Study
| EST. READ TIME 1 MIN.Federal government interest costs could increase to $35 billion if costs return to 2019-20 levels
Interest Cost Risks to Government Budgets
Summary
- This essay calculates the change in government interest costs and budget balances if interest costs return to their 2019-20 levels.
- Estimates are calculated for 2021-22 gross debt levels for each of the provinces and the federal government. Interest costs as a share of gross debt from 2019-20 are then applied to the estimated gross debt levels for 2021-22.
- The federal and nine provincial governments (except New Brunswick) all experience an increase in their interest costs. The largest dollar value and percentage increase is recorded by the federal government; interest costs rise from a budgeted $22.1 billion in 2021-22 to $35.2 billion, an increase of 59.4 percent. The smallest percentage increase is recorded by Quebec whose costs increase by 3.4 percent.
- Cumulatively, interest costs and deficits would increase by a total of $17.0 billion in 2021-22 should interest costs return to their 2019-20 levels.
- The forecasted increase in federal interest costs for 2021-22 ($13.1 billion) assuming interest costs return to their 2019-20 level represents 77.4 percent of the total increase in interest costs for the federal and provincial governments.
- Based on the risks assessed in this essay, governments across the country should employ much more caution regarding spending and borrowing, particularly in Ottawa.
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Jason Clemens
Executive Vice President, Fraser Institute
Jason Clemens is the Executive Vice President of the Fraser Institute and the President of the Fraser Institute Foundation. Hehas an Honors Bachelors Degree of Commerce and a Masters Degree in Business Administration from the University of Windsor as well as a Post Baccalaureate Degree in Economics from Simon Fraser University. Before rejoining the Fraser Institute in 2012, he was the director of research and managing editor at the Ottawa-based Macdonald-Laurier Institute and prior to joining the MLI, Mr. Clemens spent a little over three years in the United States with the San Francisco-based Pacific Research Institute. He has published over 70 major studies on a wide range of topics, including taxation, government spending, labor market regulation, banking, welfare reform, health care, productivity, and entrepreneurship. He has published over 300 shorter articles, which have appeared in such newspapers as The Wall Street Journal, Investors Business Daily, Washington Post, Globe and Mail, National Post, and a host of U.S., Canadian, and international newspapers. Mr. Clemens has been a guest on numerous radio and television programs across Canada and the United States. He has appeared before committees of both the House of Commons and the Senate in Canada as an expert witness and briefed state legislators in California. In 2006, he received the coveted Canada’s Top 40 Under 40 award presented by Caldwell Partners as well as an Odyssey Award from the University of Windsor. In 2011, he was awarded (along with his co-authors) the prestigious Sir Antony Fisher International Memorial Award for the best-selling book The Canadian Century. In 2012, the Governor General of Canada on behalf of Her Majesty the Queen, presented Mr. Clemens with the Queen Elizabeth II Diamond Jubilee Medal in recognition of his contributions to the country.… Read more -
Milagros Palacios
Director, Addington Centre for Measurement, Fraser InstituteMilagros Palacios is the Director for the Addington Centre for Measurement at the Fraser Institute. She holds a B.S. in IndustrialEngineering from the Pontifical Catholic University of Peru and a M.Sc. in Economics from the University of Concepcion, Chile. Ms. Palacios has studied public policy involving taxation, government finances, investment, productivity, labour markets, and charitable giving, for nearly 10 years. Since joining the Institute, Ms. Palacios has authored or coauthored over 70 comprehensive research studies, 70 commentaries and four books. Her recent commentaries have appeared in major Canadian newspapers such as the National Post, Toronto Sun, Windsor Star, and Vancouver Sun.… Read more -
Jake Fuss
Director, Fiscal Studies, Fraser Institute
Jake Fuss is Director of Fiscal Studies for the Fraser Institute. He holds a Bachelor of Commerce and a Master’s Degree inPublic Policy from the University of Calgary. Mr. Fuss has written commentaries appearing in major Canadian newspapers including the Globe and Mail, Toronto Sun, and National Post. His research covers a wide range of policy issues including government spending, debt, taxation, labour policy, and charitable giving.… Read more