It turns out that that Federal Finance Minister Joe Oliver is reported as saying that “the government can shrink the national debt by growing the economy and ‘without actually paying off any debt’.” At the same time, as part of pre–budgetary consultations with the finance committee, the Conference Board of Canada, the Canadian Taxpayers Federation and the Canadian Council of Chief Executives have argued that reducing the federal debt should be a priority in the coming federal budget. This does seem a rather odd coincidence of comments given the recent spate of austerity in Ottawa on the program spending side.
Of course, by shrinking the debt via growing the economy, the minister means reducing the debt to GDP ratio. The 2014 Federal budget pegged the net debt to GDP ratio at 33.1 percent in 2012-13 and it is projected to go down to 27 percent by 2017-18. Provided there is no global financial apocalypse in the offing, this will likely come to pass without too much effort. Despite Mr. Oliver’s view that he does not need to get around to actually paying off the debt, even the absolute value of the federal net debt is projected to decline from 618.9 billion in 2014-15 to 596.2 billion by 2017-18. I suppose the recent comments from the Conference Board and like-minded individuals are designed to pick up the pace of that movement.
So what gives? Well, as we move into budget season in early 2015 with a projected 6.4 billion dollar surplus for 2015-16 and federal election slated for the autumn of 2015 we have competing interests trying to stake their claim to the anticipated fiscal dividend. The paramount interest for the government is of course getting re-elected and the Spring 2015 budget will give us a taste of what the new initiatives on the tax and expenditure side will be that are designed to take the government into the fall election. Everyone is waiting to see if income splitting is where the government will actually go. As for paying down the debt? Even fiscal conservatives realize that paying down the debt during an election year is not bound to be a big vote getter.