In Maclean’s, Stephen Gordon provides an updated look at the Harper government’s ongoing “starve the beast” policy:
As I’ve written before, the Conservatives have applied the “starve the beast strategy“: First, cut taxes; second, cut spending in order to match lower revenues; third, obtain a balanced-budget for a smaller government. As the red line in the chart shows, the Harper government was temporarily thrown off this past by the financial crisis, which required emergency stimulus spending. They are, however, back on track.
Once again though, we need to be careful to see that the government’s revenues are back above expenditures (so the yearly deficit has been reduced over time), but the government’s outstanding debts are still quite substantial: $892 billion for 2012-13. As long as interest rates stay low, the debt should start to decline, but if-and-when interest rates rise, so will that big pile of accumulated debt.