As the budget looms, how heavy is Canada's debt burden?
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Kevin Carmichael and Rick Cash
The Globe and Mail
The best way to think about a country's debt burden is to compare it to the size of the economy, or gross domestic product. The nominal debt can be a big number, but if the sum of the goods and services a country produces is bigger, governments will have little trouble generating the revenue necessary to finance its obligations. Economists start to worry when the debt approaches 90 per cent of GDP. That's why Finance Minister Jim Flaherty and his provincial counterparts are talking austerity: the combined federal and provincial debt is now about 88 per cent. But every jurisdiction is unique. Japan's debt has exceeded 150 per cent of GDP for years. The country can get away with it because Japanese are big purchasers of government debt, a steady source of demand that keeps borrowing costs low. But economists question how long this can last. Domestic demand has limits, and Japan's debt is now twice the size of its economy.