A hundred billion

Just one more sleep until Chrystia tells you how bad things are.

The deficit was supposed to be capped at $40 billion this year, and fade ever so slowly in the years to come. Well, forget that. Economists are saying it may well come in at forty-five. Quite possibly fifty. And that’s before we talk about Tariff Man.

Are you sitting down?

Here’s the latest from cowboy bank economist Derek Holt, a man who had been frighteningly accurate:

An election year beckons. Governments throw money around into election years even when they’re not polling poorly. Governments that are polling as badly as this one get even more desperate in that sense… Get used to it. It’s not over yet. A twelve-figure annual deficit cannot be ruled out.

Whoa, economist dude. Twelve figures starts at $100,000,000,000 – a hundred billion. Yikes. We haven’t seen red ink like that from the federal government since way back during the pandemic – when the lights went off and jobs were nixed around the world.

Holt argues a disgraceful deficit (which is the shortfall between taxes and spending – added to the existing debt of $1.2 trillion) was already in the cards after the T2 government spent gobs on social programs. Subsidized day care. Subsidized wrinklies. Subsidized dental care. Subsidized parents. Subsidized first nations. Subsidized battery plants. It’s an endless list.

And now we have Trump.

If the tariffs come to pass (it appears they will), and sit at a withering 25%, we’re pooched. Chrystia’s pooched. The GDP’s pooched. There will be a recession, many more jobless and big demands on Ottawa to ‘do something’ to compensate. “A tariff war scenario could conceivably bring out stimulus measures directionally akin to measures undertaken at the start of the pandemic including much larger stimulus cheques,” says Holt. Especially with an election coming, quite possibly, just a few months after the orange guy strikes.

Already we’re spending close to $1 billion a week on debt interest payments. Adding fifty or a hundred billion to the pile won’t help. And if Canada retaliates with export duties on big stuff like cars, ag products or oil, everything gets more gnarly. Not only will we have a recession, but romping inflation with the dollar heading for 56 cents. Both of those will cause the Bank of Canada to pivot and raise interest rates. Perhaps the better part of 3% – worse that where we were two years ago.

So, look at the charts below, all you Trump fans and people who see the world in the blinding simplicity of right-vs-left. If tariffs of 25% materialize and Canada takes the hit, our economy could lose 4%. If we retaliate, the damage could be 6%. Compare that to Covid – when GDP went down a little more than 2%.

Tariffs of 25% would make Covid look like fun

The point is simple. There’s a storm coming from below the border, and we’re busy not getting ready. Running a $40 billion deficit when things are peachy (like now) is irresponsible. Moreover, it makes us vulnerable. Instead of hunkering down and repairing the mess the pandemic caused, the elected folk in Ottawa kept the taps open and started or expanded programs – kid pogey, dental care, cheap drugs and daycare, more cash for seniors. This is spending that can never be curtailed, turned back or ended.

What she says tomorrow during the autumn economic statement is just noise. Background. A reckoning of the precarious position we’re now in, waiting for the real event.

A lot of people will soon be hurt. Thus, no patriotic, caring Canadian can defend Donald Trump.

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Source: https://www.greaterfool.ca/2024/12/15/a-hundred-billion/