Public debt, US vs Canada


Extrait de: Canada's economic prospects sour: IMF, BMO, Bank of Canada, Ben Rabidoux, Economic Analyst, September 2011

There was a slew of revisions to Canada's economic growth prospects today.

IMF warns of slower economic growth:

The International Monetary Fund has released their latest World Economic Outlook publication.  Although the IMF has been notoriously 'behind the eight ball' in their forecasting, it's nonetheless worth hearing what they have to say.  The document is extensive, but here are just a couple key snippets:

In Canada, downdrafts from its southern neighbor will be offset in part by relatively healthy economic fundamentals and still supportive commodity prices.

I’ve made it no secret that I think Canada’s current debt dynamics and over-reliance on consumer spending and real estate-related industries to generate economic and labour market growth makes the Canadian economy fully capable of wilting under domestic pressures alone, a fact lost on economists who ignore private sector debt, as evidently the IMF does.  For more on that, check out the following posts:  'Why a housing correction would CAUSE a recession' and 'The confidence economy'.

That being said, the fact that our largest trading partners are reeling is certainly of concern.

In Canada, growth is forecast to moderate from 3¼ percent in 2010 to 2 percent during 2011–12, reflecting ongoing fiscal withdrawal and downdrafts from the U.S. slowdown.

This new outlook for 2011 is nearly a full percentage point lower than in their last outlook and creeping towards my unchanged estimate of 1-1.5% GDP growth in 2011.

Although jobs have rebounded at a faster pace than in the United States, a slower pace of recovery over the near term is expected to keep unemployment at 7½ to 7¾ percent during 2011–12.

For Canada, which is in a sounder fiscal and financial position than the United States, ongoing fiscal tightening can continue, but there is policy room to pause if downside risks to growth keep rising.

Of course, we need to delineate between ‘sounder’ fiscal position and ‘sound’ fiscal position.  While most economists are happy to look at Canada’s national debt and pat ourselves on the back since it’s barely over 50% of GDP (compared to 100% in the US), once we combine federal and provincial debt and compare it to federal and state debt in the US, we find that we’re not as angelic as often portrayed.

Étranges, que nos économistes dans les médias traditionnels aient tendance à oublier ce facteur si fondamental, nos provinces peuvent faire des déficits d’opérations, tandis que les États américains ne peuvent le faire à cause de leur constitution.

Les États américains doivent négocier avec leurs employés pour atteindre l’équilibre budgétaire, nos provinces emploient la méthode la plus simple, transférer les dépenses d'opération sur la dette, ces deux graphiques sont assez révélateurs.

Total Canadian public debt

 

US total public debt

On remarque, si on combine les dettes publiques du Canada (fédéral, provinces et municipal), nous avons un fort accroissement de la dette, et beaucoup d’entre eux sont des déficits structurels, tandis qu’aux États-Unis les villes et les États sont sur contrôle, car ils ne peuvent pas faire des déficits d’opérations.

À titre d’exemple, plus du 2/3 de la dette brute du Québec n’est que des dépenses d’épiceries.

Donc, notre position est loin d’être aussi beau que nos médias prétendent, une chance qu’il y a encore des économistes qui ne couchent pas avec tous les groupes d’intérêts, ça redonne un peu de crédibilité à leurs professions, d’ailleurs c’est un très bon site à consulter, Economist Analyst.

Total US public sector debt is 120% of GDP as of mid 2011.  In Canada, it’s 110% as of the end of 2010.  ‘Sounder’, but not necessarily ‘sound’, though we have made significant efforts to reduce the combined debt levels from 135% of GDP in the mid 90s.  Canada’s national balance sheet is in good shape relative to many Western nations, but again I’m concerned at the self-congratulatory tone in our mainstream media when it comes to our debt levels, and I’m equally concerned that most international economists who look at our debt situation don’t seem to understand (or care?) that our combined provincial debt burdens are greater than our federal debt