The net direct debt of all three levels of government in Canada fell from $832.7 billion to $798.4 billion between 1999/2000 and 2003/2004. This is a small drop compared to the growth since 1990/1991 when net debt was $533 billion. There are several reasons that even a small reduction in debt is good news. First, governments have begun to balance their books and some have started paying down their debt. Second, continued economic growth will help reduce the ratio of debt to gross domestic product (GDP), currently at 65.6%. Third, a constant or declining debt stock will demand a smaller portion of government revenues. As a result, some of the 10.7% of revenues currently being spent on interest charges can be used for further debt relief or tax cuts.

The bad news is that the $34.3 billion drop in debt was more than offset by increases in other liabilities such as program obligations, which grew significantly from 1999 to 2003. The net increase in total liabilities over this period was $259.4 billion. The growth in obligations under programs such as the Canada and Quebec Pension Plans, the Old Age Security, and the Medicare system has been a focus of this debt study for many years. Specifically, the concern lies in the size of these obligations and what this implies for the future health of these programs. Largely due to increases in program obligations, in 2003/2004 federal, provincial, and local liabilities added up to $171,032 for each Canadian taxpayer or $85,525 for each Canadian citizen.