Canadian National Debt $565 B

The enduring legacy of Pierre Elliot Trudeau for your children and grandchildren shall be our enormous national debt of $565 billion. (And no thanks to Brian Mulroney either.)

The annual cost on this $565 B is, presumably, $41 B, which converts to an interest rate of 7.25%. This presumably converts to 25 cents of every dollar collected in tax. It is not clear if this rate is fixed to the Canadian dollar, fixed to the American dollar, or floating with respect to prevailing Canadian or American interest rates.

We suspect that it is mainly linked to prevailing interest rates, such that, if interest rates increase from 7.25% to 9.25%, annual interest charges will increase to $52 B. That is an extra $11 B, which takes a huge chunk of any surplus that we may have. ($52 B converts to 32 cents of every tax dollar.)

We suggest that the strong Canadian economy of the last several years, has little to do with what the Canadian government did or didn't do, and very much to do with the strong American economy. Should the American economy turn downwards, the present Canadian surplus would evaporate almost instantly. And should interest rates continue rising, annual interest charges on our national debt would also rise.

The above simple calculations illustrate how very precarious debt reduction projections can be. No one can predict what the economy will be like next year, let alone five years hence. It is ridiculous that the politicians are already arguing how to spend money which is unlikely to materialize.

In our opinion, the spending priorities should be:
1. Pay down the debt! (Our preference would be $41 B per year, i.e. equivalent to the annual interest charge. Minimum $6 B per year as suggested by Canadian Alliance is a good idea.)
2. Very modest and well planned increases in research and development, health care and infrastructure spending. (Throwing money at perceived problems, as all the political parties are promising, is the worst possible thing that could be done.)
3. Very modest decreases in taxation, until the national debt is brought under control. (Again, suggesting large tax decreases is irresponsible and stupid, since it would be impossible to implement without society breaking down or the deficit ballooning.)

Responsibility for existing National debt:

Although the prime responsibility for our national debt lies with Pierre Trudeau and Brian Mulroney, all the Cabinet Ministers and all Members of Parliament must be held accountable for this period of irresponsibility. It seems only fair that legislation should be enacted that, upon their deaths, the total value of their estates would be used to pay down the onerous debt burden that they had placed upon Canadians.

For the future, it should be enshrined in law that any deficit would trigger a fine on each MP equivalent to a maximum of 50% of their parliamentary salary.

debt.html is under construction