Dear John,

There are misperceptions out there that government deficits have no cost.

But a new study published by the Fraser Institute today finds that higher deficit-financed spending by provincial governments over the past 50 years has led to higher taxes and higher debt-servicing costs.

The study analyzes provincial government finances since 1966 and finds that for every $1 increase in deficit-financed program spending, there was a 26 cent increase in taxes and a 10 cent increase in debt servicing costs.

It also finds that an increase in current spending is not entirely offset by future spending reductions. In other words, even when provincial governments run so-called “temporary” deficits, future taxpayers are still left with higher taxes.

Check out the full study – and find out which are the only three provinces to, on average, run surpluses instead of deficits – here.

Sincerely,

Niels Veldhuis
President
The Fraser Institute