Neo-Liberals have been preaching the same message for over thirty years: Debt -- all debt -- is bad. And they have relied on a well worn analogy. Public debt, they say, is like household debt. But, Scott Clark and Peter DeVries write:
We’ve said it before and we’re saying it again: When a government spends money on infrastructure that will provide services to Canadians for decades to come, that’s not the same as spending the same money on programs and services that only benefit current generations.
Programs and services that benefit people paying taxes now should be paid for by the people using them. But public infrastructure is different. Things like modern transportation systems are going to be around for 20, 30 years or longer, and will be used by Canadians who aren’t paying taxes now but will be in the future. So it’s fair and logical to expect future generations of taxpayers to share the burden — through debt.
And right now the economy reqiures public spending:
Build an efficient new highway system and you increase productivity for trucking companies — possibly earning them a return of five per cent, which is taxed. And given the government can issue 20-year bonds at 2.0 per cent right now, the argument for new infrastructure spending becomes bulletproof: cheap debt for higher productivity and higher tax revenue.
This means that if the federal government spends $5 billion fixing the Champlain Bridge — money which could be borrowed in financial markets on 50-year bonds in the first year of work — the spending wouldn’t show up in the budget until the work is done. At that point, the government would start recording $100 million in new spending in every federal budget for 50 years (assuming the bridge that lasts 50 years), along with the annual interest costs associated with the borrowing. Not really a big deal.
The answer to the problem of debt is the same answer to most of life's problems. It depends. But for Neo-Liberals, there are no extenuating circumstances. There is only one answer -- for all time.