Now that the federal election is over, it’s time for the Canadian government to act on reducing the deficit, working towards a balanced budget and eventually paying off the debt.
In order to accelerate achieving these goals, I propose a program, which will enable the government to easily decrease its expenses by more than $14 billion in this fiscal year and more than $30 billion per annum over the long term.
According to the March, 2011 budget, the projected deficit for fiscal year 2011 – 2012 is $29.6 billion resulting in a total federal debt of $586 billion.
The debt charges (interest) on this debt are projected to be $33 billion. That works out to an average interest rate of 5.6%.
During the year, $258 billion will be borrowed to refinance $221 billon of the debt that is coming due plus other financial requirements.
If this loan were financed at the average interest rate, the annual interest on this amount would be over $14 billion.
Instead, this portion of the debt should be refinanced with an interest-free loan from the Bank of Canada. Then the deficit would be decreased by $14 billion in this and subsequent years.
As the debt comes due in subsequent years, refinancing should again be done through interest-free loans from the Bank of Canada.
Eventually, the government would be free of the interest expense, which is projected to be over $39 billion by 2015 if the government continues to borrow from private banks and other sources.
Alberta Social Credit Party