"...at historic lows, Glen."

A second take on a 2020 press conference that turned testy but seems relevant again.

[I’m pleading for readers’ indulgence of this self-referential post. I get asked about this exchange often and would rather explain here than on Twitter/X.]

In Tuesday’s Fall Economic Statement — the cool kids on Parliament Hill call it “the Fez” — the federal government revealed that financing costs on the national debt will top $46.5 billion and could be on pace to eclipse, in a few years, the amount of the Canada Health Transfer that Ottawa sends to the province each year to help pay for doctors and hospitals.

The servicing costs on the debt are high for the simple reason that the interest rates have climbed sharply since early 2022. Just as mortgage holders find huge chunks of their monthly payments going to interest instead of reducing principal, the carrying costs of debt are also squeezing government budgets.

With this news from the economic update, a video in which I asked the prime minister about this very outcome is back in heavy rotation on social media. The clip from a June 9, 2020 press conference had popped up online repeatedly over the past few years and was even included in some Conservative Party online advertising. Those versions, however, use only a brief snatch of the exchange.

The clip was extracted from one of the near-daily press conferences Trudeau held outside his home at Rideau Cottage during the pandemic. (Think what you like about his stewardship during COVID-19, but I don’t believe journalists have ever had such sustained and repeated access to a Canadian prime minister, ever. That should be lauded.)

In the Q & A section of the press conference, I used the first of two allotted questions to ask about when we might expect an update on the nation’s finances. The budget that is usually tabled in the spring had been put on hold and Canadians didn’t have a good idea of the state of the government’s balance sheet, after spending hundreds of millions on the CERB and other pandemic-relief measures.

Trudeau’s view was that a fiscal update would be unhelpful because the economic situation was so unusual that any look-ahead would be unreliable.

Trudeau: “There are so many things that we simply don't know that making projections about what our economy could look like six months from now or a year from now would be an exercise in invention and imagination.”

But, as I mentioned in the follow-up question, the Parliamentary Budget Officer had done just that — made a projection about the budgetary balance. And it wasn’t good. With all the COVID spending and an economy substantially shut down, he estimated the federal government was on course to a massive shortfall.

Me: “The Parliamentary Budget Officer has produced a deficit projection of $260 billion. I don't think that he would consider that invention or imagination.”

That remark, throwing back his line about invention, I think provoked Trudeau’s later response. I’ve seen the same tone from him in interviews and press conferences before. He doesn’t seem to respond favourably to sarcasm or snark. (Don Martin, then the host of CTV’s Power Play, in an interview with Trudeau, once made a joke based on Pierre Trudeau’s line about the state having no business in the bedrooms of the nation. Trudeau stared daggers at him and the rest of the interview became uncomfortably frosty. It was awkward.)

I moved on and asked Trudeau how the government would manage the financing costs of all that new COVID spending added to the national debt, which was then just over $1 trillion.

Trudeau (tilting his head as if he had misheard): “Sorry?”

At the moment, I thought I had garbled my question, as I sometimes do. Had I not not enunciated properly? Was the idea unclear? I repeated it.

Me: “The servicing costs on the debt you're gonna have to carry, you're adding to now. Right? Interest—”

And then the line that lives on.

Trudeau (interrupting): “Interest rates are at historic lows, Glen.”

Most broadcasts journalists bristle when a politician uses their name in a reply. It renders the clip virtually unusable in an edited television report. Without a line of explanatory voiceover to proceed it — a waste of precious seconds in the script — viewers have no clue who he’s talking about.

From the tone of his response, I realized he hadn’t misheard my question. He sounded irked by it.

I tried again.

Me: “It’s still a lot of money. [CROSSTALK] And you don't know where? So, but — how are we going to pay for that? How are we going to pay for those costs in future years? Are you going to increase taxes? Are you going to cut programs?”

The prime minister continued to give a longer response and an explanation of why he believed the COVID spending was necessary and would position Canada well for an economic recovery when the pandemic passed.

Then he said something that hasn’t been picked up in the more-recent discussion of debt.

Trudeau: “And as we move forward, because of historically low interest rates, the debt servicing costs will be low.”

I don’t know if Trudeau now regrets that statement. At the time, it was an accurate assessment of the current rates.

But it was not, as the yesterday’s Fez showed, a particularly astute prediction of future trends in government debt financing.