I would give federal budget a 'D' grade: David Rosenberg
Bay Street veteran David Rosenberg said the federal government may be heading down a slippery slope with its massive spending plans.
Rosenberg, chief economist and strategist at Rosenberg Research, said in a broadcast interview Tuesday that Ottawa’s current fiscal path puts the Liberal government at risk of repeating mistakes of the past.
“As an economist, I would probably give [the budget] a 'D' and I might be charitable on that score,” he said. “I think that we’re definitely mortgaging our future with this extreme increase in debt.
“The assumption that interest rates are going to remain this low into perpetuity and that we’re not going to have a recession in the next six years that’s going to cause even more fiscal and debt problems down the road, I think is basically irresponsible.”
The federal government has pointed to its so-called “fiscal guardrails” and declining debt-to-GDP ratio as key to ensuring Canada’s fiscal situation does not become untenable. That ratio is forecast to peak at 51.2 per cent in fiscal 2021-22 before steadily declining to 49.2 per cent by the end of the five-year forecast horizon.
Rosenberg said that while the current federal debt-to-GDP ratio is lower than its peak in the mid-1990s, policymakers should also consider the massive debt burdens carried at the provincial level when assessing Canada’s financial health.
“This notion that we’re 50 per cent debt-to-GDP ignores the mountain of debt at the provincial level. So when you take a look at Canada, at the all-in government level, our debt-to-GDP ratio is already at 110 per cent and climbing,” he said. “That is going to come at the cost of future growth down the road.”
Rosenberg said that any kind of economic shock could make Canada’s fiscal position much more tenuous, and pointed to the painful cuts to social programs of decades past when the country ran headlong into dire concerns over its finances.
“Are we really going to make this assumption that interest rates are going to stay static for the next 10 or 20 years? I just find so many people have short memories against what happened in the 1970s into the 1980s, and then all the tough choices and the hardship to get our fiscal situation back into some mode of stability,” he said.
"We’re adding on more debt in six years than we did in previous 152 years combined, and I just don’t see that as a future of stability.”