Canada has spent hundreds of billions of dollars to help workers and keep businesses afloat during the pandemic, causing its national debt to skyrocket. But usually frugal Canadians don’t seem to care.
Monday’s snap election is expected to herald an era of higher spending, with both the usually thrifty Liberals and Conservatives neck and neck pledging more government aid, a monumental change for Canada after decades of tightening the economy. the belt.
“It’s not that I don’t care about the debt, it’s just that I don’t think about it as much as my parents and previous generations who thought it was a huge problem,” AFP told AFP Meg Sweeney, 23, recently graduated from college. .
Canadians aged 65 and over, who will soon make up a quarter of the population, are not afraid of having to repay borrowed funds, while millennials who will likely fall support higher social spending.
“In this election, I am examining issues such as climate change, student loan relief, racial justice and tackling social issues – like others of my generation,” added Sweeney.
Canada entered the pandemic in a strong fiscal position after a long period of frugality, which allowed it to distribute hundreds of billions of dollars in Covid emergency aid.
This, however, cost it its AAA debt rating after Fitch downgraded the country’s rating a notch to AA +.
It also boosted Ottawa’s debt to a projected C $ 1.2 trillion (US $ 960 billion) in fiscal year 2021-2022, with a peak debt-to-GDP ratio of 51.2. % that would only drop slightly by 2025-2026, compared to an average of 31 percent before the pandemic.
Justin Trudeau’s Liberals are proposing C $ 78 billion in new spending.
His main challenger, Conservative leader Erin O’Toole, also believes the government should spend more to pull the country out of recession. O’Toole is proposing C $ 51 billion in new spending to “kick start the economy” and use the resulting income increase to balance the budget in 10 years.
“This election is about those who you think can pull us out of the recession and rebuild the economy,” O’Toole said at the start of the election campaign.
Asked about the debt, Trudeau replied, “It is important to be financially responsible. It is important to live within our means. I think it’s also important to make the right investments so that future generations can prosper.
Trudeau noted that record interest rates have made the cost of borrowing cheap.
But Kevin Page, director of the University of Ottawa’s Institute of Public Finance and Democracy, warned that there is always a risk that rates will rise.
Although economists agree that the debt is sustainable, Page said: “There is a legitimate concern that this is an open bar, with people assuming with low interest rates that we can accumulate debt and that there will be no significant costs. “
– Social inequalities exposed to the pandemic –
Jerry Dias, leader of Canada’s largest private sector union, argued the pandemic has exposed social inequalities that require heaps of new spending to fix.
“It makes perfect sense to fix our social programs to reflect reality,” Dias said. He called for universal pharmacare and affordable child care so that women, who have lost significant incomes while bearing the brunt of unpaid child care in the past 18 months , can return to the labor market.
Ian Lee, a professor at the Sprott School of Business at Carleton University in Ottawa, said he was amazed at the change in people’s mindsets.
“I am surprised that the attitude of Canadians towards debt has changed so drastically during the pandemic, how much people have gotten into debt. “
Lee warned that soaring costs, including on health care, could prompt the government to adopt “very far-reaching tax changes.”
Canada needs more immigration and better productivity, but in this election, Lee laments, the candidates debated “how we are going to redistribute income, without saying much about how we are going to generate income. of wealth ”.
Growing up during the 2008 financial crisis, weather disasters and now the pandemic, University graduate Sweeney says, “The national debt is so back and less, along with everything else.”
“I prefer to focus my voting and community engagement on things where I can see a tangible impact now, and we can settle the debt later,” Sweeney said.
amc / md