Dear John,

Just like when a family takes out a mortgage, the government must pay interest on the debt it incurs.

These debt interest costs are taxpayer dollars that don’t go towards government programs such as health care, education, or national defence.

In other words, when the government spends money it doesn’t have – and when interest rates go up – the government has less money available to spend on important programs.

What’s worse: this creates pressure to take on additional debt to keep those programs fully funded!

In 2015, the Trudeau government came to power promising “small, temporary deficits”.

This promise was immediately broken because the Trudeau government lacks any sense of spending restraint and has chosen to run an uninterrupted series of deficits.

In just nine years this government has nearly doubled federal gross debt, increasing it by roughly $942 billion ($942,000,000,000.00).

Just last year, former Bank of Canada governor David Dodge warned that the federal government’s finances are on shaky ground and suggested the government should ensure debt interest costs stay below 10% of total revenues to keep its finances sustainable.

This became known as the “David Dodge” rule.

The Trudeau government is already expected to break this rule.

In 2023/24, federal debt interest costs are expected to reach 10.2% of projected revenues.

In other words, more than 10 cents of every dollar the federal government receives in revenue will go towards debt interest.

To put this into context, these debt interest payments are going to cost far more than the federal government spends on child-care benefits – and almost as much as they spend on health care!

John, maybe you already understand all this.

Sadly, many Canadians do not. After all, you’d be hard-pressed to learn any of this by reading the news.

This is the value that the Fraser Institute brings to the table: every single week, we produce studies and commentaries that break down the effects of government policies.

If you support the work we do, I’d like to ask you to make a donation today.

We of course never accept government money – we rely entirely on supporters like you.

Thank you for your support,

Sincerely,

Niels Veldhuis
President
The Fraser Institute