Canada Needs A Debt Ceiling  

September 1st, 2013 | J. Hodgson 

"I care not what puppet is placed on the throne of England to rule the Empire. The man who controls Britain's money supply controls the British Empire, and I control the British money supply." - Nathan Rothschild

Canada’s National Debt is now well over $616,000,000,000.00 and this doesn’t include provincial and municipal debt, which easily pushes total public debt over $1 trillion. Finance Minister Jim Flaherty still insists that Canada will be back into surplus by 2015, but many people are becoming skeptical. We’ve heard rhetoric about deficit slaying in the past, but the Federal government under Chretien/Martin in 1995 only acted when it was absolutely necessary. The same story has unfolded in the provinces as well. The mentality is ‘borrow and buy’ until calamity strikes and then slash and burn in order to stay solvent. Real fiscal conservatism is extremely difficult at any level of government. When it’s implemented, it works, but before long the bad habits arrive again.

What to do?

Debt ceilings operate as a straitjacket for borrowing. At least that’s how they’re supposed to work. The most famous debt ceiling is in the United States, where partisan games are played every time the ceiling is neared. The ceiling is usually raised at the last minute and the debt problems are kicked down the road. People cite this lack of rigor as an example of debt ceilings not working, but done in a different manner, a debt ceiling would do wonders for real fiscal conservatism in Canada.

“We’re not introducing a provincial sales tax, period.” - Alison Redford

The real reason Redford won’t introduce a provincial sales tax is because of The Alberta Taxpayer Protection Act of 1995. This was Ralph Klein at his finest, thinking ahead for the benefit of future Albertans. He anticipated a future “Alison Redford type” getting into power and then gouging taxpayers with a sales tax, so he passed legislation requiring a referendum throughout the province which would ask Albertans to vote on whether or not to implement one. Of course, asking people if they want new taxes introduced will always be met with a resounding NO, so the introduction of a PST is off the table.

What we need is the reverse of this in the form a debt ceiling.

Stephen Harper will be 9 years into his tenure of Prime Minister by 2015. Democracy traditionally forces a change in governments and when this happens, Canada will most likely be saddled with Liberals or...gulp...the NDP. Since both of these parties have ‘always expanding government’ in their blood, it would be of great benefit for Canadians if Harper/Flaherty legislated a debt ceiling requiring a national referendum as the only means of adjustment.

This idea is not unlike the one that Maxime Bernier is proposing at the Conservative Party convention in October. In fact, it would be complementary since his proposal works on the spending side and a debt ceiling would work on the borrowing side. This would provide Canada with a natural fiscal conservatism that would be entrenched beyond the revolving door of electoral victories.

Q: What if a future political party used a Parliamentary majority to simply override the legislation when they wanted to borrow more money?

A: A future party could do just that, but it would require submitting overriding legislation. This would look bad in the eyes of the public as it would be an admission of failure. Whichever political party was in opposition would use it as an optics hammer in the House of Commons. Secondly, unless the party in charge had a majority in both the H of C and the Senate, the legislation could be stopped.

Q: What if a future political party used legal fanciness and semantics to break the limit without actually “breaking the limit”.

A: All the more reason to promote policies of transparency and open accounting. Not only would it eliminate issues like the recent $3.1 billion unaccounted for accounting error, but it would prevent future governments from being able to blow past the limit on purpose. If everyone knows the score, no one person can change the outcome.

Q: What about wiggle room in case deficits need to happen?

A: The current debt is about $616 billion. Let’s set the ceiling at $700 billion. This way you’ve got $84 billion to work with. The public disgust towards deficits would remain intact as it does right now, however, politicians would have a wall on the horizon that would prevent them from driving the country into the ground.

Q: What about inflation?

A: An immovable debt ceiling would incentivize governments to keep inflation low, so they would be less beholden to the magic $700 billion number. In fact, as time went on, the more fiscal conservative the debt ceiling would become. On a practical level a renewal clause could be inserted for 2050, at which point the level could be increased. Or, more realistically, the $700 billion could be indexed for inflation.

Conclusion: This is a big idea that conservatives should support and promote. We need to handcuff the government or it will follow the path of all historical governments, which is: spend everything and end in bankruptcy.