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I don't buy it. Every country uses debt to finance national investments in things they think will have significant payback, or create significant benefits. As long as the debt to GDP ratio is reasonable, and in line with international standards, and there's a reasonable expectation of a reasonable return on the investment, then debt-financed investments make sense. It's no different than companies incurring debt to finance their investments, which they do all the time.
Far as I can tell, Canada stands pretty well alone in being politically fixated on debt retirement. This goes back to the early 90s, when Canada's total debt and deficit spending (hello Mr. Mulroney) were in fact out of line with international standards. The Libs reduced the debt way down to where it is now, and also ran a big PR campaign on how important this was.
I think they eventually found they liked doing this because they got all kinds of political credit for not spending money, and not doing things like actually mounting meaningful initiatives in areas that matter. Since doing things takes a lot of time and effort, and often results in having to spend political capital, the Libs were happy to make debt reduction their mantra.
Anyway, our debt is now way below international standards, and there is no compelling reason whatsoever to reduce our debt any further. The debt meme, however, is a rationale for right wingers and corporate mouthpieces to decry government action on just about anything. Since they don't support state action to address national issues in the first place, it works out just fine for them if the government artificially starves itself of resources.
So that's my view.
- B
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