Canada is fairly close to a public debt crisis: Magna International founder
The founder of one of Canada’s largest multinational companies is calling on politicians to rein in their spending and deal with the country’s ballooning debt.
Frank Stronach, the founder of Magna International Inc., also said if governments don’t want to scale back expenditures, business leaders and individual Canadians should lobby for new legislation that will prohibit excess spending.
“Every businessman knows he can't spend more than the profits he makes,” he said an interview Wednesday.
His argument is essentially one of the most basic aspects in personal finance: don’t spend more than you make.
The federal debt is expected to top $1 trillion in the 2022-23 fiscal year, according to Fitch Ratings, after the pandemic accelerated government borrowing to fund COVID-related aid programs.
And the prospect of more big-ticket spending moved to the fore on Tuesday, when Prime Minister Justin Trudeau announced a support agreement with the New Democrats to push through priority items on the agenda such as a national pharmacare plan and affordable housing measures.
“That leads to a great problem. So we need to face it and what we’re doing to the future generation,” Stronach said.
Meanwhile, he explained in an opinion piece in the National Post on Tuesday that he’s concerned federal officials feel Canada is immune to a financial crisis similar to what struck debt-laden countries like Greece in 2015 and Argentina in 2001.
Stronach, born in Austria to working-class parents, moved to Canada in 1954 and recounted in the interview difficult financial times throughout his family and business life, and the sacrifices that were made when money was scarce.
He also recalled when he had to fix Magna’s balance sheet around the time he stepped away from the company to run for the federal Liberal Party in 1988.
“I stepped away for a year, you know, I was seeking political office and during that time [Magna’s] debt grew by about a billion and a half, which in today's dollars, it will be about 15 billion. So I put in [measures] and we had the debt paid up five years later. And then we issued [a policy] that the company wasn't allowed to have any debt. So we were building up cash — when all was said and done, maybe a billion or so of cash in the bank,” he said.
As for his idea of legislation banning governments from racking up more debt, he wants to see this seriously discussed across all political parties.“I think it should be totally discussed — what (ballooning government debt) would lead to, what the damage is it could do, and how it would affect people. It's so obvious,” he said.