An Indebted Generation

Late last month, the Fitch Group, one of the big three globally-recognized credit rating agencies, downgraded Canada’s credit rating from AAA to AA+, the first such downgrade of our nation’s credit score since the early 90’s.  In its report, Fitch stated “the rating downgrade reflects the deterioration of Canada’s public finances in 2020 resulting from the coronavirus pandemic”, which is not surprising given the state of affairs, not just in our country, but around the world.

However, what some analysts are lamenting is not the credit score, or the significant debt obligation we have all just assumed in 2020.  To be clear, most analysts, myself included, support the federal government’s substantial financial investment to combat this crisis.  And it is very likely that much more work needs to be done.  What concerns market experts is that both federal and provincial governments (of all political stripes) have, for years, continued to run up a tab and spend more than they earn, even in good times.  As one respected Financial Post analyst who actually predicted the downgrade put it: “…it is shameful to have been incurring such a massive debt load at the peak of the (economic) cycle and at or near full employment”.

Make no mistake, the numbers are staggering.

Most estimates put the current combined federal/provincial debt at somewhere between $1-1.5 Trillion.

That equates to approximately $45,000 of debt owed for every Canadian living today and every new Canadian born tomorrow.

These estimates do not include all of the underfunded liabilities (e.g. pensions) that do not currently sit on the books.

And the final credit card bill for the nation’s pandemic response is not yet in.

In the fact, the numbers are so daunting, it is hard for Canadians to comprehend. This issue is further complicated by numerous debt financing proponents, who use comparative ratios and low interest rates as an argument to convince Canadians that this level of debt is not only acceptable, it is even encouraged.

I do not share that view.  Just servicing our current debt load burns through approximately $25-30 billion in interest payments annually.  And that was before COVID-19!

Imagine what we could do with a little fiscal discipline and an extra $30 Billion in annual tax revenue – improve our strained health care system, invest in an underfunded education system, address our massive housing shortage, better protect our environment, repair our tired infrastructure, and/or address some long-standing social injustices.

So why am I writing about this now, on the weekend following our national celebration?

I am doing so for four reasons.

First, for some time now, I have been losing sleep over the state of our nation both financially and environmentally.  Most of our fiscal and environmental challenges have arisen just in the last 50 years – commensurate with the baby boom and a generation of avid consumers.  I am a member of this generation, one that has received much more from the system than has contributed to it, and one that is leaving a dreadful legacy of debt and environmental erosion for our children and grandchildren.  I am not happy about it and believe that we have a moral obligation to do what we can to fix it.

Second, I believe that the challenges before us are fixable.  Canada is a remarkably prosperous nation with a wealth of natural and knowledge resources.  Our people are resilient, well-educated, enterprising and caring.  When times are tough and a neighbour is in need, Canadians have always risen to the occasion.  And while our economic and environmental challenges are formidable, so too is our federation, an impressive array of diverse cultures and communities capable of once again setting aside any differences, and delivering on our shared promise to each other to continually evolve as a nation.

Third, I believe that I have something to contribute.  Through a blend of hard work and good fortune, I have acquired a skill set that specializes in revitalizing struggling enterprises and making them better than they were before.  My executive experience at the corporate, entrepreneurial and institutional levels has provided me with a broad training ground from which to develop my expertise in business development, operations, restructuring and financial management.  As people who know me well can attest, while I cannot sing a note nor hit a golf ball straight to save my life, I am pretty good at fixing organizations, and would welcome the opportunity to apply this skill in service of the public.

Which leads me to my final point.  I have been giving a great deal of consideration to running for elected office again.  I thoroughly enjoyed meeting so many wonderful Londoners during the Mayor’s race, and still very much want to make a contribution to our community and our country.  And thanks to a terrific campaign team, generous donors and supporters, we did better than expected against a crowded field and better-known opponents.  I am not yet sure what level of office I might seek, but if I ever hope to help address the challenges before us, I need to put my name on a ballot at some point in the next 24 months, and deliver on a desire to help remedy what we have sowed.

Not surprisingly, I have a number of thoughts, suggestions and ideas on how to best dig ourselves out from these financial and environmental deficits, and will be sharing them with you in writing and video in the coming weeks and months. It is not my approach to outline a problem without proposing a clear solution, and I believe the electorate needs to know exactly what they are voting for before they ever cast their ballot.

For now, suffice it to say, that Fitch has set off the first of what will surely be many warning signs that Canada needs to get its financial house in order, sooner rather than later. We can collectively address this challenge now and make it a national priority, or continue to pass it on to the next generation with increasing severity and consequences.

It has been our shared experience that always Canadians ‘lean in’ when called upon.  My hope is that the credit downgrade serves as Canada’s call to action, to once again rise to a common purpose greater than any one individual,

  • one that is substantial,
  • one that sustainable, and,
  • one that continues the legacy of past generations and leaves our country in a better state than we found it.

For the boomers, this is our last chance to preserve that legacy and reverse the perception of us as a generation that took more than it gave.

The choice is ours.  The obligation is ours.  The time to act is now.