Crawl Across the Ocean

Tuesday, March 28, 2006

$500 Billion Dollars

What's $500 billion dollars, you ask? $500 billion is what the total federal debt was at the end of 2004-05.

Per person, this works out to around $16,000.
5% annual interest on $16,000 is $800/year.

So think about that. Every year your income is reduced by $800 to pay for the borrowings of Federal Canadian governments from previous years.

So do me a favour, any time the government collects more in revenue than it pays out in expenses for a given year - so the $500 billion sack on our back gets a little lighter - don't call it a surplus.

Call it a mortgage payment. Call it a gift to the next generation. Call it whatever you want, just don't call it something that implies the money isn't being put to a much needed use.

Yes, I know, if you look up the meaning of the word surplus the second definition is, "an excess of receipts over disbursements", which seems appropriate.

The problem is that when they hear the word 'surplus', too many people think of the word's first meaning: "the amount that remains when use or need is satisfied".

In case I haven't been clear: need has not been satisfied when we still owe $500 billion dollars.

Don't let the next generation of Canadians be impoverished because we were confused by a word which happened to have two different meanings - use a different word.



    Do your part - deposit your earning in the federal bank account set up to pay for the debt. ;) You have the power to personally put your money where your mouth is.


    By Blogger Andrew, at 3:46 PM  

  • And after you singlehandedly pay off the debt, you should stop global, catastrophic climate change by walking to work each day.

    (yes, I realize that Andrew was just kidding around)

    By Blogger Simon, at 4:04 PM  

  • Good point! You're on a posting roll too.

    By Blogger KevinG, at 4:08 PM  

  • You know, despite being the fairly well left of center pwerson that I am I might actually be convinced to support the Conservatives if they were to:
    1. Pass legislation requiring all budgetary surpluses to be used to pay down debt and safeguards against budgets deliberately inflated to avoid surpluses.
    2. Raise taxes to create even creater surpluses to pay down the debt even faster - as that - getting out of debt and in doingf so paying as little interst as possible - is a truly conservative thing to do.

    Fortunately for me I'll never be put in that position of having to support them. They aren't the least bit interested in doing what's right.

    By Anonymous Anonymous, at 8:25 PM  

  • Doug,

    Canada has a law in place that forces all unexpected surplus to be funnelled into the debt.

    This is a DUMB law because it allows overtaxation without flexibility. Canada currently budgets $3b per year in debt repayment - there are reams of reasons why this is a good figure (read the budget for a number of them) - we don't need unexpected surplus into the debt as well.

    By Blogger Andrew, at 9:03 PM  

  • Have to agree with Andrew on this one - flexibility is the most important feature a government can have, and that includes the ability to create debt if needed.

    By Blogger Thursday, at 9:54 PM  

  • Andrew (1st comment) - Sure, I'll just stand in line like a chump, while everyone else cuts the line. It's a collective action problem - everyone needs to do their part.

    Simon - If that would do it, I would!

    KevinG - thanks.

    Doug - legislation might help, but the most important thing is for paying down the debt to be politically popular. Politicians will find a way to do what they think will be popular, even if there are laws in place.

    Certainly I agree that paying down the debt as quickly as possible is the conservative thing to do - who knows what challenges are coming around the bend (of course even the ones we know about (aging population, climate change, unsustainable increases in personal debt, etc.) are formidable).

    Andrew (2) - you say overtaxation, I say mortgage payment!

    Thursday - The way legislation could be beneficial (in my opinion) is not by making it impossible for government to increase debt, but by leaving them that flexibility, while making them pay a political price (by having to pass a law to increase the debt limit, a la the U.S.)

    By Blogger Declan, at 10:58 PM  

  • Declan,

    (1) - I am doing my part. I'm contributing to the $3b/year that the gov't has deemed is the appropriate and responsible rate at which to pay back the debt.

    If YOU don't think that rate is high enough, then YOU can contribute more - feel free, the option is yours.

    (2) - But you're the one spinning the term here (to try to bolster your case) - I'm just calling it what it is. Surplus IS overtaxation - gov't revenue comes from taxes, thus exccess revenue == excess taxes.

    By Blogger Andrew, at 5:00 AM  

  • Andrew,

    There is nothing "dumb" about the fact that any surplus remaining at the end of the fiscal year be channeled intro debt reduction. Government is free to adjust tax rates or increase spending at any time during the fiscal year, so they've all the flexibility they need. What they can't do is use surpluses from years past for their own puposes (invariably political) in future years. I have little doubt that you'd have bitched and moaned had the Grits changed the rules to allow them to reallocate surpluses after the year was up -- they caught quite a bit of flak for cutting taxes and/or boosting spending before the year was up once it became apparent that the governmetn was going to take in more than expected. (Remember the minibudgets?)

    Besides, we were undertaxed (by your own logic) for 25 straight years, leaving us with that big fat mortgage that Declan alluded to above.

    By Blogger Ian King, at 5:37 PM  

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