borrows money from the private sector, it competes with private borrowers for available funds, driving up interest rates. Higher interest rates can make it more expensive for businesses and individuals to borrow money, reducing their willingness to invest and consume. This can lead to a decline in economic activity, including lower levels of investment, output, and employment..When the government spends more money, it can increase demand for goods and services, driving up prices and inflation. Higher inflation can also lead to higher interest rates, further reducing private-sector investment and consumption..Overall, ‘economic crowding out’ can have negative effects on the economy, as it reduces private sector investment and consumption, increases interest rates and inflation, and eventually leads to a decline in economic activity and a hurtful economic recession..Another aspect of economic crowding out is known as 'fiscal crowding out' or interest rate crowding out. This occurs when a government's increasing debt and deficits cause the cost of servicing its debt to rise, which leads to a reduction in available funds for essential core program spending, such as pensions, healthcare, education, and infrastructure..When a government spends a larger proportion of its budget on interest payments, it leaves less money for other essential programs, which reduces effectiveness and leads to social and economic disruption. This results in a trade-off between servicing the government's debt and funding essential programs, which can become impossible to balance..Furthermore, if interest rates continue to rise, the government may need to borrow even more to service its debt, leading to a further increase in debt and interest payments, which can exacerbate the fiscal crowding-out effect. Canada faced this before under Liberal carelessness..Overall, 'fiscal crowding out’ is a significant concern for the government, as it limits its ability to invest in essential programs and services, and leads to long-term economic challenges. It highlights the importance of managing the government debt and deficits to ensure long-term fiscal sustainability and avoid the negative effects of crowding out..In contrast, the Conservative approach of keeping federal public finances on a sustainable path would ensure a wise and responsible position. The basic international value of the Canadian dollar and the fiscal anchor — reducing the federal debt-to-GDP ratio, are the two obvious measures for the average person to understand how poor is the Liberal-NDP cabal. These two measures cannot be hidden with fiscal bafflegab and budget papers with wishful charts. A high debt-to-GDP ratio is a risk to Canada’s economic security..The debt-to-GDP ratio measures a country's debt relative to the size of its economy. A high debt-to-GDP ratio is a problem if Canada is unable to service its debt payments, leading to higher interest rates and potential economic instability. Moreover, a country with a problematic debt-to-GDP ratio will have fiscal challenges if it continues to run large budget deficits and then not be able to face emerging economic problems..It's important for the Canadian government to carefully manage its financial position to ensure long-term sustainability; they're not doing it in this budget. That involves making tough choices about spending priorities and implementing measures to increase revenue (unleashing the economy) as well as controlling spending..Ultimately, the sustainability of Canada's fiscal position and the well-being of the average Canadian will depend on sound fiscal judgment, including how well the economy grows, inflation realities, and global economic trends. Canada is not in safe hands.
