Gubmnts have run up massive debts, increasingly so after 2007 and the Great Recession. A recent study by The Fraser Institute (reported here in the NatPost) points out that the total amounts currently being spent on just the interest payments on gubmnt debt now surpass the total amounts being spent on K-12 education in Canada. Imagine what the interest costs will be if/when interest rates rise back up to the 3-4% range that might be thought of as more "normal" (whatever that means). From the article:
Combined federal and provincial debt in this country will top $1.3 trillion this year, according to a new Fraser Institute report out Tuesday.
“It’s not a trivial amount,” said Charles Lammam, one of the report’s co-authors of the $450 billion in government debt that’s accrued since the recession. “There’s [sic] short and long-term consequences.”
In the short term, massive interest payments on debt gobble up revenues that could be better spent, Lammam said. Local, provincial and federal governments pay more than $60 billion a year to service their debt, money that could be better spent on services. Over the long-term, a growing body of research suggest [sic] heavy government debt loads dampen economic growth.
The current 90-day T-bill rate in Canada is about 0.50. Imagine what the numbers in the Fraser study would be like if interest rates were 3.5% or higher, as they were a decade ago!
Debt servicing is going to become a major issue for the future.