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March 23, 2021

Someone has to pick up the tab for lockdown-induced debt

  • Federal debt is likely to be about $550 billion higher because of pandemic-related lockdowns, and fairness requires this increase in debt be retired before the next generation starts working and paying taxes, which will occur 18 to 25 years from now.
  • The analysis in this paper indicates that the income loss arising from the recession can only be deferred, not eliminated, by issuing debt because debt has an economic cost.
  • Government needs to implement a set of debt reduction policies that, given the distribution of income losses during the recession, achieves a fair sharing of the burden of the recession, without passing the debt on to future generations.
John Lester

John Lester is an Executive Fellow at the School of Public Policy at the University of Calgary.