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Debt Paydown A Good Thing

September 27th, 2006

The Tories found 13.2B in extra money at the end of this fiscal year, and blew it all on one debt pay down. Some will likely offer all manner of excuses why they shouldn’t have, but I say good on you. Here’s why:

Paying down debt, in the long haul, saves the government money. Debt comes with interest charges, which must be paid. According to the National Post, the debt, after this payment, will be $481.5B. We pay (all of us as taxpayers) $20B a year on this money (assuming a 4% interest). By paying off $13.2B, the Conservatives have saved us half-a-billion dollars a year. Half-a-billion that goes back into general revenues.

At its highest point in 1996-97 the debt was $562.9B. The difference between then and now is $81.4B, for an interest savings of 3.25B a year.

Remember this when people are yelling in the next few weeks that a) there’s no real need to pay off the debt and b) the sky is falling because the Conservatives want to cut $2B from expenditures. That $2B is nothing compared to the money being saved by not paying interest on debt that has been paid off in the last ten years.

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