Joe Oliver says the government can shrink the national debt by growing the economy and “without actually paying off any debt,” but some groups are urging the Finance Minister to take a more aggressive approach.
Mr. Oliver made the comment Tuesday in New York during an “armchair discussion” with Bloomberg Television that touched on his priorities heading into the fall economic update and 2015 pre-election budget.
“Our goal is to reduce the federal debt from about a third of GDP [gross domestic product] down to a quarter by 2021, and we can achieve that without actually paying off any debt. That’s just the natural growth of the economy. And we may of course do better,” he said.
The minister’s comments come a day after several groups – including the Conference Board of Canada, the Canadian Taxpayers Federation and the Canadian Council of Chief Executives – told the House of Commons finance committee that reducing the federal debt should be a priority in the coming budget.
“If you have a dollar left over, I would actually use it to pay down debt,” said Conference Board chief economist Glen Hodgson on Tuesday, reflecting the advice he gave MPs this week. Mr. Hodgson said lowering debt now would help Canada face challenges in the future.
“Ironically, the year after the election, we start getting impacted by the aging population demographics and that really pulls down the growth potential of the economy,” he said.
Mr. Oliver’s office said the minister’s comment was not intended to rule out the possibility of devoting future surpluses toward the debt.
The minister also said that while his government is not anticipating a surplus this year, “the numbers are getting close.”
The federal debt represents the accumulation of annual deficits. The Conservative government has run deficits since the 2008-09 fiscal year, when the size of the federal debt heading into that year was $457.6-billion. The 2014 budget estimated the debt will grow to $618.9-billion this year – representing an estimated total of $161.3-billion in additional debt over the past seven years – before declining in dollar terms. The government’s 2014 budget figures suggested the full amount of future surpluses would go toward paying down the debt. In reality, the government is more likely to use its 2015 pre-election budget to announce tax cuts and new spending.
The minister’s comment that economic growth alone will reduce the debt as a percentage of the economy is considered a statement of fact by economists, but it is similar to one made earlier this year by Justin Trudeau that is frequently ridiculed by Mr. Oliver and the Conservative Party.
During a February television interview with CPAC, the public affairs channel that broadcasts the parliamentary proceedings, Mr. Trudeau made a comment that attracted the attention of the Conservatives.
“The commitment needs to be a commitment to grow the economy and the budget will balance itself,” Mr. Trudeau said.
The Conservative Party uses the comments as part of a pitch for donations, claiming the remarks show “a staggering display of ignorance.”
Economist Rhys Kesselman, who holds the Canada Research Chair in public finance at Simon Fraser University, said there are similarities in the comments from Mr. Oliver and Mr. Trudeau.
“I think what the two people are saying – they’re not inconsistent with each other. They’re looking at different sides of the same coin,” he said. “There’s still a little bit of light between the two in that the Conservatives can say that the Liberals are not committed to balancing the budget itself but to growing the economy and hoping that will keep the budget in balance. So it’s a matter of emphasis and as politicians they of course will find differences and put the less complimentary light on the other one.”Report Typo/Error