Budget Watchdog Says Ottawa Has Fiscal Room to Reduce Taxes or Increase Spending

The federal government can afford to increase spending or cut taxes by 1.5 percent of gross domestic product (GDP) annually for the next 74 years and still maintain fiscal sustainability, according to a report from the Parliamentary Budget Officer (PBO). In current dollars, that would mean Ottawa could increase or decrease spending by $46 billion while also stabilizing the net debt over the long term, PBO Yves Giroux said in his 2024 fiscal sustainability report. “Based on our projection, the federal government’s net debt of 29.1 percent of GDP in 2023 would be eliminated in 2058 in the absence of policy changes,” the report says. The latest report’s estimate of 1.5 percent is less than the PBO’s 2023 evaluation of 1.7 percent of GDP. The change is due to an increase in spending that offsets the rise in revenues, coupled with higher interest rates that limit fiscal flexibility, the report says....