Path to budget balance - Canada's modest spending cuts

Feb 14, 2024


In a fresh perspective on Canada's fiscal policy, the Fraser Institute has revealed a study proposing a practical route to balancing the federal budget within a few years.  

Co-authored by Jake Fuss, the institute's director of Fiscal Studies, the report titled "A Case for Spending Restraint: How the Federal Government Can Balance the Budget" provides a clear roadmap for fiscal prudence. 

The analysis reveals two key strategies: slowing the growth in nominal program spending to just 0.3% could achieve budget balance by 2026/27, while a more immediate 4.3% cut in nominal program spending would expedite this outcome to 2025/26.  

This approach addresses the rapid spending increases seen before the COVID pandemic, which outpaced both population growth and inflation, contributing to significant budget deficits. 

The federal government's spending spree has led to an estimated $941.9 billion increase in gross federal debt from 2014/15 to 2023/24. The study highlights the burdensome cost of interest on this debt, now one of the largest budget expenses, made worse by recent interest rate hikes. 

Fuss emphasizes the importance of fiscal responsibility, stating, "The federal government should prioritize balancing the budget, so taxpayers aren’t saddled with future tax increases to pay ever-increasing interest on federal debt."  

He suggests that with the options laid out in the study, the path forward requires governmental willingness to adopt sensible fiscal measures. 

The Fraser Institute's report offers a clear analysis of Canada's fiscal challenges and presents attainable solutions. It advocates for spending restraint as a viable strategy for achieving a balanced budget, ensuring a stable economic future for Canadians.  

This study serves as a call to action for federal policymakers to consider wise financial management to prevent future tax burdens resulting from growing federal debt. 

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