Federal Debt Repayment as an Instrument of Fiscal Centralization

Published on June 24, 2004

This commentary shows that the debt-to-GDP ratio, federal and total, is on a rapidly declining path, even without debt repayment. It also shows that the federal debt repayment plan will have little effect on the automatic rate of decline in this ratio. What the “Goodale plan” will do, however, is intensify the trend towards fiscal centralization, a move that will aggravate vertical fiscal imbalances, may distort national priorities and may weaken the federal foundations of Canada.

Tony Myatt is professor of economics at the University of New Brunswick. He can be reached at tmyatt@unb.ca

Joe Ruggeri is Vaughan Chair in Regional Economics and Director of the Policy Studies Centre at the University of New Brunswick. He can be reached at ruggeri@nbnet.nb.ca

ISBN – 1-55382-110-6

Summary

This commentary shows that the debt-to-GDP ratio, federal and total, is on a rapidly declining path, even without debt repayment.

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Government spending and tax