(September 7 – 10:15 ET) – Royal Bank chief economist John McCallum says the surprisingly strong economy has “created a compelling window of opportunity for aggressive federal debt reduction”, preferring that to tax cuts.
In a new report, McCallum offers five reasons to slash the debt, calling for the feds to cut the debt to 20% of GDP by 2015, down from 80% today. “With today’s economy unexpectedly strong and budgetary surpluses unexpectedly large, an annual debt reduction of $3 billion seems unduly small,” he said. “Also, to the extent the U.S. embarks on a program of radical debt reduction, Canada’s competitive position will erode if our pace of debt reduction remains sedate.”
McCallum’s five reasons to make debt reduction job one are:
- Canada’s economy is close to being “as good as it gets,” now is the ideal time to cut debt;
- pursuing debt reduction over tax cuts or more spending may lower interest rates and spark a higher rate of investment and increased productivity;
- failing to aggressively reduce debt may widen the Canada-U.S. tax gap;
- the debt level as a share of GDP is one of the highest in the world; and
- there is only 15 years until baby boomers reach retirement placing a strain on government spending.
-IE Staff