Federal Budget 2016: $29B Deficit

[bizaro86]

Originally Posted by polak

Luxemberg, Norway and Switzerland are tiny countries that could fit in Alberta. It's unrealistic for people to expect Canada to be able to provide the standard of living we have come to expect, to it's tiny population over such a massive area of land and such a harsh climate without accumulating debt.

Do you think infrastructure grows on trees?

So are Iceland and Belgium, and they both have higher debt loads than Canada, so quality of governance obviously matters. Also, Australia is pretty darn big and their debt is very low.

Most of the deficit spending in this budget isn't infrastructure, which was my point. Deficit spending on infrastructure is very different than deficit spending on ongoing programs and entitlements.

[Leeman4Gilmour]

Originally Posted by transplant99

3.4 B for public transit.

2.24B for water and waste infrastructure for First Nations communities

1.48B for affordable housing.

1.22B for social infrastructure for First Nations, Inuit, and Northern communities.

500M for climate change mitigation and adaptation.

400M for early learning and childcare.

342M for cultural and recreational.....something or other.


Yup.

I'll spend more time reading the details later, but my initial reaction to this summary.....

[polak]

How much could we save annually by telling Quebec to go #### themselves?

[bizaro86]

Originally Posted by polak

How much could we save annually by telling Quebec to go #### themselves?

Canada belongs to Quebec.

[EldrickOnIce]

Originally Posted by bizaro86

Canada belongs to Quebec.

Justin, is that you?

[OMG!WTF!]

Originally Posted by Fuzz

We don't look like we are doing so bad.
Some other countries:]

Really? The PIIGS countries are worse than us. That's good I guess. Being where we are on that list is most definitely not good. It will be worse in 2016 too.

[Fuzz]

Ya, after I posted that second graph I don't understand, becuase the number is way off. We are much closer to 30%. Maybe it is including all debts?


Adds in provincial.

[EldrickOnIce]

^ most of the EU countries with higher debt ratios nearly defaulted with Greece recently.
Pretty sure that indicates were not doing all that good.

[bizaro86]

Originally Posted by Fuzz

Ya, after I posted that second graph I don't understand, becuase the number is way off. We are much closer to 30%. Maybe it is including all debts?


Adds in provincial.

It said "gross financial liabilities" so I wonder if it includes the liability associated with CPP or OAS or something like that.

[GirlySports]

Originally Posted by OMG!WTF!

It's not about balancing tho budget. Having some control on spending and a vague notion of the consequences of borrowing is all people are asking for. Perhaps a little trimming of governmental fat would have also been appreciated. At least some recognition that public sector jobs doesn't equal job creation.

those were their promises.

[rubecube]

Originally Posted by Fuzz

We don't look like we are doing so bad.
Some other countries:

So 4 of 15 countries with the best debt:GDP are socialist countries?

[Knut]

Originally Posted by NuclearFart

Anybody else upset getting bent over the barrel with their PC?

Bunch of godless communists running the show here.

I have not really figured out how it will affect my PC . Small Business tax seems to have gone down from 12.5 - 10.5 % . I think PC's would fall into that (under 500k).

[Enoch Root]

Originally Posted by mrkajz44

While the $30B deficit number is a bit of a surprise to me, I'm not that concerned overall. Personally, I think the Debt to GDP ratio is much more important than just a deficit / surplus number. Here is a Debt to GDP ratio chart for Canada:



We've come a long way from the mid-90s and even with these deficit numbers projected, we are actually still looking to be in good shape going forward. Couple that with the fact that GDP growth was very conservative in the budget and could actually grow much more than anticipated, I'd say the deficit is not as bad as everyone thinks.

I think people have to remember that a government budget is very different that a personal budget. If I am personally spending more than I earn, I'm doing something wrong. But a government can effectively run deficit budgets and have it be a good thing. Government earnings will continue to increase over time, while personal earnings plateau and then drop off. That's a key fact that is often overlooked.

If Canada's economy continues to grow, then it doesn't seem unreasonable to have debt grow at a similar rate as well, especially when times are tougher. It's sort of like a corporation. Notice that some of the biggest company's have large amounts of debt on their balance sheets. As the company gets bigger, their debt loads tend to grow as well. The banks are fine loaning the money so long as debt ratios are met, similar to debt vs GDP ratio for the government.

Conversely, difficult macro-economic shocks could hit again (like in 2008) and then what?

With the government already spending like drunken sailors, there is little in the tank for the kind of deficit-stimulus spending that would then be required.

Also, you are assuming better growth, but you are not assuming new spending. Is that a reasonable set of assumptions considering what we have seen so far from this government?

Trudeau is so far looking just like his dad - completely oblivious to fiscal responsibility.

For those that weren't around and don't know, it was Mr Trudeau that brought big deficit spending into vogue. It was Mr Trudeau that created the massive debt-load that his own party eventually had to to address.

Here's another tidbit for those of you that weren't around the first time...

Larger deficits, and more importantly, larger debt to GDP ratios, result in higher interest rates.

Take our high housing prices, and the resultant large mortgages that we carry on them. Add in our historically high net personal debt levels.

Now, overlay that with higher interest rates, and try to imagine how that plays out.

In 1981 (I think was the peak), mortgage rates hit 21%. A VERY large percentage of people who's mortgages came up for renewal had to simply walk away from their homes because they couldn't afford the new mortgage rate.

Unbridled spending is a sure-fire recipe for disaster.

[Enoch Root]

Originally Posted by rubecube

So 4 of 15 countries with the best debt:GDP are socialist countries?

If you want to play that game...

11 of the 15 aren't.

More pertinently, most of the worst countries are socialist.

[heep223]

Originally Posted by mrkajz44

While the $30B deficit number is a bit of a surprise to me, I'm not that concerned overall. Personally, I think the Debt to GDP ratio is much more important than just a deficit / surplus number. Here is a Debt to GDP ratio chart for Canada:



We've come a long way from the mid-90s and even with these deficit numbers projected, we are actually still looking to be in good shape going forward. Couple that with the fact that GDP growth was very conservative in the budget and could actually grow much more than anticipated, I'd say the deficit is not as bad as everyone thinks.

I think people have to remember that a government budget is very different that a personal budget. If I am personally spending more than I earn, I'm doing something wrong. But a government can effectively run deficit budgets and have it be a good thing. Government earnings will continue to increase over time, while personal earnings plateau and then drop off. That's a key fact that is often overlooked.

If Canada's economy continues to grow, then it doesn't seem unreasonable to have debt grow at a similar rate as well, especially when times are tougher. It's sort of like a corporation. Notice that some of the biggest company's have large amounts of debt on their balance sheets. As the company gets bigger, their debt loads tend to grow as well. The banks are fine loaning the money so long as debt ratios are met, similar to debt vs GDP ratio for the government.

Why did you post a chart that uses real data until 2010 and then projections from 2010-2015? Is it really old?

Also, there is a lot of apples to oranges going on with the debt ratios that have been posted in the last page or so (not pointing this at you). This looks like net federal debt to GDP, then there was a chart of the US total public debt to GDP as a comparison. The US one may include state debt while the one you posted looks like it's only federal. There are a lot of different metrics to look at when comparing countries public debt loads, and it's important to make sure that it's apples to apples. The last I checked total public debt in Canada was around 90% of GDP while total public debt in the US was around 75%.

Canada (including the provinces) is currently very indebted.

[Fuzz]

Ya, sorry that was me. I thought it would be easy enough to compare between countries, apparently it is not.

[Jacks]

Originally Posted by heep223

Why did you post a chart that uses real data until 2010 and then projections from 2010-2015? Is it really old?

That chart is from 2011.
http://www.budget.gc.ca/2011/images/ENG/bpc5_1-eng.jpg

[heep223]

Originally Posted by Jacks

That chart is from 2011.
http://www.budget.gc.ca/2011/images/ENG/bpc5_1-eng.jpg

Why?

[NuclearFart]

Originally Posted by Hesla

I have not really figured out how it will affect my PC . Small Business tax seems to have gone down from 12.5 - 10.5 % . I think PC's would fall into that (under 500k).

Not sure if opto's have a similar PC structure, but the I'm going from 13.5% to 27% on my corporate tax rate

Trudeau is pooping in my mouth.

[Slava]

Originally Posted by Enoch Root

Conversely, difficult macro-economic shocks could hit again (like in 2008) and then what?

With the government already spending like drunken sailors, there is little in the tank for the kind of deficit-stimulus spending that would then be required.

Also, you are assuming better growth, but you are not assuming new spending. Is that a reasonable set of assumptions considering what we have seen so far from this government?

Trudeau is so far looking just like his dad - completely oblivious to fiscal responsibility.

For those that weren't around and don't know, it was Mr Trudeau that brought big deficit spending into vogue. It was Mr Trudeau that created the massive debt-load that his own party eventually had to to address.

Here's another tidbit for those of you that weren't around the first time...

Larger deficits, and more importantly, larger debt to GDP ratios, result in higher interest rates.

Take our high housing prices, and the resultant large mortgages that we carry on them. Add in our historically high net personal debt levels.

Now, overlay that with higher interest rates, and try to imagine how that plays out.

In 1981 (I think was the peak), mortgage rates hit 21%. A VERY large percentage of people who's mortgages came up for renewal had to simply walk away from their homes because they couldn't afford the new mortgage rate.

Unbridled spending is a sure-fire recipe for disaster.

Its not that cut and dried regarding interest rates though. We've seen high borrowing through the late 2000's and rates were cut. The reality is there are a lot of factors that go into the central bank setting the overnight rate. There are obviously drawbacks to increased borrowing, and I'm not denying that, but 21% overnight rates isn't a definitive outcome either.