PBO Report on Fiscal Sustainability Shows We Have Room for Big Ideas

At the end of August, the Parliamentary Budget Officer Yves Giroux released his department’s Fiscal Sustainability Report. While not necessarily the most attention-grabbing item on the agenda at the end of summer, it’s a deep dive into how well federal and provincial finances are faring at the moment, and for years to come. What may be surprising to some is that, despite some surface-level rhetoric on government finances we’ve heard in recent years, the Government of Canada is not only financially stable, but we also have a lot of room to shape government policy that can make a real difference in people’s lives.

“Current fiscal policy at the federal level is sustainable over the long term,” reads one of the headline items from the Fiscal Sustainability Report 2024. “We estimate that the federal government could permanently increase spending or reduce taxes by 1.5 per cent of GDP ($46 billion in current dollars, growing in line with GDP thereafter) while maintaining fiscal sustainability.” At its most basic level, the report tries to explain that government spending is growing in concert with economic growth, and that the feds could theoretically spend more on social programs or provide a tax cut while still remaining fiscally solvent.

The PBO takes into account a number of important details to come to this conclusion, including estimates of population growth, potential changes in debt, and interest rates to ensure their model stacks up with reality. The report literally pours cold water on the argument that many weird right-wing think tanks seem to argue that our current fiscal path is unmanageable. Ensuring we have some fiscal headway is good, and ensuring government doesn’t accumulate too much debt is also good. The PBOs report shows we actually have some room to do big things.

The report generally acknowledges that combined spending from the federal and subnational (as in, provinces and territories) as well as the Canada and Quebec Pension Plans (CPP and QPP) are completely sustainable, although there is some concerns about increased health care spending at the provincial level due to aging populations, and also that “some subnational governments will also face significant budgetary pressures owing to reduced federal transfers (relative to the size of their economies).” New Democrats have been arguing that the federal government needs to engage with the provinces more on health care spending and increase health transfers.

On the CPP & QPP, they are completely sustainable as they currently exist, with the report stating “under the current structure of the CPP, contributions could be reduced, or benefits increased by 0.2 per cent of GDP while ensuring that the net asset-to-GDP position is at its initial value after 75 years.” Canadians’ national pension system is operating as expected, its sustainable, and can actually be increased, which would lead Canadians to a more comfortable retirement.

So what could we do with $46 billion? A lot! A fully-implemented universal, single-payer pharmacare plan that covers drug costs for all Canadians would cost federal and provincial governments $11.2 billion in its first year, while also providing economy wide savings because of bulk purchasing, according to another report by the PBO last year. We can increase investments in Inuit and First Nations communities to help them bridge the massive infrastructure and housing gaps. In May, the PBO also demonstrated that a 50 percent reduction in chronic homelessness could be achieved with additional investments of $3.5 billion per year.

We have the resources to do what’s necessary, but like anything else, political will has to be applied. We can do great things and make Canada a freer and more equitable place.