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Fraser Institute

Federal government should have taken own advice about debt accumulation

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From the Fraser Institute

Authors: Grady Munro Jake Fuss

In 2024/25 the federal government now expects to pay $54.1 billion in debt interest, or $1,331 per Canadian, which is $2.0 billion more than it plans to spend on health care transfers to provinces.

In the foreword of the Trudeau government’s recent budget, Finance Minister Chrystia Freeland declared that, “it would be irresponsible and unfair to pass on more debt to the next generations.” Minister Freeland is absolutely right—if only she had listened to her own advice.

Fairness was the purported theme of this federal budget and nearly every new policy is presented as something that will help make life fairer for Canadians—especially younger generations. But the glaring contradiction is that partly due to all of the new spending on these policies, the Trudeau government is doing the very thing it admits is “unfair” and saddling future generations with hundreds of billions in added debt.

By 2027/28, the Trudeau government plans to add $395.6 billion to the total (gross) amount of debt held federally, which is $180.0 billion more than it planned to add just last spring. Overall, gross debt is projected to increase by nearly 20 per cent over the next four years. Adjusting for population growth and inflation during this period, by the end of 2027/28 every Canadian will be responsible for $2,301 more in gross federal debt than they are currently.

Much of this added debt stems from the introduction of new programs, which have caused federal program spending (total spending minus debt interest) over the next four years to be an expected $77.2 billion higher than was forecasted last spring. And though the Trudeau government will increase capital gains taxes to try and pay for this new spending, much of the new spending will still be financed through borrowing. Indeed, combined deficits from 2024/25 to 2027/28 are $44.7 billion higher than forecasted in last year’s budget, and there is no balanced budget in sight at all.

The problem with accumulating substantial amounts of debt, and why Minister Freeland is right when she asserts that it’s “irresponsible and unfair,” is that a growing government debt burden imposes costs on Canadians now and in the future.

One of the most important consequences of government debt are debt interest payments. These interest payments represent taxpayer dollars that don’t go towards any programs or services for Canadians, and have grown to impose a significant burden on federal finances. Specifically, in 2024/25 the federal government now expects to pay $54.1 billion in debt interest, or $1,331 per Canadian, which is $2.0 billion more than it plans to spend on health care transfers to provinces.

While debt interest costs represent a more immediate impact, debt accumulated today must also ultimately be paid for by future generations, again in the form of higher taxes. In fact, research suggests that this effect may be disproportionate, with one dollar borrowed today needing to be paid back by more than one dollar in future taxes.

One study estimates that Canadians aged 16 can expect to pay the equivalent of $29,663 over their lifetime in additional personal income taxes as a consequence of rising federal debt. Older age groups shoulder a much smaller burden in comparison. A 65-year-old can expect to pay $2,433 over their lifetime in additional personal income taxes due to rising federal debt.

The outsized burden of federal debt borne by younger generations of Canadians is hardly what any reasonable person would consider “fair.”

For all its talk about fairness and helping the next generation of Canadians, the Trudeau government’s incessant spending and substantial debt accumulation will simply result in young Canadians paying disproportionately higher taxes in the future. Does that seem fair to you?

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Alberta

Governments in Alberta should spur homebuilding amid population explosion

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From the Fraser Institute

By Tegan Hill and Austin Thompson

In 2024, construction started on 47,827 housing units—the most since 48,336 units in 2007 when population growth was less than half of what it was in 2024.

Alberta has long been viewed as an oasis in Canada’s overheated housing market—a refuge for Canadians priced out of high-cost centres such as Vancouver and Toronto. But the oasis is starting to dry up. House prices and rents in the province have spiked by about one-third since the start of the pandemic. According to a recent Maru poll, more than 70 per cent of Calgarians and Edmontonians doubt they will ever be able to afford a home in their city. Which raises the question: how much longer can this go on?

Alberta’s housing affordability problem reflects a simple reality—not enough homes have been built to accommodate the province’s growing population. The result? More Albertans competing for the same homes and rental units, pushing prices higher.

Population growth has always been volatile in Alberta, but the recent surge, fuelled by record levels of immigration, is unprecedented. Alberta has set new population growth records every year since 2022, culminating in the largest-ever increase of 186,704 new residents in 2024—nearly 70 per cent more than the largest pre-pandemic increase in 2013.

Homebuilding has increased, but not enough to keep pace with the rise in population. In 2024, construction started on 47,827 housing units—the most since 48,336 units in 2007 when population growth was less than half of what it was in 2024.

Moreover, from 1972 to 2019, Alberta added 2.1 new residents (on average) for every housing unit started compared to 3.9 new residents for every housing unit started in 2024. Put differently, today nearly twice as many new residents are potentially competing for each new home compared to historical norms.

While Alberta attracts more Canadians from other provinces than any other province, federal immigration and residency policies drive Alberta’s population growth. So while the provincial government has little control over its population growth, provincial and municipal governments can affect the pace of homebuilding.

For example, recent provincial amendments to the city charters in Calgary and Edmonton have helped standardize building codes, which should minimize cost and complexity for builders who operate across different jurisdictions. Municipal zoning reforms in CalgaryEdmonton and Red Deer have made it easier to build higher-density housing, and Lethbridge and Medicine Hat may soon follow suit. These changes should make it easier and faster to build homes, helping Alberta maintain some of the least restrictive building rules and quickest approval timelines in Canada.

There is, however, room for improvement. Policymakers at both the provincial and municipal level should streamline rules for building, reduce regulatory uncertainty and development costs, and shorten timelines for permit approvals. Calgary, for instance, imposes fees on developers to fund a wide array of public infrastructure—including roads, sewers, libraries, even buses—while Edmonton currently only imposes fees to fund the construction of new firehalls.

It’s difficult to say how long Alberta’s housing affordability woes will endure, but the situation is unlikely to improve unless homebuilding increases, spurred by government policies that facilitate more development.

Tegan Hill

Director, Alberta Policy, Fraser Institute

Austin Thompson

Senior Policy Analyst, Fraser Institute
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Alberta

CPP another example of Albertans’ outsized contribution to Canada

Published on

From the Fraser Institute

By Tegan Hill

Amid the economic uncertainty fuelled by Trump’s trade war, its perhaps more important than ever to understand Alberta’s crucial role in the federation and its outsized contribution to programs such as the Canada Pension Plan (CPP).

From 1981 to 2022, Albertan’s net contribution to the CPP—meaning the amount Albertans paid into the program over and above what retirees in Alberta received in CPP payments—was $53.6 billion. In 2022 (the latest year of available data), Albertans’ net contribution to the CPP was $3.0 billion.

During that same period (1981 to 2022), British Columbia was the only other province where residents paid more into the CPP than retirees received in benefits—and Alberta’s contribution was six times greater than B.C.’s contribution. Put differently, residents in seven out of the nine provinces that participate in the CPP (Quebec has its own plan) receive more back in benefits than they contribute to the program.

Albertans pay an outsized contribution to federal and national programs, including the CPP because of the province’s relatively high rates of employment, higher average incomes and younger population (i.e. more workers pay into the CPP and less retirees take from it).

Put simply, Albertan workers have been helping fund the retirement of Canadians from coast to coast for decades, and without Alberta, the CPP would look much different.

How different?

If Alberta withdrew from the CPP and established its own standalone provincial pension plan, Alberta workers would receive the same retirement benefits but at a lower cost (i.e. lower CPP contribution rate deducted from our paycheques) than other Canadians, while the contribution rate—essentially the CPP tax rate—to fund the program would likely need to increase for the rest of the country to maintain the same benefits.

And given current demographic projections, immigration patterns and Alberta’s long history of leading the provinces in economic growth, Albertan workers will likely continue to pay more into the CPP than Albertan retirees get back from it.

Therefore, considering Alberta’s crucial role in national programs, the next federal government—whoever that may be—should undo and prevent policies that negatively impact the province and Albertans ability to contribute to Canada. Think of Bill C-69 (which imposes complex, uncertain and onerous review requirements on major energy projects), Bill C-48 (which bans large oil tankers off B.C.’s northern coast and limits access to Asian markets), an arbitrary cap on oil and gas emissions, numerous other “net-zero” targets, and so on.

Canada faces serious economic challenges, including a trade war with the United States. In times like this, it’s important to remember Alberta’s crucial role in the federation and the outsized contributions of Alberta workers to the wellbeing of Canadians across the country.

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