NCPA - National Center for Policy Analysis

Canada's Public Liabilities

May 13, 2003

The Fraser Institute's fifth study examining Canadian public liabilities reveals that the net direct debt of all three levels of government in Canada fell from C$851 billion to C$797 billion between 1996-1997 and 2000-2001. This is a small drop compared to the growth in debt over the last decade. The debt was only C$533 billion in 1990-1991.

Nevertheless, there are several reasons why even a small reduction in debt is good news.

  • Governments have begun to balance their books and some have started paying down their debt.
  • Continued economic growth will help reduce the ratio of debt to gross domestic product (GDP), currently at 75.4 percent.
  • A constant or declining debt stock will demand a smaller portion of government revenues.

As a result, some of the 16.8 percent of revenues currently being spent on interest charges can be used for further debt relief or tax cuts.

The bad news is that the $54 billion drop in debt was more than offset by increases in other liabilities such as program obligations, which grew significantly from 1996 and 2001. The net increase in total liabilities over this period was C$279 billion.

The growth in obligations under programs such as the Canada and Quebec Pension Plans, the Old Age Security and the Medicare (universal health) system has been a focus of this debt study for many years. Specifically, the concern lies in the size of these obligations and what this implies for the future health of these programs. Largely due to increases in program obligations in 2000-2001, federal, provincial and local liabilities added up to C$172,416 for each Canadian taxpayer or C$83,927 for each Canadian citizen.

Source: Raphael Barth, Joel Emes, Todd Fox and Niels Veldhuis, "Canadian Government Debt 2003: A Guide to the Indebtedness of Canada and the Provinces," Public Policy Sources No. 67, April 2003, Fraser Institute.


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