A report from the office of Congressional Budget Director Yves Giroux found that the federal government could increase spending by $46 billion a year through 2098 or cut taxes by that amount and still remain fiscally sustainable.
This year’s Financial Sustainability Report It also states that while, taken as a whole, Canada’s provincial governments are sustainable, they cannot collectively increase funding or reduce taxes over the same period.
Some provinces, including Quebec, Saskatchewan, Ontario and Nova Scotia, have room to increase spending or cut taxes, while Alberta remains sustainable and breaks even, the report said.
But the remaining states and territories would have to raise taxes or cut spending to remain sustainable until 2098.
The purpose of this annual report is to look at economic growth over the long term and determine whether changes in fiscal policy are needed to avoid the accumulation of unsustainable debt levels.
“From the perspective of the entire general government sector, which combines federal and provincial governments and public pension systems, Canada’s current fiscal policy is sustainable over the long term,” the report, released Wednesday, said.
Sustainable Growth
When the report states that the government’s fiscal position is “sustainable” in the long term, the PBO means that the size of the government’s debt “will not continue to increase as a share of the economy.”
Sustainable growth means that the size of the debt continues to grow, but the economy also grows, and the debt does not become such a large part of the economy that the government cannot repay it.
The PBO report’s assessment takes into account all expenditure announced in Budget 2024, including projected revenue from the increase in capital gains surcharge rates.
The model does not take into account commitments to increase defense spending to meet NATO’s 2% target.
As part of its economic modelling, the PBO takes into account projected population growth, demographic changes, rising debt levels and long-term interest rate trends.
