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The federal government’s deficit this fiscal year is so big that borrowing is covering more than half its programs. The tax cost of a program dollar is less than 50 cents. No wonder people are talking about new federal spending on everything from drugs to daycare to universal incomes. Everything looks better at half price!

Over time, however, any sustainable fiscal path brings the tax cost of a program dollar back towards 100 cents. Even the projections in the federal government’s Fall Economic Statement, which assumed very low interest rates and lots more borrowing to finance programs, have the tax cost of a program dollar doubling after four years.

A lot of programs that look attractive at half price will look less attractive at full price. And they will look unattractive at a premium – if mounting interest payments push taxes paid per program dollar above 100 cents. As I urge in this Intelligence Memo, the only programs the federal government should promise are ones we can sustain – those for which the government is willing to charge, and for which Canadians are willing to pay the full price.

William Robson is CEO of the C.D. Howe Institute.