Government Spending, A panacea for all troubles and a tough addiction to break

In reading today's Edmonton Journal I was once again struck by how great our societies addiction to government spending has become. The headline that caught my eye today read "Money for museum reinstated", the article went on to say how the Federal Government has agreed to contribute $122.5 million dollars towards the construction of a new $340 million Provincial Museum. Now please don't get me wrong, I think a museum is a wonderful use of taxpayers money as it provides a lasting legacy that all citizens can enjoy and learn from. However I have a slight problem with some of the math.

When it comes to spending (personal, business, or government) I guess I am just a little old fashioned in the sense that I firmly believe that you can't spend what you don't have. Now this isn't to say that you can't borrow a bit for the occasional large purchase (auto, home, etc) but at the end of the day you have to take care not to overextend yourself to the point where your financial future is in jeopardy. Any financially responsible individual knows the key to responsible borrowing is to ensure that that payment terms fit within your budget, that you take the shortest term on the financing you can afford, and that you never borrow more than you absolutely need.

Unfortunately our Federal Government's finances have been in jeopardy for years if not decades, yet the spending continues. We now find ourselves at the point where every penny the Federal Government spends is a penny they do not have, worse yet it is a penny of debt that they are incurring for the next generation. Although incurring debt today means that the average citizen gets to see instant gratification through programs such as grants to build a museum, in the big picture it ultimately results in all of us seeing less return for the tax dollars we contribute. How so?

Our current  Canadian Federal Government debt is around 600 Billion dollars (for a more accurate figure check the Debt Counter on the right of this page) and we have been paying interest on that debt at varying rates over the last 25 or so years, all told around $1 Trillion dollars in interest (give or take a few billion). Now lets face it, the Federal Government only has one source of income, the taxpayer. You can debate this all you want but the fact is every penny comes from the taxpayers pocket by one route or another. Currently it costs our Federal Government about $84 Million per day or 10 cents of every revenue dollar to service the debt (to put this in perspective the contribution to the Museum was equivalent to 1.5 days of interest). The scary part about this is that these numbers are based on some of the lowest interest rates seen in four decades. What happens when they rise? Well you don't have to look too far to find an answer to that question, just turn the clock back 15 years or so to the mid 1990's when 29.5 cents of every revenue dollar went to servicing the debt!

So, all things being equal just imagine how many museums and such we could have if we hadn't given away that $1 Trillion in interest, if we had just payed as we went. Better yet, imagine how much more money the average Canadian would have had in their pocket if tax rates hadn't been increased to pay the cost of servicing the debt. Money in pockets leads to increased consumer spending, which in turn generally results in a stronger economy.

On a last note, now that our generation has indulged in instant gratification, what do we plan to tell our kids when there is no money to maintain the museums, the roads, or all of the cradle to grave social programs that Canadians hold so dear.