In his ongoing attempt to become the Jordan Peterson of elected officials, Pierre Poilievre has released another lengthy, laboured video about the policy failings of the Trudeau government. This time, it’s the first in what will apparently be a four-part series on Canada’s so-called “debtonation,” an awkward portmanteau that suggests an imminent reckoning. Poilievre invokes the wisdom of Seneca, Churchill, and Ecclesiastes (Laurentian elites, anyone?) to argue Canada is careening toward a Greek-style debt crisis — and that, of course, only he can prevent it from happening.

It starts, as most of Poilievre’s political messages tend to, with a misleading representation of reality. Canada, the video ominously intones, has racked up $10 trillion in debt, more than three times our annual GDP, and it’s about to blow up in our faces. But this deliberately commingles personal and corporate debt with government debt to make the number as large as possible. It ignores the fact that household and corporate debt is more than covered, by many, many multiples, by underlying assets they helped finance.

As University of Calgary economist Trevor Tombe wrote in a recent piece for The Hub, this framing of household debt is misleading. As a percentage of assets, Canada’s household debt is just a smidge over 15 per cent, which is where it’s been for most of the last 30 years. “It’s actually on the relatively low end of things historically,” Tombe says.

But what about government debt? Here, too, Poilievre is bending the truth to his purposes. As Tombe pointed out, the net debt of all Canadian governments (federal and provincial) was 20 per cent of GDP as of 2022. In the United States, it’s nearly six times as high. Only a small handful of mostly central European and Scandinavian countries have a better ratio than Canada, with major G7 peers well behind.

What really matters is the government’s debt-servicing costs, which were the impetus behind the Chretien Liberal government's deep spending cuts in the 1990s. As the Globe and Mail’s Mark Rendell wrote back in September: “We’re still a long way from the fiscal crisis of the early 1990s, when the federal government was spending more than 30 cents of every dollar it collected on interest payments. The budget projects an interest expense-to-revenue ratio of around 9 per cent in the coming years. That’s up from an average of 7 per cent in the five years before the pandemic, but still low by historical standards.”

You might be wondering: given the nearly continuous increase in the national debt, why hasn’t Canada’s “debt bomb” exploded yet? As Poilievre notes, it’s because interest rates have remained low for most of the last few decades. Right now, Canada’s combined $10 trillion in debt carries an average interest rate of 4.72 per cent, while the historical average over the last six decades is 7.6 per cent. “What happens if at some point down the road, the interest rates paid on our debt return to their normal historical averages?”

This is the crux of his argument: if it happened before, it’ll happen again. As he says in the video: “What has been, will be again. What has been done, will be done again. There is nothing new under the sun.” But when it comes to interest rates, this is almost certainly incorrect. Central bank interest rates haven’t hit seven per cent in Canada since the late 1990s, and an awful lot has changed since then. When you account for the deflationary impacts of technology and declining energy prices (sorry Pierre!) along with rapidly slowing global population growth, the odds of interest rates averaging above seven per cent going forward (or even anywhere near it) are almost impossibly small. If Poilievre is taking bets here, I’m happy to make a friendly wager.

It’s tempting to challenge Poilievre even further on his underlying thesis here. Instead, let’s take him at his word. Let’s assume he’s genuinely worried about a potential debt crisis and its impact on mental health, suicide rates, and other potential negative outcomes. How, exactly, does he intend to shrink Canada’s debts? What programs and services will he cut to balance the federal budget so he can start paying them down? Eliminating the CBC won’t get the job done. Neither will getting rid of the ArriveCan app or any other ideological hobby horses he and proxies like Melissa Lantsman trot out when asked this question. Where are they going to find the $40 to $60 billion in annual savings in the federal budget?

One seemingly inevitable answer is new tax cuts for businesses and the rich — sorry, “job creators.” But as we’ve already seen in the United States, that only makes the hole they’re supposedly trying to plug even bigger. The massive tax cuts passed by Presidents Bush and Trump — ones that, remember, were supposed to “pay for themselves” — have already added $10 trillion to the U.S. national debt. “Without them,” the Center For American Progress noted, “debt as a percentage of the economy would decline indefinitely.”

Pierre Poilievre wants Canadians to believe their national debt is a ticking time bomb, and Justin Trudeau lit the fuse. Here's the catch: his attempts to defuse it would almost certainly blow a hole in Canada's social safety net.

The truth is that there are no free lunches here, and we should be wary of anyone trying to sell one. Governments can’t rack up debt indefinitely without it eventually constraining the choices and opportunities of future generations. But governments also can’t implement the deep spending cuts (or tax increases) needed to meaningfully reduce our national debt without hurting some people along the way. What we need is a serious conversation about the trade-offs involved, not politicians who pretend they don’t exist.

On the contrary, it is very much something. As clearly laid out by George Lakoff. ("Don't think of an Elephant") , the whole exercise is directed precisely at rolling back or eliminating all social programs. In Lakoff's analysis, Conservatives are driven by a "strict father" morality - you will succeed, and be rewarded if you "work hard", and follow the dictates of industry. If you aren't "succeeding", it is because you are not working hard, or not doing what you are told. You should be punished, not rewarded by social program supports. This is a lot more serious than political bombast. Underlying it is a deadly serious moral ideology of individual vs. social responsibility, which mandates reward of the deserving disciples, but appropriate punishment of the non-compliant "failed" individuals, particularly by withdrawal of rewards compensating for their "failures".

Very insightful.
Please continue to spread the word before they get their meathooks into all of us, except of course the compliant who will be lining up to vote for Poilievre.

Yeah, and this "moral ideology" or Puritan work ethic comes from RELIGIOUS DOCTRINE where that and the patriarchy still reign supreme as central, traditionalist planks of conservatism, making "modern conservatism" an oxymoron similar to "conservative democracy."
So basically they're intent on pulling us all BACKWARDS, even stopping societal change in its tracks, but still calling this overt regression a political "movement" despite the usual connotation of that phrase meaning going FORWARD in time while improving conditions for people. This is generally agreed to be societal "progress."
So conservatives literally have to turn themselves inside out here by calling up DOWN and black WHITE stridently, repetitively and as authoritatively as only members of Her Majesty's Loyal (and esteemed) Opposition can, augmented by performing physical makeovers on a "leader" who looks older than the Liberal leader despite being ten years YOUNGER. His intonation gives him away though, bringing Presto Manning to mind, who in turn tellingly brings Jimmy Stewart, American actor from the fifties to mind.
And now there's social media with its memes to reach the younger audience in thrall to Tik-Tok, thereby employing some of the smartass wordsmiths conservative bad boys have in abundance, and we have a dangerously auspicious time for posers of all kinds.
So it's like conservatives have died and gone to heaven.

So nice to read a comment thar is true and accurate! Don't see that often. Smith is implementing the old cut social programs in Alberta. Canada is not a socialist country and doesn't even have a socialist party anymore. The one and only socialist government in the Canadian/ USA part of North America was in Saskatchewan lead by Tommy Douglas. Do Canadians want to abandon our social democracy benefits like public education, public health care, disability benefits, employment insurance, senior pensions and income supplements. I don't think so!. We abandoned social housing and made a losing bet on that supposed free market. Look where in got us ,both parties! Food insecurity, homelessness and rent increases. That's what free markets, tax cuts for the rich and businesses has done. Are we happy? Read the polls. Now like the UK and the USA we have increased inequality and that will destroysociety and possibly our democracy. And as to Poilievre debt issue, look at Japan. Our government is the lowest of Western Democracies such as North America and Europe. Japan for 30 years now has a national debt 3 x its gdp. Still has social programs, still a wealthy industrial country and still adding to debt every year. Plus 2.5 times the population of Canada. Poilievre , Smith, Moe and Ford are not conservative! They extreme right radical conservatives which bear no resemblance to Conservatism

I can tell him how to fix the debt with three words. Tax-The- Rich.

P.P. would just plug his ears (or his newly elected National Council would do that for him) and pretend he didn't hear a word you said.
Like their Republican Party brothers in arms to the south of us, the CPC would much rather have a problem to get the base riled up over, than actually contributing constructively to fixing it.

True enough.

It is time that we all got a lot smarter about macroeconomic policy and the relationship of the national debt and interest rates to the economy.
Personally, I would like to sue the University of Toronto for my tuition for the graduate courses in macroeconomics I took, because they were all built on faulty assumptions about the link between the money supply and inflation particularly. The only relationship that can be proven between interest rates and the economy goes like this:
* increasing the policy interest rate by the Bank of Canada acts to slow the economy by making business investments in job-creating activity more expensive.
* This (eventually) reduces the demand for labour, and reduces national wage income, causing a fall in demand, and a reduction in inflation. But it is wage earners who almost single-handedly bear the cost of the "fight on inflation" because higher interest rates actually transfer wealth to the holders of financial assets (and can even cause inflation to be higher than it would be otherwise!).

What about government spending vs taxes?
One of the key errors is the assumption that taxes fund government spending. They do not, never have, never will. The government spends money on goods and services that it wants to do based on social policy and to encourage certain sectors of the economy. The only limit on government really is that it cannot buy more of something than the economy is able to produce--if it does, it will cause inflation, full stop.
Taxes are simply used to control consumption and to also favour some kinds of economic activity over others.
When the government spends more than it taxes back, it creates a private sector SURPLUS. The funding of the "debt" by issuing bonds is just another way to encourage savings and pay interest to the holders of the bonds.
This is a very short summary of what you will find by reading The Deficit Myth by Stephanie Kelton. I encourage everyone to read it, including those who have opinon columns in the National Observor.

Another form of private sector surplus creation is third party money deposited in Canadian banks.

For example, the Russian government deposited about half its profits primarily from the Russian oil industry in Western banks. One of them was RBC which has $US134.5 billion of Putin's cash sitting in its coffers, now frozen by international sanctions over his warmongering.

I would assume RBC will keep the value of the principal intact, but can probably continue cycling the money into investments.

The latest political thought is to grab this Russian money so foolishly deposited in Western democracies while planning all along to attack an emerging democracy, erase its culture through mass murder and subsume its territory.

The total value of Putin's money in Western banks is likely around $US800B, enough to largely rebuild Ukraine...after Putin is hopefully evicted.

I hope the West can bend their banking rules enough to open up their accounts and retrieve funds deposited by authoritarian regimes to repair the physical damage wreaked by fascist tyranny on innocents.

I have my doubts. According to Bloomberg, Illicit sales of Russian oil are now part of a huge international black market with India and China being the big customers. A fleet comprising hundreds of "ghost ships" transport the oil, which is often transferred ship-to-ship, legitimate insured tanker to rusty tramp tanker (with unclear ownership and insurance coverage, and with their transmitted AIS info turned off) while anchored in Greek waters before taking the unregistered cargo through the Suez Canal. Dark Oil, a product the global economy is silent about because it's addicted to it.

Will Russian deposits in Western banks similarly become Dark Money, protected by governments in fear of the repercussions of confiscating it from their own domestic banks?

I doubt Econ courses don't teach about this stuff.

"I doubt university Econ courses teach this stuff."

No donation on top of subscriptions until there is a basic Edit Button.

I've become increasingly skeptical of the usefulness of the whole "Taxes don't fund government spending" MMT schtick. Sure, there's a sense in which it's not "really" true . . . but it's pretty much the sense in which money doesn't "really" exist. The whole thing we call "the economy" and all of its "rules" are put together by vague consensus, by elite actions, and by government, and they only work because we agree that they do. Taxes fund government spending in about as real a sense as anything else about "the economy" is real.

And the fact is that governments using taxes to fund their operations is real in that sense. Governments do collect taxes, this is seen as the movement of money from people who pay the tax to the government that receives it, when money gets debited from people who pay, it gets put in some government financial institution account, the government then moves some of that same money when they pay their employees or whatever.

It's true that government COULD just burn all the money they're paid and print fresh, and that would be effectively the same thing. Or if the Joker managed to intercept all the tax money before it reached the government, manifest it all as a mountain of printed cash, and burn it, the government could then print fresh money in the same amount, and it would make no technical difference. But it's not what they DO. What they DO is collect taxes and use the money. The fact that doing something different from what you actually do would be in many ways the same, does not make it false that you actually do it.

I get what the MMT people are trying to do with that claim; they think their point won't be made effectively if it's not made decisively, and saying it that way makes for a dramatic metaphor for what they're getting at. But I wonder if it isn't also counterproductive. Very few people are going to buy it at a gut level, when they pay income tax every year and see sales tax on little slips all the time.

Poilievre's national economic policy is so busy switching gears and directions it's making observers dizzy. Maybe that's the plan, to cover up the fact he has no plan.

First it was promoting bitcoin like some pyramid scheme. Now it's deep, deep cuts to everything with the word "social" in it -- all implied, of course, because they can't come right out and say that before an election. That would be akin to prematurely exposing their hidden agenda.

What is annoying here is the fact we have to go searching for the rebuttal to this kindergarten level of economic analysis so full of lies. The response by media (exceptions for Fawcett and his respected sources), the government and financial institutions should be very loud and very clear: Poilievre has no viable plan for the nation's economy.

This doesn't go far enough on some very basic levels. Especially at the end, where Mr. Fawcett says the government cannot continue racking up debt indefinitely. Yes, it can--within certain constraints, but it certainly can, for the same reason it's been racking up debt all this time but the debt-to-GDP ratio isn't very high: The economy grows. If the government adds debt at a rate equal to or less than the rate of growth of the economy, the debt-to-GDP ratio remains constant or even shrinks.

There are other issues. Typical talk about government debts pretends that all government expenditures are equal and that government has no assets. But the government does have assets, lots of 'em. And, spending money to create new assets (e.g. government owned infrastructure which helps expand the economy) is very often going to be well worth any debt accrued. There are other expenditures which will also create returns that are well worth the money spent. And then, there are expenditures that don't do that, are worthwhile for other reasons but it is worth watching out for debt issues around them, and still other expenditures that aren't worth anything and may actually make the country a worse place (for instance, many things that Conservatives want to spend money on).

Additionally, all debts are not created equal. If Canada owes $BIGSUM in Canadian dollars to Canadian banks, corporations and citizens, that is quite different from if Canada owes that same $BIGSUM in American dollars to non-Canadian investors or, God forbid, the World Bank or IMF. The former debt is under Canada's control, in a currency Canada issues, to institutions operating under Canadian laws. If it gets problematic there are lots of things that can be done about it. Foreign debt is much worse, and one of the best reasons to keep debt relatively low is that there's a tendency as debt gets higher to need to go to foreign creditors rather than maintaining most of the debt internal. I don't know how much of Canadian debt is internal and how much is foreign--last time I paid attention we were in fairly good shape on that with the majority of the debt being internal, but that was some time ago and things could have changed.

In any case, debt worries are precisely a reason not to elect Conservatives, because if you look at the records of Canadian federal and provincial governments, the record for increasing debts looks like this: Best, NDP. Next best, Liberals. Worst, Conservatives, and by a long way (and, again, when Conservatives rack up debt it's never for anything useful, because their ideology says government can't and/or shouldn't do anything useful). Of course mainstream newspapers continue to pretend that Conservatives are safe hands with the economy, or Conservatives mentioning debt would be cutting their own throats.

When the Bank of Canada holds government bonds, the interest received is returned to government as shareholder profits since the Bank's shares are wholly-owned by the Minister of Finance. So in addition to low-cost financing that allows proceeds to be invested in health, education, and other infrastructure for the benefit of Canadians, there is effectively no public debt since the government owes money to itself.

But when the private sector owns the government bonds, then affluent investors, big asset managers, and large financial institutions receive and retain the interest payments. These actors and their captive economists have devised many dubious reasons why high-cost financing of public services provided by market lenders is the preferred and only legitimate option.

So if one believes that rising interest costs on the public debt are indeed a problem, then the solution is simple. Cut the private sector payments by having the Bank of Canada buy more bonds directly from the government, an operation the Bank has been performing for the better part of a century.

How the Bank of Canada Creates Money for the Federal Government: Operational and Legal Aspects ,
Economics, Resources and International Affairs Division, Library of Parliament

"By recording new and equal amounts on the
asset and liability sides of its balance sheet, the Bank of
Canada creates money through a few keystrokes. The federal
government can spend the newly created bank deposits in the
Canadian economy if it wishes."


".....there is no external limit to the total amount of money that the Bank of Canada may create
for the federal government."


"The Bank of Canada's money creation for the Government of Canada is an internal government process. This means that external factors, such as financial markets dysfunction, cannot cause the federal government to run out of money."