If you spent and borrowed like Ottawa you’d be in big trouble

If the median household chose to spend like the Trudeau government, it would spend $109,982 and incur a deficit of $8,161, which it would put on a credit card. And this year—again, if the family was in the same fiscal situation as the federal government—it would pay $11,066 in interest on an overall debt burden of $427,759.

According to polling released earlier this year, two-thirds of Canadians are concerned about the size of the federal deficit. And considering its size, Canadians are right to be concerned, but it can be hard to wrap our heads around the scale of the numbers involved. A new study puts the federal deficit in more familiar terms, and shows what the median Canadian household’s finances would be like if it budgeted like the federal government.

This year, the Trudeau government plans to spend $537.7 billion while expecting to collect $497.8 billion in revenues—a $39.8 billion difference or deficit, which represents the amount of money Ottawa must borrow in 2024/25 to cover its spending commitments. The Trudeau government has run deficits every year for the last decade, and plans to continue running deficits for at least the next five consecutive years.

Consequently, the government has racked up massive amounts of debt. In 2024/25, federal gross debt is expected to reach $2.1 trillion, which is nearly double the $1.1 trillion held in 2015/16.

So what would the median household budget look like in 2024 if it managed its finances like the federal government?

In 2024, the median household will earn $101,821 after taxes (median means half of Canadian families earn more than this amount and the other half earn less). If the median household chose to spend like the Trudeau government, it would spend $109,982 and incur a deficit of $8,161, which it would put on a credit card. And this year—again, if the family was in the same fiscal situation as the federal government—it would pay $11,066 in interest on an overall debt burden of $427,759.

While it’s clear that a family spending 11 cents of every dollar it earns on debt interest, and ending the year with $8,161 in new credit card debt, is not in a good financial situation, there’s an important nuance that makes this situation even worse.

For this comparison (the federal government and a Canadian household) to work, we shouldn’t view the $427,759 in debt as a mortgage. Why? Because when a family takes out a mortgage, the amount of debt is balanced by the value of the house. In other words, the family could sell the house and use that money to pay off most or all of the outstanding mortgage.

The same cannot be said about government debt. In many cases, government debt is not backed by many assets. In the unlikely scenario the federal government used all of its financial assets to pay off its debt, it would still be left with $1.4 trillion in debt this fiscal year. If the government went a step further and sold all its non-financial assets (which includes all buildings and land owned by the federal government), it would still have $1.3 trillion in debt. In other words, more than half of the federal government’s debt cannot be paid off simply by selling its assets.

The Trudeau government continues to spend beyond its means and rack up mountains of debt every year, which has eroded federal finances. If a family budgeted like the federal government, it would be in big financial trouble.

Authors:

Jake Fuss

Director, Fiscal Studies, Fraser Institute

Grady Munro

Policy Analyst, Fraser Institute

Related Topics:#FederalDebt #FederalDeficit #FraserInstitute #GradyMunro #JakeFuss #JustinTrudeau FederalSpending LiberalGovernment

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Canada’s energy exports to US hit with 10% Trump tariff over fentanyl crisis

Published on February 2, 2025

Todayville

From The Center Square

By Brett Rowland

American’s northern neighbor will get the same 25% tariff except with a 10% tariff on Canadian energy resources. That will continue “until Canada cooperates with the U.S. against drug traffickers and on border security,” the statement said.

President Donald Trump on Saturday moved to hold Mexico, Canada and China accountable with tariffs on the nation’s top three trading partners, raising concerns about the potential for higher prices.

“This was done through the International Emergency Economic Powers Act because of the major threat of illegal aliens and deadly drugs killing our Citizens, including fentanyl,” Trump wrote on Truth Social. “We need to protect Americans, and it is my duty as President to ensure the safety of all. I made a promise on my Campaign to stop the flood of illegal aliens and drugs from pouring across our Borders, and Americans overwhelmingly voted in favor of it.”

Trump put in place a 25% tariff “to be paid for by Mexican producers until Mexico cooperates with the U.S. in the fight against drugs,” a White House statement said.

Tariffs are taxes paid by the companies that import goods.

Fentanyl is an opioid blamed for more than 75% of U.S. overdose deaths.

“Mexican cartels are the world’s leading traffickers of fentanyl, meth, and other drugs,” the statement said. “These cartels have an alliance with the government of Mexico and endanger the national security and public health of the United States.”

American’s northern neighbor will get the same 25% tariff except with a 10% tariff on Canadian energy resources. That will continue “until Canada cooperates with the U.S. against drug traffickers and on border security,” the statement said.

Trump’s Canadian tariff is further aimed a stopping illegal border crossings.

“Illegal border crossings from Canada reached historic new highs every year for the last four fiscal years,” the White House said.

For China, the tariff will be an additional 10% until it cooperates with the U.S. on the fight against fentanyl.

“The Chinese Communist Party has subsidized Chinese chemical companies to export fentanyl,” the White House said. “China not only fails to stem the source of illicit drugs but actively helps this business.”

The tariff’s were posted on The White House’s X account Saturday afternoon.

Mexico, Canada and China are the top three U.S. trading partners responsible for about 40% of U.S. imports in 2024. Some economists say the move could push prices higher for U.S. consumers. It could also start a trade war. All three countries have promised to respond in kind.

Trump initially said the tariffs would be put in place on Jan. 20, but didn’t immediately follow through on that. Rather, he waited until Feb. 1.

Trump promised during his inaugural address that tariffs would make America “rich as hell.”

Trump also promised tariffs would help lower the tax burden on Americans.

“Instead of taxing our citizens to enrich other countries, we will tariff and tax foreign countries to enrich our citizens,” the president said.

Trump’s tariffs could generate $450 billion in revenue a year, according to adviser and investor John Paulson. The amount such tariffs would ultimately bring in depends on multiple factors, including how other nations respond to U.S. tariffs. That makes it “highly uncertain,” according to credit-rating agency Moody’s.

Trump previously said he couldn’t guarantee that his tariff plans will not raise prices for U.S. consumers.

Tariffs could raise prices for U.S. consumers and slow economic growth. S&P Global, a credit-rating agency, reported that Trump’s proposed tariffs could boost inflation by 1.8% and lower U.S. economic output by 1%, according to a post-election report.

Canadian Prime Minister Justin Trudeau said Friday Canada was prepared to respond.

“If the president does choose to implement any tariffs against Canada, we’re ready with a response – a purposeful, forceful but reasonable immediate response,” Trudeau said.

“We won’t relent until tariffs are removed,” the prime minister said.

Mexican President Claudia Sheinbaum said Friday that Mexico “will always maintain dialogue with the U.S. and that Mexico has multiple plans for a response.”

The United States-Mexico-Canada Agreement, or USMCA, governs trade between the U.S. and its northern and southern neighbors. It went into force on July 1, 2020, and Trump signed the deal.

U.S. goods and services trade with USMCA totaled an estimated $1.8 trillion in 2022. Exports were $789.7 billion and imports were $974.3 billion. The U.S. goods and services trade deficit with USMCA was $184.6 billion in 2022, according to the Office of the United States Trade Representative.

Brett Rowland

Investigative Reporter

Economy

With no will for political union, Canada should consider economic union with the U.S.

Published on February 1, 2025

Todayville

From the Fraser Institute

By Cornelis “Kees” van Kooten

According to an announcement on Friday by White House press secretary Karoline Leavitt, President Dondald Trump will implement a 25 per cent tariff on Canada and Mexico (and a 10 per cent tariff on China) beginning Saturday, Feb. 1.

Over the last few weeks, Canadian policymakers have been rather naïve in responding to Trump’s tariffs threats. They seem not to have figured out what Trump really wants (although perhaps no one knows what he really wants). But the Canadian side has focused on retaliatory measures, lobbying to ensure certain industries are exempt, and an advertising campaign to get consumers to prefer Canadian products—a “Made in Canada” preference.

It’s also been proposed that by lowering trade barriers between provinces, the Canadian economy can offset a trade war with the United States. But this raises the question—why hasn’t this already been done if it leads to such great benefit?

It’s clear that Canadians don’t want to be part of the U.S. However, given Canada’s dependency on the U.S. economy, Canada’s lagging productivity, the inefficiency of separate currencies, and the effect of changes in the Canadian-U.S. exchange rate on prices in Canada, it’s surprising that some kind of economic union with the U.S. is not being considered or even discussed. Or at least it does not appear to be something that politicians north of the border consider.

The post-war European enterprise can serve as a model for how Canada might approach the U.S. In Europe, the Germans remain German, the French remain French and the Dutch remain Dutch. This, despite the fact that the European enterprise has gone well beyond that of economic union. The Maastricht Treaty (1992) created the European Union (EU) by combining the three European Communities—the European Atomic Energy Community, the European Coal and Steel Community and the European Economic Community—into a single entity. While it set the stage for a single currency (the Euro), the Treaty was seen as a first step toward an eventual political union. While the EU has taken large steps toward political union, the enterprise is not going as well as envisioned. The United Kingdom left the EU principally because it did not want to take orders from Brussels. The U.K. was interested in an economic union, but not political union.

The lesson for Canada is clear—we do not want political union, but should be open to economic union with the U.S. This would essentially mean two things. First, eliminating the border with respect to trade in goods and services, and free movement of investment capital. Whether this would include labour would need to be addressed, although economists would argue that, from an efficiency point of view, it should. As a blueprint, one might begin with what’s referred to in Europe as the Schengen Area, which is a group of EU countries that have eliminated all internal border controls and established common entry and exist requirements. This would require that the effective border protects both Canada and the U.S. simultaneously—the northern U.S. border moves to the Pacific, Arctic and Atlantic oceans. If a person qualifies to come to Canada, they automatically qualify to come into the U.S. and vice versa.

Second, monetary union under those circumstances makes a lot of sense. It would be simple to implement. For example, we might say that one Canadian dollar is on par with one U.S. dollar, or that it’s equal to US0.85 or 0.90. The exact value is less important as wages and other costs will adjust with increases in Canadian productivity that will then lead to increases in wages.

Finally, Trump insists that Canada commit 2 per cent of its GDP to defence. I would argue that, given a willingness to negotiate an economic union, and a commitment to increase defence spending to meet the 2 per cent target by 2030, would be sufficient to remove the Trumpian tariffs.

By agreeing to negotiate an economic union, Canada may convince the Trump administration to remove the tariffs. If an economic union were a threat to Canada’s viability, to our Dominion, then we do not deserve to be Canadian. I would venture that our national identity vis-à-vis the U.S. is strong enough to survive an economic union.