Ballooning federal deficit will only worsen if economy sours
An end-of-year poll by the Angus Reid Institute showed increased concern among Canadians about government spending and deficits. It’s a well-founded concern.
Government spending and the economy share top spot as the chief issues of concern.
Notably, federal finances remain in the red despite a growing economy.
A key risk of running deficits during times of economic growth is that the budget can’t be balanced regardless of economic conditions. That’s because a permanent imbalance develops between how much the government spends and the amount it raises from taxes. This is exactly what Canada experienced throughout the 1970s, ’80s and early ’90s. It didn’t matter if the economy was growing, slowing or in recession. The federal government couldn’t balance its budget.