Mr. Speaker, it is said that talk is cheap. That is not the case with the government. When it talks, it is very expensive.
Just yesterday, the finance minister spoke for about 40 minutes. During that time, he also, simultaneously, added $1.5 million to our national debt. That is either too much talking, too much spending, or both. Either way, there sure is a lot of debt piling up to pay for it.
The Prime Minister promised a small deficit of $6 billion during the last campaign. It is $18 billion for this year, three times bigger than he said it would be. He said the deficit would be gone by next year, 2019. Now his finance department has said it will be at least another quarter century of deficits, for a total reaching almost a half a trillion dollars, and that assumes the Liberals do not add any new spending in next year's pre-election budget. How likely is that?
The Liberals have tried to comfort us by saying that we should not worry about growing debt because all of the money that has come in from the growing U.S. economy, the higher oil prices, the booming global economy, will allow us to keep our debt-to-GDP ratio lower than it was before. Let us discuss some of the risks associated with that assumption.
The government is ignoring the overall debt that Canadians must shoulder. The debt of the government is the debt of the people. There is no special debt-repayment machine that can service the interest on Canada's national debt, other than the taxpaying entrepreneurs and workers who pay the bills in the country. When it comes to their debt levels, there is very bad news. Canada has the highest levels of household debt-to-income ratios in the OECD. In fact, when we take the corporate, personal, and government debt of Canada and add it together, it is 300% the size of our entire economy, which is, this month, for the first time ever, the biggest in the OECD. We have now surpassed Greece as the most overall indebted people in the entire OECD.
What does that mean? It means that when interest rates go up, our families, our businesses, and our governments will be under a great deal of pressure.
The government has not planned for that eventuality. Rather, it has taken the good fortune it inherited, both in terms of a balanced budget on the day that it walked into the Prime Minister's Office at the Langevin Block and the unusual and almost unnatural coexistence of favourable international economic conditions for Canada. Let me share a few of them that normally do not ever go together.
We have both a low dollar and high oil prices. Oil prices have nearly doubled in the last three years, while the dollar has remained low. Therefore, we have a boost for our western producers, albeit one that is held back by a lack of market access, and a price advantage for our central Canadian manufacturing exporters. Very rarely do those two things simultaneously occur. We have a booming U.S. and world economy, yet we still have low interest rates. Again, those do not typically go together. However, in this very brief window they do.
Unfortunately, it will not stay that way. Already interest rates are going up south of the border. Just since September, the interest rate on the two-year U.S. government bond has nearly doubled, from about 1.2% to about 2.2%. That does not sound like a big deal. However, it means that the cost of borrowing for that government has gone up dramatically.
If bondholders want to lend to government and can get more interest from the government in Washington, they are going to demand more interest from the government in Ottawa. This means that Canadians would pay higher taxes to fund interest payments to those who lend to fund the government.
Simultaneously, interest rates on consumer debt are slowly starting to creep up. Interest rates on mortgage debt are slowly starting to increase. Our businesses will soon have to pay more for the debt they hold as a result of that ongoing phenomenon. The same taxpayers who are struggling under a burden of unprecedented and unmatched personal debt will simultaneously have to shoulder, through their taxation to the government, higher debt interest so that the Prime Minister can fund interest payments to bondholders.
Over the next five years, according to this budget, which is based on, I would suggest, very irresponsible projections over what interest costs will be, the government is going to be spending $9 billion more on debt interest in the year 2022 than it is today. Even if we believe those projections, that is an increase in the interest expense of the government of well over 35%. The cost of funding the debt will be $33 billion per year. That is money taxpayers contribute for which they get literally nothing in return. It goes out the door to lenders who have financed this short-term spending spree by the present-day government.
That assumes that there will be no sudden and unexpected increase in interest rates, which we have every reason to suspect there might be. If the rates go up faster than Finance Canada expects, then those numbers I just shared with the House will actually be an underestimation.
The second risk the government is failing to consider, the first being higher interest rates, is that this budget has left no room to address some of the obvious dangers that are staring all of us in the face. We are in the process of renegotiating a trade agreement with our number one customer. We sell $400 billion in goods and services to the United States of America, the equivalent of one-fifth of our entire economy. We have a $2-trillion economy, and we sell $400 billion to the Americans.
Imagine running a small business and learning that it might be losing its biggest client, who is responsible for one-fifth of all the company's revenue. Would we go out on a big borrowing binge at that moment in time, or would we stabilize our finances and prepare for the eventuality that the client, who has proven to be unpredictable, as is the relationship we currently have with our biggest customer, may no longer be buying our goods in the same numbers it has in the past? There is nothing in this budget to plan for that negative eventuality, even though we all acknowledge, even the government, if it is being honest, that the NAFTA negotiations are going badly and could finish with disastrous consequences for our economy.
We have massive housing bubbles in Toronto and Vancouver, a third danger for which the government is not preparing. If there were a significant correction in housing prices, it would affect the construction industry. It would mean that the net worth of households in those markets would dramatically decline. In some cases, they might be underwater on their mortgages. In other words, their homes could be worth less than the mortgages themselves. All of that would mean a big hit to federal government revenues and to the ability of the government to meet its own obligations, or, more importantly, to provide some relief to those families if such an eventuality were to occur. However, that danger is not accounted for in these numbers either.
It is like the government is assuming that the sunny ways will never be replaced by rainy days. It has done nothing to prepare for that rainy day. Instead of setting aside and squirrelling away our resources to prepare for trouble ahead, the Liberals have blown them in the present. They have spent tomorrow today.
That brings me to the final point I want to make on the subject of debt. We just heard a Liberal member across the way talk about social deficits and all these social shortcomings that need to be addressed. Of course, the Liberal solution to that is always more and more government, trickle-down government, the idea that it can scoop up all the tax dollars of the working class and the entrepreneurs. Politicians give it to bureaucrats and bureaucrats to interest groups, or, in the form of corporate welfare, to companies. The hope is that some of this money will trickle back down through the system to the very people who earned it in the first place.
Let us assume that there is a problem with social inequality in this country. How would a larger national debt affect those inequalities? Who holds the bonds in the Government of Canada? Are they the poor people, the suffering, the downtrodden? Are they even the aspiring and struggling working class? Of course not. Bonds in governments are overwhelmingly held by more affluent, and even rich, people. That is why we will always hear international bankers recommending that governments go into deficit. It makes perfect sense for them. They are the ones lending the money and getting the interest. They receive interest payments. The working class pays them. In that sense, debt interest is a wealth transfer. It is a form of redistribution from the working class to the super-rich.
By expanding the national debt, the government is carrying out a massive multi-billion dollar transfer from the have-nots to the have-yachts, from those with the least to those with the most. Once again we see that when government gets big, when the wealth of the nation is concentrated in the state, those with power and influence over the state always win or are always better off.
We on this side of the House of Commons believe in a merit-driven economy, where people get ahead through their hard work, where the free enterprise system allows everyone to do better by making everyone else better, a system where people make decisions with their own money rather than with the money of others.
It is a great irony that our friends across the way, who subscribe to seventies-style central planning, think that people should not be trusted with their own money but that a person should be trusted with other people's money. Who the Liberals want to control other people's money is always them. It is a self-serving and egotistical ideology to which they subscribe.
We on this side subscribe to a view that requires humility of government. We understand that the people who earn the money should keep the money rather than having politicians use the power of coercive taxation to extract it from them and spend it on their behalf. Simply put, as my leader has, we believe in putting people ahead of government in a system in which no one can get ahead except by making people better off by offering them something that is worth more than they had to pay to get it.
That is the free market system, and in reinstating that great free market tradition in this country, not only can we give everyone a chance to succeed but we can replace this notion of a modern-day aristocracy through big government with the notion of a meritocracy through the free market.