$13.2 billion surplus

[Ricki Bobbi]

Government debt is my mortgage, yours to.

That's the key. Imagine the fiscal shape we would be in if the Liberals had decided to just run balanced books back in the mid 90s and didn't keep running surpluses?

Pay off the debt! Pay off the debt! Pay off the debt!

[Riverwind]

Government debt is my mortgage, yours to.

Government debt is my pension - yours too. Many retired persons and pensions need to have a low risk stream of income that are traditionally provided by gov't bonds. Some pension funds are having problems as the supply of gov't bonds dries up and they are forced into riskier forms of investment.

You could look at gov't debt as a social security plan for wealthy and/or unionized Canadians paid for by working taxpayers.

[Ricki Bobbi]

Government debt is my pension - yours too. Many retired persons and pensions need to have a low risk stream of income that are traditionally provided by gov't bonds. Some pension funds are having problems as the supply of gov't bonds dries up and they are forced into riskier forms of investment.

Riskier than a government bond doesn't necessarily have to be very risky at all.

If you want the Government to subsidize your retirement so be it, but that isn't a valid reason to argue for the Government not paying of its debt.

[Argus]

Isn't this the same party that accused the Liberals of poor fiscal management for having massive surpluses? Why do politicians of all stripes make it so easy to point out their hypocrisy?

Look a little closer. About $5b of this is because of accounting changes the AG has been requesting for years. The Liberals played games with the books to hide the surpluses. Another $5b will likely disappear next year due to Tory tax cuts. So such surpluses should be no more.

[Wilber]

Government debt is my mortgage, yours to.

Government debt is my pension - yours too. Many retired persons and pensions need to have a low risk stream of income that are traditionally provided by gov't bonds. Some pension funds are having problems as the supply of gov't bonds dries up and they are forced into riskier forms of investment.

You could look at gov't debt as a social security plan for wealthy and/or unionized Canadians paid for by working taxpayers.

Exactly, you are asking people who don't have private or company pension plans to subsidize those who do by paying more taxes to carry public debt. If pensions are your only concern it would be more equitable to pay off the debt and use the money saved on interest payments to bump up CPP so it benefits everyone who works and pay taxes.

[kimmy]

Interest payment on the national debt remains the single biggest expenditure of the Canadian government, doesn't it? Larger than healthcare, or education, or social programs?

I recall reading that over 1/3 of the annual budget goes into interest on the national debt; imagine the tax reductions that would be possible in the future if the national debt were substantially reduced or eliminated. Using the surpluses to give miniscule tax cuts right now, or wasting it on vote-buying type shenanigans, is the kind of thinking that will prevent *real* tax cuts in the future.

Riverwind wonders what investment funds will do as government bonds become scarcer... well, I'm sure that there are lots of other governments that would love to pick up the slack. Our neighbors to the south, for instance.

-k

[Renegade]

Yield on 10 year Canadian government bonds is around 4%.

That means the Canadian government is taxing Canadians (many of whom have a mortgage above 6%) to pay back debt at 4%.

The government would be better to cut taxes and let people pay down their mortgages.

Many people have savings in accounts earning 1% or less. Another way of looking at this is the govenment is paying down debt earning effectively 4% instead of giving money back to the taxpayer so they can earn 1%.

[M.Dancer]

Yield on 10 year Canadian government bonds is around 4%.

That means the Canadian government is taxing Canadians (many of whom have a mortgage above 6%) to pay back debt at 4%.

The government would be better to cut taxes and let people pay down their mortgages.

Many people have savings in accounts earning 1% or less. Another way of looking at this is the govenment is paying down debt earning effectively 4% instead of giving money back to the taxpayer so they can earn 1%.

I don't understand why anyone would settle for the 1% solution when ING or even Presidents Choice, HSBC and a kettle of others offer upwards to 3.5%

[Riverwind]

Riverwind wonders what investment funds will do as government bonds become scarcer... well, I'm sure that there are lots of other governments that would love to pick up the slack. Our neighbors to the south, for instance.

My comment was both serious and tongue in cheek - many pensions funds do depend on gov't bonds and you cannot simply replace those bonds with foreign currency bonds because the currency risk is huge. That said, it does appear that gov't debt is kind of a back door social program for wealthy people.

[geoffrey]

That said, it does appear that gov't debt is kind of a back door social program for wealthy people.

Explain that one to me.

[kimmy]

That said, it does appear that gov't debt is kind of a back door social program for wealthy people.

Explain that one to me.

Everybody pays the interest on the national debt, through taxes.

The interest is payed to people who hold government bonds.

It's a fair bet that the large majority of those government bonds are held by wealthy people, either directly or through investment funds.

-k

[geoffrey]

Wise investors aren't heavy into bonds right now, but beside the point.

The affect large debt has on available financing capital would in my view make large debt bad to wealthy business people. The more government borrows, the less money to lend, then businesses have a harder time affording the interest on loans as the market tightens. Happens more in a deficit situation then just a debt situation, but the principle is there.

Large debt is more negative to business then for it... assuming we are talking wealthy business folks, not just your run of the mill ex-Royalty.

Like August said though, the government is paying 4% interest on it's debt. We are paying 6% on our homes and 18+% on our credit cards right... who needs the money more? Having Canadians pay their own debt is more productive then the government paying it's debt.

[Riverwind]

It's a fair bet that the large majority of those government bonds are held by wealthy people, either directly or through investment funds.

It is a 'social program' because it is a way to redistribute income from one group of Canadians to another.

[geoffrey]

It's a fair bet that the large majority of those government bonds are held by wealthy people, either directly or through investment funds.

It is a 'social program' because it is a way to redistribute income from one group of Canadians to another.

I really don't see how.

[Renegade]

It's a fair bet that the large majority of those government bonds are held by wealthy people, either directly or through investment funds.

It is a 'social program' because it is a way to redistribute income from one group of Canadians to another.

It is not simply a redistribution of 4% to the bond-holding public. The government (and by proxy the population) get something for it. They get the time-value of money. IOW they get to use the money. If the government is only paying 4%, it is getting a great deal from the bondholders, rather than running a social program for the bondholders.

[August1991]

The government would be better to cut taxes and let people pay down their mortgages.

Government debt is my mortgage, yours to.

But it's a mortgage at the lowest rate going. Try to negotiate a fixed interest rate, 10 year term mortgage at 4% at your local bank. Yet when we borrow through the government, that's the rate we pay.

A simple rule of financial management is to reduce the high interest debt first. By that standard, we should pay government debt last. In practical terms, many Canadians are paying high interest on consumer debt because high taxes don't leave them with enough cash.

But listen. I don't really care whether Harper uses the $13.2 billion to pay down the debt or to cut taxes. I'm just happy that he didn't blow it on an NDP shopping list.

Andf if Harper's decision to pay down the debt means that voters like you Wilbur are more likely to vote Tory, then I'm all in favour.

I feel somewhat the same way about the GST cut vs. an income tax cut. If the GST cut means that more voters trust Harper, then I'm in favour.

----

On a related point, I really like the way this news announcement was made. Compared to the way the Keystone Kops Liberals release information, the Tories were reassuringly professional.

[Wilber]

It's a fair bet that the large majority of those government bonds are held by wealthy people, either directly or through investment funds.

It is a 'social program' because it is a way to redistribute income from one group of Canadians to another.

I don't think it is that Machiavellian. It's just another instance of people trying to live beyond their means. In this case a whole country.

[kimmy]

It is not simply a redistribution of 4% to the bond-holding public. The government (and by proxy the population) get something for it. They get the time-value of money. IOW they get to use the money. If the government is only paying 4%, it is getting a great deal from the bondholders, rather than running a social program for the bondholders.

I don't think it's necessarily "a great deal" unless the money is actually used for something useful. Borrowing money just because the interest rate is low doesn't seem to make a lot of sense...

-k

[Remiel]

Debt is not a bad thing, bud the assumption of debt is that you incur in the present to pay it back in the future. If you never pay it back, you defeat the reason you incurred it in the first place.

It just occurred to me that many business startup models could be an expression of Keynesian economic policy. You spend in the present when you don't have money, to pay back in the future when you do (the money from the future being generated by the spending in the present). And they said Keynesian economics were dead, hahahahaha...

[Remiel]

Err, I should also mention that while some of the programs the Conservatives are cutting we could probably do without, I do think that allegations of being ruled by ideology are true. I don't see any pet projects of conservative types on the chopping block. And it isnt like there arent any blue liberals, so there should be at least a few hanging around.

[Wilber]

Err, I should also mention that while some of the programs the Conservatives are cutting we could probably do without, I do think that allegations of being ruled by ideology are true. I don't see any pet projects of conservative types on the chopping block. And it isnt like there arent any blue liberals, so there should be at least a few hanging around.

How long have the Conservatives been in power and how many pet projects have they established in that time?

[geoffrey]

Err, I should also mention that while some of the programs the Conservatives are cutting we could probably do without, I do think that allegations of being ruled by ideology are true. I don't see any pet projects of conservative types on the chopping block. And it isnt like there arent any blue liberals, so there should be at least a few hanging around.

When the Liberals are in power, they can have their Liberal interests. Canadians didn't vote for them, why do you expect the CPC to follow the Liberal socialist shopping spree agenda?

[Remiel]

Liberal shopping spree agenda? We are talking about the governments of Finance Minister Paul Martin and Prime Minister Paul Martin, champion of deficits to surpluses, right? Maybe someone who was of age at the time could point out some prominent Conservative shopping spree items from the Mulroney era... I was 9 when the Liberals took power in '93.

[Renegade]

I don't think it's necessarily "a great deal" unless the money is actually used for something useful. Borrowing money just because the interest rate is low doesn't seem to make a lot of sense...

Yes, of course. I'm assuming that the money is borrowed for a worthwhile purpose. In retrospect, that is probably a bad assumption given the use that was made of the money. Of course, if a government is going to waste the money, then even a loan at 0% is a bad deal (both for the borrower and the lender).

[Remiel]

Liberal shopping spree agenda? We are talking about the governments of Finance Minister Paul Martin and Prime Minister Paul Martin, champion of deficits to surpluses, right? Maybe someone who was of age at the time could point out some prominent Conservative shopping spree items from the Mulroney era... I was 9 when the Liberals took power in '93.

But that aside, how old were many of those spending initiatives? I don't think goverment should spend all of its time axing every little program they find, just because it isnt theirs. To some extent a new government has to honour an old governments commitments, and a few of the axed programs dont even appear to be leftist policy items, but rather party neutral. If the government were to change every four years, that means that we would be on a constant roller coaster ride for everything.