I'm Sure It's All Nothing to Be Concerned With

This will all right itself as surely as budgets balance themselves:

Canadian governments are lot more indebted than we think. And I don’t just mean the vast add-ons now taking place and for coming years. No, what I mean is that the official public debt figures mask the true debt position of our governments. This can send the wrong signal to taxpayers that we are OK when we are not. ...

First, national accounting (unlike the public accounting used in federal and provincial budgets) does not include government employee pension plan liabilities — the money we will all owe to retired civil servants that isn’t covered by a corresponding asset. Add at least another 15 per cent of GDP for this item to the 2019 debt load. Government pension liabilities will easily surpass that in 2020 as asset returns tank and discounted liabilities rise sharply because of low interest rates. (With lower interest rates it takes more money to cover a given future pension obligation.)

Second, to get to net debt we subtract Canada and Quebec Pension Plan assets from our overall debt. But we ignore any liabilities these plans will pay out beyond one year. Unless governments renege on future CPP and QPP pension benefits, adding in these future obligations raises our 2019 net debt by another 14 per cent of GDP.

Third, both financial and non-financial assets, like roads, bridges and other public capital, are carried at book value. But the 2020 market downturn means a government wishing to sell financial assets to avoid rolling over debt will have less money on its hands. Financial values generally do come back over time. But non-financial assets, of which over 90 per cent are held by provincial and local government, are a different, more troubling matter. They typically earn little financial return and are highly illiquid. If governments need money to cover debt repayments, their non-financial assets will have few buyers unless they are privatized at low prices. If we don’t follow the usual practice of subtracting non-financial assets from liabilities, the net debt burden would be higher by another 53 per cent.

And we’re not finished yet. Governments also have major unfunded liabilities such as Old Age Security, Guaranteed Income Supplements, age-related tax credits, seniors’ drug plans, long-term care facilities and health care benefits. The IMF estimates that on its own unfunded health-care spending for the next 30 years adds up to another 42 per cent of GDP.

(Sidebar: it's probably because those old people were asking for too much than the government was prepared to give.)

Add it all up and Canada’s debt burden is $3.2 trillion. That’s 166 per cent of GDP — fully four times the IMF forecast for 2020.

See, it's not as bad as all that.

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Statistics Canada says the economy in the first quarter had its worst showing since 2009 as steps taken to slow the spread of COVID-19 forced businesses across the country to close their doors and lay off workers.

Statistics Canada says gross domestic product fell at an annualized rate of 8.2 per cent in the first three months of 2020. The collapse came as gross domestic product for March fell 7.2 per cent as restrictions by public health officials began rolling out during the month, including school closures, border shutdowns and travel restrictions.

 
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Cabinet borrowed more than a third of a trillion dollars in 27 days, the Commons finance committee was told last night. The unprecedented borrowing was to finance pandemic relief programs: “Brace for the coming storm.”

Borrowed money has to be repaid but whatever ...

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Because transparency:

Infrastructure Minister Catherine McKenna yesterday would not tell Parliament how much was paid in six-figure bonuses to a former CEO of the Canada Infrastructure Bank. The executive abruptly resigned April 3: ‘Is this a good way to spend taxpayers’ money?”

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Did the subsidies work?

Some say not:
 

Amid Depression-level unemployment, some employers in low-wage industries are actually struggling to fill jobs, business groups say.

The Canadian Federation of Independent Business (CFIB) says a third of its members report having trouble staffing up, as potential employees fear returning to work amid the ongoing pandemic, while still able to rely on federal emergency benefits.

Who could have seen that coming?

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How could this go wrong?:

A multi-billion dollar pandemic relief program intended for post-secondary students will pay jobless teenagers whether or not they are studying. High school graduates need only mail a student application to a college or university to qualify for federal cheques, according to regulations detailed yesterday: “I admit this is not a perfect system.”

See! Nothing to worry about!