TIME TO RETIRE THE DEBT, BUILD THE NATION

 

Canada at a Crossroads: 

Retire the Debt, Build the Nation

A strategic essay/report on Canada’s challenges, options, 

and a practical blueprint to become a top-tier G7 nation

 

Prepared for Canadian Sentinel• August 27, 2025

 

Executive Summary

Canada faces a slow-grind future if it continues with large structural deficits, underpowered business investment, and an uneven approach to energy, power, and housing. Annual federal interest payments are roughly the size of the Canada Health Transfer—about $54 billion a year at present—crowding out core services and investment. Meanwhile, housing supply lags, electricity system upgrades trail new demand (including power-hungry AI and advanced industry), and skilled-trades retirements outpace fully qualified entrants.

This report lays out two paths:
1) Status Quo: modest growth, rising interest costs, persistent affordability strains, and missed industrial opportunities.
2) Retire-the-Debt & Build-Build-Build: internalize the interest bill at the Bank of Canada (over time, with safeguards), and redeploy ~$54B/year into nation-building assets—firm 24/7 power (nuclear/hydro + transmission), export corridors (LNG/pipelines/ports/rail), industrial sites, and scaled housing infrastructure—coupled with a Trades Surge Plan.

Done right, the build agenda can lift potential GDP, anchor globally competitive industrial clusters, and improve living standards, while a disciplined implementation (phased finance, sterilization tools, trade-proofed exports, and workforce pipelines) contains inflation and execution risk.

Part I — Where Canada Stands

Key realities shaping the next decade:

·       Interest burden: roughly $54 billion a year in federal debt charges today, rising on current plans without a pivot.

·       Productivity & investment: business investment per worker has lagged peers; without capital deepening, real incomes stagnate.

·       Housing & cost-of-living: supply shortfalls and sticky rents keep affordability strained even as headline inflation cools.

·       Power constraint: data centres/AI, electrified industry, and transit/housing require firm 24/7 electricity and new transmission.

·       Social stress: elevated food-bank usage, visible homelessness, and a toxic-drug crisis signal widening cracks in the social fabric.

Part II — Money, Debt, and the Bank of Canada (BoC): A Plain-English Primer

• The BoC is a publicly owned Crown corporation under the Bank of Canada Act. It issues cash/reserves (base money) and targets inflation. Commercial banks create most deposit money when they lend.
• Ottawa finances deficits mainly by selling bonds to markets. Investors (domestic/foreign) earn interest; a minority share is foreign-held, so a portion of interest payments leaves the country.
• The BoC can purchase Government of Canada bonds and rebate the interest—this internalizes debt service. During crises, it also buys bonds on secondary markets (quantitative easing) to stabilize conditions.

Implication: Canada can, in principle, reduce the net fiscal cost of debt service by shifting more of its debt to the BoC balance sheet. The constraint is not legal feasibility but macro management (inflation expectations, currency confidence) and financial-system plumbing.

Part III — Two Paths for the 2025–2035 Window

Path A: Status Quo (Present Trajectory)

1.       Interest costs climb: more tax dollars service yesterday’s spending, squeezing room for health, housing, defence, and skills.

2.       Underpowered investment: productivity and wages drift sideways; tech and industrial projects choose grids with more firm power.

3.       Exports plateau: TMX and LNG Canada help, but without follow-on capacity and corridors, the dividend fades over time.

4.       Housing struggles: starts fail to reach scale needed to restore affordability; rents remain high, formation is delayed.

5.       Visible social strain persists: homelessness pressure and the drug-toxicity crisis stabilize at a higher baseline.

 

Path B: Retire the Debt & Build-Build-Build

·       Firm power first: build small modular reactors (SMRs), extend/refurbish hydro and nuclear, and construct transmission interties to deliver 24/7 power where industry and AI will plug in.

·       Export infrastructure: add LNG phases, pipes, ports, and rail capacity to lift non‑U.S. market access and improve terms of trade.

·       Industrial sites: pre-permit, service, and power ready-to-build zones for advanced manufacturing, critical-minerals processing, and data centres.

·       Housing & enabling works: scale municipal water/sewer/transit and standardized designs to double starts where jobs are.

·       Trades Surge Plan: convert registrations into certifications with paid mentorship, compulsory trades expansion, school-to-apprenticeship pipelines, targeted immigration, and mobile training.

Scenario Snapshot (Illustrative, order-of-magnitude)

Metric (circa mid‑2030s)	Path A — Status Quo	Path B — Retire & Build
Net federal interest outlay	High (>$60–70B/yr as stock rolls)	Near‑zero net (internalized/rebated)
Firm power capacity added	Limited; incremental refurbishments	Multiple GW (SMRs/hydro) + major interties
Industrial/AI siting	Constrained by power; slower wins	Power‑anchored clusters (AI, fabs, green industry)
Export capacity	TMX/LNG Phase 1 only	Additional LNG/pipelines + port/rail upgrades
Housing starts	Below need; affordability improves slowly	Higher, sustained starts via enabling works
Jobs (construction peak)	Tight labour slows timelines	~140k+ job‑years/yr over a 5‑yr build if ~$54B/yr is deployed
Real incomes	Flat-to-modest gains	Higher via productivity & tradables growth

Part IV — Implementation Blueprint (How to Do It Safely)

6.       Phase the BoC buyout: gradually increase BoC-held GoC debt; use sterilization tools (interest on reserves, term deposits) to anchor inflation expectations.

7.       Capital budgeting: create a multi-year capital envelope dedicated to firm power, transmission, export corridors, industrial sites, and enabling housing works.

8.       Fast-but-fair approvals: time-box impact assessments; embed early Indigenous partnership/equity so projects are co-owned and resilient to challenge.

9.       Trade-proof exports: design projects to meet verifiable carbon-intensity thresholds to avoid border carbon tariffs (CBAM-style) in key markets.

10.   Corridor strategy: designate national energy/transmission corridors with standard designs and pre-cleared rights-of-way where possible.

11.   Workforce pipeline: fund paid mentorships, raise in-school training capacity, expand compulsory certification in safety-critical trades, and align immigration to project regions.

12.   Finance discipline: keep program spend in step with capacity (people/materials) to avoid bidding up costs; roll with measurable gates and kill-switches.

13.   Local value add: preference Canadian content where feasible (without violating trade agreements) to deepen supplier ecosystems.

14.   Municipal enablement: tie federal dollars to predictable approvals and standardized housing designs near jobs and transit.

15.   Transparency & KPIs: monthly dashboards on power MW added, jobs, certifications, starts, and delivery against budget/schedule.

Part V — Key Risks and How to Contain Them

·       Inflation/FX risk from rapid monetization — Mitigation: phase-in, sterilize liquidity, sequence projects to match workforce capacity, and maintain a credible inflation target.

·       Execution capacity (permits, labour, supply chain) — Mitigation: pre-permitting, corridor approach, training/immigration surge, and milestone-based contracting.

·       Trade retaliation/carbon border taxes — Mitigation: certify clean power inputs, MRV systems, and align export grades to CBAM rules even if domestic targets change.

·       Financial-system disruption — Mitigation: gradual BoC purchases, clear communication, and maintenance of a market float of bonds for collateral/liquidity.

Part VI — Safeguarding Quality in the Trades (So We Don’t Just Build—We Build Well)

·       Competency logs and practical capstones: no ticket without signed experience on critical tasks and a real-world fault‑finding exam.

·       Pay mentors and track ratios: journeyperson premiums for training time; publish mentor coverage metrics.

·       Repair culture on purpose: diagnostics modules (relay/PLC, vibration/thermal, HV test sets), right‑to‑repair access where safe.

·       Modern ‘shop’ in schools: dual-credit Grade 11–12 pathways that deliver Level‑1 technical training before graduation.

·       Engineer–trades crossovers: site rotations for EITs and design-office rotations for senior apprentices; joint failure reviews.

·       Train where the work is: mobile training units at SMR, transmission, LNG, and corridor sites; regional immigration matching.

·       Craft ladders and recognition: public titles and pay steps up to Master/Commissioning Tech; measure rework and first‑pass yield.

Part VII — KPIs & Scorecard (What to Watch Quarterly)

·       Net federal interest outlay (actuals vs. plan); share of GoC debt held by BoC vs. market.

·       Firm power MW added (by type) and new transmission km energized; industrial interconnection queue times.

·       Export capacity and utilization (LNG cargoes, pipeline throughput, port/rail tonnage).

·       Housing starts and enabling works delivered; median approval times for eligible projects.

·       Apprentice registrations, in-training seat capacity, completion rates, time-to-ticket, mentor coverage.

·       Rework rates, incident rates, and first‑pass commissioning success on mega‑projects.

·       Private non‑residential investment per worker and manufacturing output in powered industrial zones.

·       Real median disposable income growth and rent/own affordability indicators in target regions.

Conclusion — Choosing a Higher Trajectory

Canada’s institutions are sturdy, but today’s trajectory underuses our advantages. The interest bill siphons fiscal oxygen while capacity constraints delay the very builds that would raise living standards. A phased retire‑the‑debt & build‑build‑build agenda—focused on firm power, export corridors, industrial sites, and housing—can reset the country’s growth path. The prize is not a short‑term sugar high; it’s a durable lift in productivity, wages, and national resilience.

References & Notes (selected)

·       Bank of Canada Act; Bank of Canada Monetary Policy & Balance Sheet publications (2020–2025).

·       Department of Finance: Budget 2024; Fall Economic Statement 2024; Fiscal Reference Tables 2025 (public debt charges).

·       Bank of Canada, Parliamentary Budget Officer, and independent estimates of annual federal interest costs (~$54B, 2024–25).

·       Canada Energy Regulator; Trans Mountain Expansion (in service 2024).

·       LNG Canada project updates (first export cargo in 2025).

·       Ontario Power Generation / GE‑Hitachi: Darlington SMR (BWRX‑300) program cost/schedule.

·       International Energy Agency: data-centre and AI electricity demand outlook to 2030.

·       EU/UK Carbon Border Adjustment Mechanism (CBAM) implementation timelines and scope.

·       BuildForce Canada: 2024–2033 construction labour outlook; retirement and hiring gap estimates.

·       Statistics Canada: apprenticeship registrations/certifications (2019–2024); labour force and productivity indicators.

·       CMHC: housing supply/affordability scenarios and required starts through 2030–2035.