As Canada approaches deficit spending for the 17th consecutive year, a new study contextualizes the spending showing that if families spent like the federal government they would be in financial trouble.
A recent study by the Fraser Institute looked at the federal government’s ever-growing deficits and how that spending would impact the average Canadian family if they decided to budget like the Liberal government.
It found that if the average family making just about $102,000 a year were to spend the same dollar ratio per income as the government, with its expected $39.8 billion deficit in 2024/2025, it would be in “financial trouble.”
“The median family earning $101,821 in 2024 would be spending $109,982 if it spent the way the federal government does. To cover the difference, it would put $8,161 on a credit card, despite already being $427,759 in debt,” the report said. “Of the total amount spent, $11,066 would go towards interest on the debt his year.”
According to the study, the Trudeau government has increased spending, driving up the federal debt to nearly double what it was before taking office: from 53% of the economy, $1.1 trillion in 2014/2015, to an expected 69.8% of the economy, $2.1 trillion in 2024/2025.
“The primary consequence of rising government debt is that they now have to pay more interest on that debt,” Grady Munro, a policy analyst at Fraser Institute and co-author of the study told True North in an interview. “for this year, the federal government is expected to spend about $54.1 billion just to on debt interest.”
He said the feds are expected to pay $54.1 billion on debt interest in this year alone.
“If governments continue to accumulate debt, especially at the pace that it’s been accumulated over the last decade, we’re going to see those interest costs rise, and that’s going to ultimately end up as a higher tax burden on Canadian families,” Munro said.
Franco Terrazzano, the federal director for the Canadian Taxpayer Federation, thinks it’s unfair that Canadian families make tough decisions to live within their means while the feds show no sign of trying to fix the budget.
“The Trudeau government’s spending and debt-binge is out of control. And it means higher taxes for Canadians and more money wasted on interest charges,” Terrazzano said. “All this government wants to do is keep the taxpayer-funded party going. This government’s spending is out of touch with the reality facing Canadian taxpayers.”
He said the government debt is costing taxpayers more than $1 billion each week.
“If the government keeps running massive deficits, interest charges will blow bigger holes in the budget and taxes will go up,” Terrazzano said. “The government must cut spending to balance the budget. That means stop wasting money on silly stuff like building an $8 million barn, shrink the bureaucracy and cancel corporate welfare.”
This month, though the federal deficit is dropping, the CTF has recommended the government reduce wasteful spending, including the over $30,000 spent on an “intersectional feminist” review of space exploration and the $10,000 it spent over four years to catch one frog.
Although the study did not offer suggestions on how the government should fix the budget, another Fraser Institute study found that it could balance the budget by 2026 while providing room for tax reductions.
“We calculate that if the federal government reduced annual program spending by 2.3% over two years, it could both balance the budget and deliver reduced tax rates for many Canadians,” Munro said.
The previous study said the federal government could balance the budget by cutting $11 billion from its annual spending over those two years.
Munro said the government could turn the budget from a near $40 billion deficit to a $12.3 billion surplus by 2028 / 2029 if it followed the Fraser Institute’s recommendations.
In a July interview with True North about the study, Munro, like Terrazzano, pointed to corporate welfare as a first step to cutting spending and fixing the budget.
He also said an area of spending reduction to look at could be balancing the amount federal employees make with their private sector counterparts and advocated that the government limit spending to the rate of inflation and population growth.
