I try to avoid politics in this website other than how they interact with the financial markets (which is a material consideration – don’t face the headwinds of the central banks or federal governments – just ask Albertan oil and gas producers!), but this little interaction in Parliament should be a pretty good indication of the minds of our esteemed Ministry of Finance (MP Pierre Polievre has been a very effective finance critic for the opposition):
(You want the actual answers? Try here.)
I understand what the Minister of Finance is doing from a political angle – he is obviously being given specific advice to not say anything that is clippable in a negative light. So he won’t answer any real questions in Parliament. There are no consequences to not answering questions in Parliament other than public embarrassment, which didn’t seem to hurt the Liberals in the previous election (Trudeau’s blackface, etc.).
Although the USA is blowing more money out the door, one can make the claim that they still have the strongest military and still an extremely powerful economy that, when they actually care about it, can be nearly self-sufficient from a domestic perspective. As a result, they can take ridiculously huge monetary and fiscal actions and will still be in reasonably good shape (inflation would result when claims on currency start flowing in to purchase goods and services, but it would not be a country-ending event). Canada cannot make such a claim as our primary export is natural resources, and we rely on imports for significant amounts of goods. We still have a reasonably decent amount of domestic production, but it is nowhere as robust as the USA. As a result, at the same levels of debt (proportionate to our GDP and population) we are more brittle economically.
Fortunately, the federal entity has had a relatively low amount of debt to GDP, but this is going to change (upwards) very quickly. Our debt to GDP will rise about 15% this fiscal year alone. Canada is structurally unusual in that our sub-soverign entities (i.e. provinces) are relatively more powerful entities than other countries, and as such, to have a proper apples-to-apples comparison, provincial debt should be included with the overall burden – when taking this into light, Canada is slipping into fiscal territory where it should not be going. We’re still miles away from around 1993 where interest expenses on gross debt was a third of our revenues (it was about 7% in the previous year), but it doesn’t take much imagination where you start having a monetary crisis and interest rates skyrocket, and that’ll force some really terrible fiscal decisions to properly regain the confidence of the financial markets.
Unfortunately, by the time that the country has to pay the bills for what is happening today, the people causing the problems will be long gone. It makes Harper’s performance during the 2008-2009 economic crisis (which was in itself instigated by a minority parliament that was going to overthrow him from office if he didn’t spend like mad) look quite good by comparison.
The ultimate irony is if there is enough supply destruction in the US shale market (coupled with lack of capital plus the depletion of the top-tier sites), fossil fuel prices might rise enough to bail out Canada’s energy companies, which would have a positive effect on the country’s finances (and the Canadian dollar). This would be despite the current government doing everything it can to shut them down.