by Charles Lammam, Milagros Palacios, Hugh MacIntyre
April 15, 2014
With Canadian governments having returned to deficit-financed spending, the growth in direct government debt has re-emerged as a serious public policy issue in Canada. The net direct debt of all three levels of government increased from $872.2 billion to $1.2 trillion between 2007/08 and 2011/12. Apart from direct debt, government indebtedness also includes debt guarantees, contingent liabilities and contractual commitments, and unfunded program obligations. Thus, the total liability of Canadian governments (federal, provincial, and local) increases dramatically—to $4.1 trillion in 2011/12. The largest portion of total liabilities is made up of the unfunded liabilities of government programs such as the Canada Pension Plan (CPP), Old Age Security (OAS), and Medicare. Along with restructuring program obligations, governments should make balancing their budgets a more immediate priority. Otherwise, the annual deficits currently planned for the foreseeable future will simply add to the existing stock of government debt.