National Deficits and Debt: Meeting the Challenge

An Overview of the Federal Financial Situation With Fact and Analysis Supporting Efforts to Reduce Deficits and to Deal With Canada's Growing Debt Problem

What the experts are saying

"Prudent economic and financial management demands government action now to stop the federal debt from growing faster than the economy. The need for such action is not a matter. of ideology. It is an inescapable reality we have to deal with ….

If interest rates were to remain above JO per cent over the medium term and real economic growth were slower than projected as described above, then the deficit could easily rise to $1/5-$50 billion by fiscal year 1990-91. And this calculation does not take into account the very real possibility of a severe recession at some time during the second half of this decade if deficits, and hence interest rates, are not reduced to manageable dimensions. Clearly, with these risks, this government must take action to restore fiscal flexibility and by doing so help to create an environment that would allow interest rates to fall."

The Honourable Michael Wilson, Minister of Finance

"We must make some unpalatable choices in 1985 to determine how the deficit will be cut or risk poor growth and the possibility of a debilitating fiscal and economic crisis in the years ahead."

1985 Policy Review and Outlook, C.D. Howe Institute, 1985

"However difficult a decision may be in 1985 Ito reduce the deficit), the mathematics and economics of rapidly rising ratios of debt to GNP ensure that any such decisions in the future will be substantially more difficult -- if indeed there will be any decision flexibility."

Deficits: How Big and How Bad?, The Ontario Economic Council, 1985