Public spending and public debt

Russil Wvong

Per capita figures (i.e. per person) for the 1995/96 fiscal year, for someone living in Edmonton:

Government of... debt interest spending surplus (deficit) population
Canada 19,500 1,800 3,000 (1,200) 28,000,000
Alberta 9,800 700 4,300 120 2,600,000
Edmonton 300 25 1,500 60 700,000
Total 30,000 2,500 9,000 (1,000)

These are all extremely rough estimates, obtained by dividing total numbers by population. Assuming that they're approximately correct, we spend 2,500 on interest and 9,000 on public services, out of an average income of 28,000 (GDP per capita). We pay about 10,500 in taxes, and borrow about 1,000 to make up the difference.

In other words, we're spending about 30% of our income on public services and about 10% for interest on the debt. (Note that taxpayers who own government bonds -- i.e. people who lent us money -- will be receiving some of this interest, but not all of it, because some was borrowed from foreign investors.)

Is 30% still too high? If so, what's a reasonable number? 25%? 20%? Or is 30% too low? Do we want to increase it to 35%? 40%?

  1. If we decide that 30% is a reasonable number -- that we've cut all we can -- then we probably need to raise taxes from 10,500 to 11,500.

  2. If we want to increase spending, then we need to raise taxes even more: to increase spending from 9,000 to 10,000, we need to raise taxes from 10,500 to 12,500.

  3. If we decide that we don't want to pay any more taxes, then we need to cut spending further, probably from 9,000 to 8,000. I hate to think what kinds of cuts would be required to reduce taxes.

I'd vote for #1. I'm willing to pay 40% of my income in taxes, with 30% going to spending and 10% going to interest and paying off the debt. I think it makes sense to pay for reasonably good education, health, and welfare/unemployment systems, and I think I'm getting value for my money. As a 26-year-old, I don't resent the fact that we (i.e. young people) have to pay off existing debt; 30,000 is only about one-third of a mortgage.

I'd be interested in seeing similar numbers for Canadian cities in other provinces. I don't think the numbers are too different; total government debt is supposedly above 700 billion, which is an average of 25,000 across the country.

I'm also curious as to whether I've gotten the estimates right. The "Tax Freedom Day" announced by the Fraser Institute every year usually falls after the middle of the year, which suggests that we're paying more than 50% of GDP in taxes (i.e. more than 14,000 per person, instead of my estimate of 10,500). I don't think that's right; maybe they're basing it on taxation at a particular income level.


Since 1995/96, the fiscal situation has improved quite a bit. The federal government has balanced the budget, and most of the provincial governments are close to balancing theirs. Alberta has even started racking up surpluses and paying down its debt.

Here's the per capita figures for the 1997/98 fiscal year, for someone living in the city of Vancouver:

Government of... debt interest spending surplus (deficit) population
Canada 19,300 1,400 3,000 0 30,300,000
B.C. 7,400 250 5,000 (200) 3,900,000
Vancouver 500 150 1,000 0 500,000
Total 27,200 1,800 9,000 (200)

So we're still spending roughly 30% of our income on public services and 10% (somewhat less) on interest, but we're only borrowing $200 each year instead of $1000, and that should continue to drop.

I have to say that I'm pretty impressed with Paul Martin for balancing the federal budget, and with Canadian voters for accepting the spending cuts required. Of course, if the global economic turmoil causes a recession in Canada, keeping public finances balanced is going to be much more painful.


You can get the latest numbers from the Canadian Government Budgets page, maintained by Stewart Clamen.

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26 February 1996; updated 13 September 1998

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