According to Conservative leader Pierre Poilievre “our country is broke.” The Parliamentary Budget Officer (PBO), Yves Giroux, says the country can afford to spend much more. Who you gonna believe?

I’ll opt for the PBO. He released his annual fiscal sustainability report this week and it states that the federal government can afford to increase spending by $46 billion (or cut taxes by that amount) every year until 2098 and remain fiscally sustainable. The PBO takes into account population growth, changing demographics, debt growth, and long term interest rates.

As for the provinces, Quebec, Saskatchewan, Ontario and Nova Scotia have room to increase spending or cut taxes; Alberta is sustainable but breaks even; the others must either raise taxes or cut spending in order to remain sustainable.

In summary, the report says, “From the perspective of the total general government sector, that is federal and subnational governments and public pension plans combined, current fiscal policy in Canada is sustainable over the long term.” We are, in other words, in good shape. We ain’t broke.

The Cassandras say yes, but, aren’t we running a deficit? And don’t we have to pay interest charges on our debt? The answers are yes and yes. But the deficit is reasonable and our public debt charges as a percent of our GDP are at historical lows. According to the PBO report we have the lowest net debt- and deficit-to-GDP ratios of all G7 countries. Again, quoting from the report, ““Relative to the size of the Canadian economy, total general government net debt is projected to decline steadily over the long term due to fiscal room at the federal level and to rising net asset positions in the public pension plans.“

And isn’t our aging population a problem? Well, no, actually. Note the above comment regarding the asset positions of the Canada and Quebec Pension Plans. The PBO report takes into account the upward financial pressure on government programs such as health care, Old Age Security and public pensions caused by the aging population.

We might ask about areas where we anticipate new spending, including expanding the dental and pharmacare programs, and spending two percent of GDP on the military to keep our allies happy. We have two sources: one is that $46 billion per year mentioned in the PBO report; two, we can raise taxes.

Fully rolling out the dental and pharmacare programs would, according to the PBO, result in incremental costs of $.5 and $11 billion per year respectively, comfortably covered in the $46 billion we can afford. However, an additional expenditure of two percent of our $43 trillion GDP for our military would be $60 billion. That would mean higher taxes.

In summary, we are comfortable financially with the services our federal government provides with a cushion for more social spending, but boosting our defence spending to the magic two percent of GDP would mean a deeper tax dip into our pockets. I anticipate a debate on priorities.