GOLDSTEIN: Poilievre says Canada faces a debt bomb in new video

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In a new 15-minute video posted to ‘X’ on Wednesday, Conservative leader Pierre Poilievre argues Canada is facing a potential debt bomb with catastrophic economic and social consequences for Canadians.

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Headlined “Debtonation: Canada’s $10 Trillion Problem” and featuring an illustration of a ticking time bomb — sticks of dynamite wired to a ticking clock — the narration, graphic and video presentation is similar in style to one Poilievre released on Dec. 2 titled “Housing Hell” on Canada’s affordable housing crisis, which he also largely blamed on the policies of Prime Minister Justin Trudeau and the Liberals.

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In the new video, Poilievre describes Canada’s total combined debt of $10.2 trillion — the sum of all household, corporate and government debt, or $255,000 per person and almost $620,000 per household — as more than 3.5 times the size of Canada’s Gross Domestic Product.

He says that’s higher than in the U.S. during the subprime mortgage housing crisis that led to the 2008 global economic crash, higher than during Greece’s debt crisis in 2009 and higher than 45 of the 48 biggest debt crises globally in the last century.

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He warns this is the “ticking sound in Canada is the debt bomb waiting to go off,” arguing it hasn’t happened yet because interest rates have been historically low for almost 15 years, even with the recent rapid spike in the Bank of Canada’s key interest rate to 5.0% — the highest since 2001 — from a low of 0.25% in March, 2022, as the bank battles inflation.

Noting that Canadians will be paying far higher interest costs as mortgages and long-term government bonds renew, Poilievre says the average interest rate on all forms of debt in Canada is now 4.72%.

He warns if interest rates rise to their average historical level of 7.6% over the past 61 years, interest payments on Canadian debt would increase to $294 billion annually, almost a much as Canadians spend annually on health care, more than 10% of Canada’s GDP and equal to $17,806 per household per year.

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While not predicting “if or when a debt crisis will occur,” Poilievre says “if our debt exceeds 3.5 times the size of our entire economy when interest rates return to long-term, historical averages, we would need to devote more than a quarter of our GDP just to paying the interest on our debt” all but guaranteeing a debt crisis, which he describes as “debtonation.”

He said this would inflict a staggering human toll on ordinary Canadians, including “massive unemployment, which leads to increased depression, suicide, alcohol and opioid addiction, overdoses and other miseries.”

The crash in housing prices would cause many Canadians to lose their homes as the size of their mortgages would exceed the value of their houses, while economic growth would decline even further.

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Poilievre cites the early 1990s debt crisis in Canada as a warning of what could happen, when then-Liberal prime minister Jean Chretien and finance minister Paul Martin slashed the federal civil service by 45,000 jobs, cut $7 billion annually from federal funding for health care, education and social services, which led to the provinces shutting down hospitals and medical services. Poilievre accuses Trudeau of following the same high-deficit policies while being simultaneously hostile to Canada’s energy sector, as his father, Pierre Trudeau did as PM, with his national energy program.

He said that led to high unemployment and high inflation, known as stagflation.

Most controversially, Poilievre says those policies will inevitably lead to high suicide rates and that given that Trudeau’s medical assistance in dying legislation will be extended to people whose only condition is mental illness as of March 2024, “this government will treat depression with a lethal injection or ingestion, in just a few months.”

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The main weakness in Poilievre’s video is that he doesn’t explain how he would reverse the debt crisis he warns about, or outline the cuts to federal government spending he would make to avoid it.

The austerity program launched by Chretien and Martin in the early 1990s in the face of Canada’s debt crisis at the time that Poilievre cites, wasn’t inherited from Pierre Trudeau’s Liberal government (1968 to 1979 and 1980 to 1984) but from the Progressive Conservative government of Brian Mulroney and, at the very end, Kim Campbell, from 1984 to 1993.

Finance Minister Chrystia Freeland has pointed to Canada’s Triple A credit rating and that it has the lowest deficit and net debt-to-GDP ratio of any country in the G-7, along with the lowest inflation rate (other calculations describe it as one of the lowest) in the G-7, as signs of Canada’s underlying economic health.

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Canada was recently judged the second-best country in the world in which to live — surpassed only by Switzerland — in a joint survey of 87 countries by U.S. News and World Report, the Wharton School at the University of Pennsylvania and WPP, a British national communications company, based on 17,000 responses around the world using 73 criteria,

The Bank of Canada predicts inflation, which reached a four-decade high of 8.1% in June 2022 and is currently at 3.1%, will return to its target rate of 2% by late next year, with some economists predicting interest rates could start to fall by then.

That said, the bank failed to predict the dramatic rise in Canada’s inflation rate, prior to it actually occurring.

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