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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 a Fellow-in-Residence at the C.D. Howe Institute. A former federal government economist, John Lester’s last public service assignment was as Director of Research for the Expert Panel Review of Federal Support to Research and Development.