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the growth of government
What are the origins of Canada’s public debt problem? The underground
royal commission Report traced the beginning of the problem
backed to the governments of the 1960s through the 1980s, particularly the
government’s of Prime Minister Pierre Trudeau of the 1970s and early
1980s. This was the era of activist governments that sought a role for the
state in all areas of Canadian life. The combination of growing social programs
(e.g. social security, pensions, health, education, unemployment insurance,
etc.), regional economic development programs, various grants and subsidies
to business and agriculture, as well as foreign aid, and Crown corporations,
led to a staggering growth in government in this period. The spending powers
of the federal government allowed it to enter areas of provincial jurisdiction,
particularly health care and education.
The following chart shows this trend of exponential growth in federal
government quite starkly.
Canadian Federal Government Expenditures (1961 – 2001)
Includes Program Spending and Debt Services Charges
$millions
| 1961-62 |
$7,462 |
| 1971-72 |
$18,405 |
| 1981-82 |
$75,981 |
| 1991-92 |
$156,389 |
| 2001-02 |
$164,408 |
Source: Finance Canada
In the 40-year period from 1961 to 2001, federal government expenditures
increased a whopping 2,200 percent. Paul Kemp, an author and producer
for the underground royal commission, notes
that if inflation is taken into account over this 40-year period, and
the federal government were the same relative size today as it was in
1961, its budget would be about $39.3 billion (source: Does
Your Vote Count?). In other words, it would have increased about 5
times what it was in 1961, not the 220 times it has increased.
Of course, much of this 2,200 percent increase in federal spending has
been financed with borrowed money. That is how we have ended up more than
$500 billion in hock. Up until the 1960s, Canada had a sterling reputation
for fiscal probity and responsibility. This is why financial markets were
more than willing to lend to us even as we buried ourselves in accumulated
debt. We are seen as a safe investment.
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