Federal Budget

**Karthik** · 30 Mar 07,, 16:24

mostlymad, you've been away for ages! Nice to see you back.

**smilingassassin** · 31 Mar 07,, 04:43

Originally Posted by cape_royds

Unfortunately, the current government has only committed to three billion in debt reduction, compared to Martin's last fiscal year in 2005, which cut eight billion from the debt.

The money towards dept reduction has to come from somewhere so either you drastically gut certain programs, services ect or you commit what you can. Considering the fact our military had one of the smallest budgets around its no surprise Martin could make such contributions to the dept.

Its absolutely unacceptable that our boys were flying around in decrepid helo's and going into Afganistan with insufficient numbers and equipment to make any credible contribution.

**Jay** · 31 Mar 07,, 20:00

Originally Posted by smilingassassin

The money towards dept reduction has to come from somewhere so either you drastically gut certain programs, services ect or you commit what you can.

Sure they can cut down the french language assistance program

Just kidding..

**cape_royds** · 01 Apr 07,, 20:43

smilingassassin:

Right now the federal gov't has nearly $500 billion in debt. Even at the current low interest rates, the servicing of that debt represents one of the largest expenditure items in entire federal budget.

We currently spend over $30 billion on interest each year, and that buys the Canadian people nothing.

No matter what you want to spend money on, whether on the military, or on highways, or on hospitals, or on slush funds for ethnic basket weavers, or on tax cuts for stockbrokers, it doesn't matter what, any of these things represents more value for the money than paying interest on a long-term debt!

It's by far the biggest waste in government, but I don't hear our current "Conservatives" saying much about it. And their efforts toward debt reduction are less than half of Paul Martin's modest measures in fiscal 2005. Remember, Martin had a minority government too. No excuses!

And let no one try to tell us that debt reduction can wait until tomorrow.

We've been recession-free for over a decade. Our current account and trade balance are in surplus. Unemployment is low in most parts of the country. Energy and minerals are fetching high prices. These are pretty good times, on the whole.

So if we can't pay down our debt in these good times, then when exactly are we supposed to pay down debt?

And as I pointed out before, the long run isn't as favourable, because pension and medical costs are rising due to our aging population. That aging population also pays less tax because fewer of them are in the workforce.

We also face possible big costs for environmental protection. I don't know how bad this will be, but if the fiscal damage is less than $10 billion a year I'll count us lucky.

Worse, central banks around the world have pursued an aggressive loose-money policy since about 1998. But there has been inflationary pressure building up in some asset categories, such as urban housing markets. This won't go on forever. Interest rates are going to rise as central banks work to bring inflation under control.

With higher interest rates comes higher debt service payments.

It is important to use periods of low interest rates, such as the present time, to pay down debt so that the higher rates of the future don't cripple the budget.

Right now the bonds on the federal debt are averaging about 6.5% That's because although the current bonds yield only about 4%, the older debt from the 1980's was 10% or more.

Every percentage point rise in interest rates will cost Canadian taxpayers about five billion dollars. That works out to the complete taxpaying life of nearly ten thousand median working citizens. All at the double-click of David Dodge's mouse!

Finally, economies are always cyclic. Recessions are a fact of life. For a trade-dependent nation like Canada, the causes of a recession will probably be external and outside of our control.

Therefore, the only things we can do are to exercise some foresight and prudence. These ought to be the hallmarks of a Conservative government. But in the important policy area of debt reduction, Flaherty and Harper are actually proving to be inferior to Goodale and Martin.