Government Debt - Impact
What it means to us and our families
Following the Symptoms and Government Debt – Knowledge blogs, let’s examine some impacts of high and growing government debt.
Quantify the Challenge
Our federal and provincial governments spent $82 billion on interest payments during 2024. (1) Roughly $46 billion (56%) is federal and $36 billion (44%) is provincial. For context, what does $82 billion mean?
· This is almost 8% of total government revenues
· This is $1750 per Canadian person per year
· A third of the $264 billion public spend on healthcare (2)
· Over 2.5x the $31 billion federal childcare expense
· Over 2.5x the $30 billion spent on national defense (though we know this is headed higher, to $150 billion in 10 years)
Impact: How does this $3 trillion plus debt (3) and $82 billion annual interest expense impact on us and our families going forward?
Taxation
Governments could choose to increase taxes, in turn increasing their revenue and choose to use it to pay down the debt. As a result, our families and our private sector employers will pay higher income and corporate taxes.
A federal tax increase of $61 billion would be enough to create a break-even federal budget. About $2000 per taxpayer per year going to the government instead of household expenses and savings. Every year. This would be on top of the $1750 per person taxes already consumed on interest for the existing debt. This doesn’t consider balancing provincial and municipal budgets. Negative impact!
Spending
Governments can choose to decrease spending on their expenses to balance the budget. A Canadian version of US DOGE would need to reduce federal spending by $61 billion, back to a break-even federal budget. That’s a 12% reduction in spending across the board, affecting health, education, childcare, social service, security, defense, roads, public sector employees and more. As a result, each member of our families receives $2000 less of these government services each year. Negative impact!
And let’s remember, break-even budgets just pause the interest expense at its current level. Paying down the debt is a whole different discussion.
Another Option?
Other than higher taxation or lower spending, the only real option available to our governments is to encourage growth of our economy. This means finding a realistic middle ground where we more rapidly develop our natural resources, Canada’s primary real asset. If successful, the result will be more and better paying jobs. Positive impact!
All Three Impacts at Once?
That’s likely. Economic growth, through resource development and nation building projects, takes several years until our country reaps the benefits of incrementally better paying jobs, healthier companies, and the resulting higher taxes received by our governments.
From now until then (maybe 10 years, if all goes well), we may have to accept higher personal taxes and lower service levels to just maintain existing government debt and interest payments.
Basically, we need to accept short term pain for long term gain.
Or we can continue to enjoy short term gain for long term pain.
This is a generational issue. We are short term, the next generations are long term.
What are you and I prepared to sacrifice now for the long term gain of our children?
Let’s help the next generations Be Prepared. Create economic growth. Be proactive and Invest in Canada.
2. https://www.cihi.ca/en/national-health-expenditure-trends-2024-snapshot#:~:text=Total%20health%20expenditures%20in%20Canada%20are%20projected,reach%20$372%20billion%2C%20or%20$9%2C054%20per%20Canadian.&text=Canada's%20per%20capita%20spending%20on%20health%20care,in%20Australia%20(CA$8%2C073)%20and%20New%20Zealand%20(CA$7%2C463).
3. Government Debt – Knowledge, Be Prepared blog, 9 June 2025