How Much Does “Free” Cost?

Economic Illiteracy, Socialism & Government Debt

If you oppose socialism as I do, or even just believe in fiscal responsibility, you will inevitably be accused of hating the poor.  To most, this sounds ludicrous. We live in a world of limited resources, and it makes sense to anyone with any budgetary knowledge that we should have to prioritize where we spend our money. After all, we don’t go out to restaurants every day because it would be fiscally irresponsible. You would think this simple truth would be obvious to everyone but once we start talking about government spending a disheartening number of people seem to throw reason out the window.

A perfect example is when I attempt to push back against a (relatively) new Canadian Dental Care Plan. Launched in December 2023, the program is designed to provide dentistry services to uninsured Canadians that meet certain criteria and is projected to cost $2.6B for the first 5 years and then $4.4B annually thereafter. Based on past reports and current population growth rates Canada has about 30 million taxpayers meaning that this program will cost the average taxpayer about $86 per year. This doesn’t look like a lot. Am I simply a heartless, money-grubbing, miser who opposes helping his fellow citizens? These individuals on X/Twitter seem to think so:

If this were the only program the government was spending money on, or if Canada had a balanced budget, this accusation might have some weight. The problem is that the government continues to create new expensive programs with little concern as to where the money will come from. Like a drunken sailor, all that matters is the now.

Canada's national debt is projected to be about $2.1T in 2024/25, while the annual deficit will be around $39.8B this year (the government is projected to spend $54.1B in annual debt charges or roughly 10% of the federal budget).  Those are some big numbers so let’s put it in terms we can all understand. According to the Fraser Institute, if the median Canadian family managed it’s household budget the way the federal government does:

• It would spend $109,982 while only earning $101,821 and. 

• To cover the difference, it would put $8,161 on a credit card, despite already being $427,759 in debt.

• Of the total amount spent, $11,066 would go towards interest on the debt this year. 

Simply put, a Canadian family that chose to spend like the federal government would be in financial trouble.

The current government is not responsible for the entire national debt, but they have arguably been one of the least fiscally responsible governments in history. In the last two years, the Liberal government rolled out the following initiatives:

• The Canadian federal pharmacare program is expected to cost $11.2 billion in its first year (2024-25) and increase to $13.4 billion by 2027-28

• The National Child Care Program is expected to cost $30 billion over five years

• National Housing Strategy projected at $70 billion over 10 years 

• The Canadian federal government has committed $1 billion over five years to establish a National School Food Program

  

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This comes to about $24.4B per year or an additional $813 per taxpayer. Come on! It’s only money! Ya, but it’s my money. Don’t get me wrong, it’s hard coming down on the side of “we don’t have money for school lunches,” but someone needs to be fiscally responsible and it’s clearly not going to be the Canadian government (at least not the current one). 

I’m not even saying “no,” I’m just saying, “prioritize and don’t spend (much) more than you have.” I’m concerned because this type of “budgeting” has two end states, either taxes will have to rise, or the percentage of the budget spent on debt payments will continue to rise until it is 100% of revenues. At that point the country either defaults on its debt, slashes every service (so no military and no border patrol?), or raises taxes. The smart bet is that the government will begin slashing services and raising taxes long before it defaults on the debt. There’s a good reason for this, debt defaults are not pretty, they result in:

• Economic Recession - Defaults often trigger deep recessions, high inflation, and a collapse in the value of the local currency.

• Social and Political Instability - Protests, political upheaval, and changes in leadership often follow defaults, as seen in Argentina, Venezuela, and Greece.

• Debt Restructuring - Countries that default generally enter negotiations with international lenders (e.g., the IMF, bondholders) to restructure their debt, often leading to austerity measures.

• Loss of Market Access - Defaulting countries often lose access to international credit markets for years, which can further stunt economic recovery. 

Few people know this and fewer seem to care. But the government should. So why is it constantly promising voters “free” stuff? Well, one obvious answer is to buy votes. After all, who doesn’t like “free” stuff? All governments do this. The current US government for example is attempting to forgive student debt. This is not done because they believe the system is unfair (nobody forced you to spend a hundred grand on a modern dance degree after all), but because they believe it will buy them votes. 

The reason people continue to ignore the debt, and deficit is a little more complicated. First, as I said, who doesn’t like “free” stuff. The second reason is that people want to be nice. School lunches and dental care for the elderly are hard to argue against. The third reason is probably the biggest though, 45% of adults have lower numeracy skills, which means they may struggle with more complex tasks involving mathematical reasoning or interpreting more detailed data (that number is 51% in the UK and a shocking 70% in the US). Put simply, almost half of Canadians are numerically and financially illiterate.

"It is better to light a candle than to curse the darkness." I find myself doing both. I am one voice trying, possibly in vain, to bring some fiscal responsibility to our political debates. “Money doesn’t grow on trees.” I don’t know how many times I heard this growing up. At times I feel like I may be the only one to have heard the phrase. The seemingly endless spending spree that the Liberal government has undertaken in a (hopefully) vain attempt to buy the next election will end at some point.

Will the succeeding government be more responsible? I don’t know, but one thing I do know is that spending beyond our means will end, one way or another. Either we will act like grownups and voluntarily prioritize what we can afford, or we will take the childish path, kick the can down the road, and hope the money lasts long enough so that it becomes our children’s problem.

Wrong Speak is a free-expression platform that allows varying viewpoints. All views expressed in this article are the author's own.