For over 30 years politicians have been telling us that government spending needs to be reined in to address one economic challenge after another. Whether it is a recession, high inflation or the instability caused by Trump’s tariffs, the solution is always to strive for a “balanced budget” — even when the problem isn’t government overspending.
So it’s no surprise the federal deficit became a major focal point during the lead up to the 2025 federal budget. Prime Minister Mark Carney announced his plans to “balance the operating budget” by 2029, by slashing most departmental budgets by 15% over four years and imposing mass layoffs across the federal public service.
After the budget was tabled in parliament, Conservative opposition leader Pierre Poilievre raised the alarm about the projected 2025-26 deficit being $78 billion.
But what no politicians are raising an alarm about is the massive amount of household debt that people in Canada have accumulated over three decades of government funding cuts.
In fall 2025, it was reported that the total amount of household debt held by people in Canada had reached $3.2 trillion. On average, for every dollar workers in Canada take home, they owe around $1.76 in debt.
Mark Carney has repeatedly mentioned that Canada, as a nation, has one of the lowest debt-to-GDP ratios in the G7. But what he doesn’t mention is that Canadian households have the highest debt-to-GDP ratio in the G7. Canada also has the highest household debt-to-income ratio in the G7, approximately 176% as of late 2025.
When politicians and the media stoke fear around government debt, it hits home because many of us have firsthand experience with debt. Common sense tells us that going into large amounts of debt, with no clear plan to pay it off, is a bad idea. Despite this, the total amount of debt held by Canadians continues to rise.
Debt is a major source of stress in many people’s lives, and unfortunately, a growing number of us must rely on borrowing to make ends meet. While Canada’s highest earners have increased their household savings significantly over the past few years, the lowest earners have gone deeper and deeper in debt and are unable to save at all.
For ordinary people, debt is a stressful burden that we are often forced to take on in order to survive. But for governments, deficits are simply a normal part of operations, despite politicians’ claims to the contrary.
It’s important to remember that government and household debt are not the same thing.
These two kinds of debt are linked, though, in that efforts to reduce public debt can lead to increased household debt.
For over 30 years, governments tried to reduce public debt primarily by cutting services. As a result, far too many people in Canada are struggling to make ends meet. When governments cut public services, the need for them doesn’t just disappear. Instead, the costs of programs are passed down to individuals, often to those who need them the most. It is not a coincidence that income inequality is reaching record highs, and that low-income households are accumulating a crushing amount of debt.
A 2025 national survey conducted by Nanos Research revealed that one in five people in Canada have skipped a bill payment in order to afford groceries over the past year, and Statistics Canada reported in October 2025 that over one in four (27.7%) were struggling to afford basic necessities like transportation, food, and clothing.
Meanwhile, food and accommodation costs continue to rise faster than overall inflation, and wealth disparities are becoming increasingly pronounced. We urgently need government action that will meaningfully address this widespread economic insecurity.
Our increasingly harsh economic reality is the direct result of decades of austerity policies that prioritize the creation and accumulation of wealth over the well-being of working people and their communities. But things don’t have to be this way.
Governments can and should invest public dollars to create a more equal society where people can live in dignity and comfort. Investments in public services and programs put money back in workers’ pockets and can help prevent further reliance on debt for survival.
Instead of focusing on big business, tax breaks, and short-sighted deficit reduction efforts, the Liberals should be expanding programs like pharmacare, dental care and $10-a-day child care. These are the true priorities of Canadian households, and will make a real difference in the lives of workers and their families.
