“Interest-rates will eat our babies screed.” That’s how one economist describes the rhetoric around deficits coming from Conservatives and right-wing publications. What this narrative often fails to point out is that Canada is doing exceptionally well in terms of debt and deficits.

Yes, the absolute size of debt and deficits are increasing. But so is the size of our economy and the size of our government’s expenditures. The figures that really matter are debt relative to GDP and debt service costs. As economist Kevin Milligan points out, both are decreasing in Canada. In the following twitter thread, Milligan shows exactly why the outrage over deficit spending is overblown.  

Other economists seem to agree. Trevor Tombe points to the fact that interest relative to government revenues is at its lowest point in Canadian history.

The story of massive debts burdening future generations is just that, a story. One that politicians use to scare citizens into embracing their plans for austerity.

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