The 2016 Federal Budget
Here is a link to the Broadbent Institute pre Budget Submission, trying to push the Liberal platform in a more progressive and social democratic direction.
There is no discussion in this article virtually about the third highest budget expenditure in the budget — namely the debt service charges line or interest on the debt. There is talk about inequality and poverty but the huge size of the interest payments precludes much being done to bring about or increase other progressive measures. That is not to say that the country should enter into an austerity programme to pay down the debt but rather to consider other alternatives including the Bank of Canada holding a greater portion of the debt if not all of it. In practice the huge interest payments ($25.7 billion) in the current budget are a transfer of tax dollars to well-off people and that has both the effect of increasing inequality and shifting more money to the financial sector from the productive sector.
And further to Herb’s point, why does the Broadbent Insititute not challenge the conservative fiscal policy anchors such as debt-to-GDP ratios intended to restrain government spending but which have no real justification:
William Mitchell is a Professor in Economics and Director of the Centre of Full Employment and Equity (CofFEE),
at the University of Newcastle, NSW, Australia
“The public debt level relative to GDP is not a matter of economic concern ever if the government in question issues its own currency and only issues debt in that currency.
Under those circumstances the government can always service its nominal liabilities and the public debt ratio is an irrelevant focus of attention.
At any time of its choosing, the government could cease to issue public debt and continue deficit spending at will. It might have to change some regulations and statutes which have been put in place to give the impression that the debt issuance is funding its net spending, but that would be merely legislative activity.
Remember the government just borrows back what it spent in deficit in a previous period. Bond sales draw on private saving which is just a reflection of past deficits.”