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Elections are about money – who will pay more in taxes and who should pay less; how much revenue government will raise; and how, where and on what it will be spent.

Over the past few days, the parties have been rolling out promises of new spending, new tax cuts and new benefits. Some of these ideas are good and some are less so.

But before we get to critiquing what the parties are pitching, let’s look at the landscape that is this election’s fiscal playing field.

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The national debt: Canada has the lowest debt burden in the Group of Seven. The weight of federal debt is not heavy and increasing; it’s light and shrinking. The debt-to-GDP ratio, a measure of the debt relative to the size of the economy as measured by gross domestic product, was low in 2015, and it’s gone down over the past four years.

At just 1 per cent of GDP, federal debt-service costs in 2018-19 were lower than at any time since at least the mid-1960s. Ottawa is currently spending less on debt servicing than during the Stephen Harper era.

In short, Ottawa does not have a debt crisis, or even a debt problem. The other parties are free to disagree with the Liberal government’s choices on other issues, but (we’re looking at you, Conservatives) don’t even try arguing that it’s dug Canada into a fiscal hole.

The deficit: On Tuesday, when Ottawa closed its books on 2018-19, it recorded a $14-billion deficit. How big is that gap between spending and revenues? Small enough that the debt-to-GDP ratio last year fell from 31.3 per cent to 30.9 per cent. That’s a level last hit in the Harper government’s pre-Great Recession years, and before that last seen when Pierre Trudeau was prime minister.

Relative to a $2.3-trillion economy, deficits of roughly $20-billion or less are small enough that the federal debt-to-GDP ratio will continue to steadily fall. A small deficit is the new balanced budget.

As such, there’s no urgency about lowering the deficit, which is why even the Conservatives are in no hurry to get to balance. But neither is there any reason, absent a recession, to pump up the deficit and send the debt-to-GDP ratio rising.

Taxing and spending: In the last full year of Mr. Harper’s government, Ottawa’s revenue from taxes and all other sources was worth 14 per cent of GDP. Four years of Liberal government have raised that number. The federal share of the economy is now one percentage point higher, at 15 per cent of GDP.

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However, Ottawa’s tax take today is smaller than at any other time in recent history. In Brian Mulroney’s last full year in office, Ottawa’s share was 17.4 per cent of GDP. In Jean Chrétien’s early years, revenues peaked at 17.8 per cent. But thanks to tax cuts in the years that followed, by the end of Paul Martin’s mandate in 2005-06, Ottawa’s revenues had been pared down to just 15.8 per cent of GDP.

Further cuts, notably to the goods and services tax, followed under Mr. Harper. Federal revenues hit a low of 13.9 per cent of GDP in 2011.

How much money a government needs is a judgment call. It depends on what voters want their government to do, and what they’re willing to pay for.

According to the OECD, the share of the Canadian economy going to all levels of government was 32.2 per cent in 2017.

Is that high or low? It’s higher than the United States’ figure of 27.1 per cent of GDP. But compared with most other developed countries, it’s low. It’s also well below the Canadian peak of 35.9 per cent, reached in 1997. Back then, Canada’s all-government revenues were 2.5 percentage points above the OECD average; today, Canada is two points below.

The appropriate level of government revenues is a decision for voters, one that affects the level of government spending. All else equal, the more or less revenue a government has, the more or less it can do.

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In the last full year of Mr. Harper’s government, Ottawa’s spending was worth 14.1 per cent of GDP. The Trudeau government has increased that, marginally but meaningfully. In 2018-19, Ottawa spent $346.2-billion, or 15.6 per cent of GDP.

Over the past week, the Conservatives and Liberals have courted Canadians with promises of more money going into their pockets, and less money coming out. They’re targeting many of the same voters, with this week’s focus on families and women. But their competing plans differ – in ways that reflect differing philosophies, as seen in Canada’s recent fiscal history. More on this tomorrow.

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