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Jay Currie

One Damn Thing After Another

6/12/2004

Dollars and debt

Clever graph people are having fun over at BlogsCanada elections e-Group looking at the Federal Debt and trying to figure out if Martin tamed the beast or if he simply got lucky and had the advantage of the fiscal pain the Mulroneyites inflicted.

I am something of an agnostic. I am inclined to think the situation the Conservatives inherited from the Liberals meant they had no choice but to bring revenues in line with expenditures. But I also note that inflation and interest rates declined through the 1990s.

In the course of reading about this I ran across the very useful Fiscal Reference Tables published as part of each year's federal budget. I would put up the whole thing but formating it would take a month.

Here is the key:

83/84
net public debt charge 16,164 million
As a percentage of public revenue 31.9
As a percentage of public expenditure 21.2

90/91
net public debt charge 38,227 million
As a percentage of public revenue 38.7
As a percentage of public expenditure 30.0

95/96
net public debt charge 44,063 million
As a percentage of public revenue 37.6
As a percentage of public expenditure 30.6

00/01
net public debt charge 37,468 million
As a percentage of public revenue 24.0
As a percentage of public expenditure 27.0

02/03
net public debt charge 30,413 million
As a percentage of public revenue 21.0
As a percentage of public expenditure 21.8

There are a couple of observations to make. First, economic growth, a reduction in inflation and the bank rate combined with increased tax revenues have brought the debt to a managable level. Second, we are still spending 30 billion a year on the debt hangover. Third, no finance minister could allow debt service to continue at the 90/91 or 95/96 levels.

Politically neither the Liberals nor the Conservatives have anything to be terribly proud of. But the Liberals have, at least, not pissed the increased federal revenue entirely away.

The difference between 95/96 and 02/03 is 14 billion a year. That is a lot of MRI machines.