Abstract:
Abstract
This thesis seeks to answer a number of questions concerning
the deficit and debt in Canada. It focuses pri.arily on the
federal level of government but with SOBe discussion of provincial
governaent policy as well. In ~997, Canada's federal debt caae
close ro six hundred billion dollars - $594 billion or 74.4 % of
Gross Do.estic Product (GDP) to be exact. The purpose of this
theses is threefold: To find out why Canada accu.ulated such a
debt, to discover if there is a so-called debt crisis; and to
discover if it is possible to preserve Canada's national welfare
state given the financial restraints that have been adopted by both
federal and provincial governments.
Politicians are torn between economist' two contrasting views
regarding deficits: Neo-Keynesian and neo-conservative. The neoKeynesian
school focuses al1llOst exclusively on the short term
stability of the economy and tends to dismiss concerns regarding
the level of debt. Neo conservatives focus almost exclusively on
the perceived costs of growth in the national debt and are willing
to forego any stabilization benefits to ensure that the debt is
controlled. These polar view do have one thing in coa.on; both
confix-. that deficits influence govermaent policies. Both of these
econoBic theories will have far-reaching influences on the federal
gover1lJlJent's decision-making process. These economic theories will
be discussed throughout this thesis.
