April 8, 2021
Tough Choices Needed to Prevent Fiscal Meltdown: C.D. Howe Institute's Federal Shadow Budget
- The Federal Government’s spending and borrowing cushioned the impact of COVID-19 on Canada’s economy, but have put national finances on an unsustainable path. The upcoming budget must make tough choices to put Canada on a path back to fiscal stability.
- As the health crisis abates, Canada faces two related challenges: supporting economic growth and slowing, and ultimately halting, increases in government debt. The authors note that the Fall Economic Statement anticipated a federal debt ratio in the 55 percent to 60 percent range for the next five years, and show that current commitments for new spending, and higher interest payments, will send the debt ratio higher in subsequent years. The federal/provincial debt burden could exceed 100 percent of GDP in about a decade and continue rising thereafter.
- In this Shadow Budget, authors Don Drummond, Alexandre Laurin, and William B.P. Robson present initiatives to support the recovery and longer-term growth, while ensuring the federal government’s capacity to deliver services in the future.