The deficit in the federal budget is causing some alarm for Canadians.
Brandon Ellis is the senior manager of policy for the Atlantic Chamber of Commerce.
What stood out to him in the recently released budget was the “jarring deficit,” which he said wasn’t surprising.
But Ellis also thinks people have lost context on what deficits are and what a big deficit looks like.
“In the past year, the deficit that’s been rung up has been quite monstrous,” he said.
Ellis said there are some needed supports for businesses that have contributed to the deficit and will extend to the fall.
Two years ago the deficit was roughly $19-billion or $20-billion a year, but now we’re in the hundreds of billions in terms of what we’re spending as a country.
Ellis said he doesn’t think it’s sinking in for people exactly what it is we’re spending and it’s interesting to view the federal budget in that context.
He pointed out that the debt servicing charges for the public debt this past year cost $22 billion, and by 2026 will be a little over $39 billion.
“That’s money that could be going to programs, it could be going to tax reductions, it could be going to any number of things but it’s just simply going on now towards servicing the debt,” he said.
“That’s one of the big dangers we get into when we engage in deficit spending such as this. We’re going to continue to rack up these public debt servicing charges and it’s going to be an inefficient use of taxpayers’ dollars.”
Ellis said the chamber is supportive of the measures put in place, especially to offset the restrictions and avoid a government-mandated recession.
“While the spending is warranted to support those businesses, those hardworking entrepreneurs and folks that are reliant on the private sector and jobs, it is also just quite jarring to know that money, that deficit, that debt is going to have to be repaid someday,” he said.
Ellis said there are a lot of people and organizations that are looking for an increase in government expenditures, and those numbers have gone up significantly in the past 10 or 11 years and even more so pre-pandemic.
“We can’t all be going with our hands out looking for money. Eventually, we’re going to have to pay that money back in terms of either increased taxes or in terms of mass expenditure reduction,” he said. “Because we can’t keep putting these deficits on the national credit card, we will have to pay for it somehow, someway.”
Ellis said the government strategy is to reduce the debt through economic growth is ambitious. There will be some economic growth after the pandemic winds down but said in his analysis that’s putting “a lot of eggs in a lot of baskets”.
The wage subsidy and the rental subsidy are core programs that will help businesses get through the next rough patch of the pandemic. Ellis said the money earmarked for the tourism sector will help out the extremely vulnerable sector since there are so many travel restrictions in place.
He noted the discussion around childcare will help get more families involved in the workforce or will help them re-enter the workforce which the chamber is pleased to see.
Ellis said he doesn’t think anyone got left behind in this budget, but the private sector benefits the most. He thinks if these deficits become structural and permanent, no one would benefit from that because it would create an uncompetitive private sector.
He said he was relieved to see there wasn’t a significant amount of tax increases in this budget but they’ll keep an eye on that in the future because high deficits today mean higher taxes tomorrow unless the government is willing to engage in significant expenditure reductions which he hasn’t seen yet.
