In Canada, cities like Toronto and Vancouver borrow money by issuing debentures—basically loans—to pay for things like roads, transit, or schools. These loans are cheap because investors trust the cities will pay them back, and provinces often help keep the costs low.
Now, imagine the Canadian government decides to make these loans more expensive, either by adding a new tax on the interest investors earn or by pulling away provincial support that keeps rates down.
For Toronto, this could mean paying way more to fix aging subways or build housing—costs they’d have to cover by hiking property taxes or cutting services. Vancouver, already strapped with high living costs, might struggle to fund SkyTrain expansions or flood defenses, forcing tough choices like higher transit fares or neglected infrastructure.
Both cities would feel the squeeze, with less cash to work with and more pressure on residents, all because borrowing got pricier.
This would force the municipal governments to also get their asses into gear and get rid of the many thousands of bullshit jobs. 25% of the Canadian labour market is government, a whole lot of that is municipal employees who stand around manholes for hours pretending to write things on clickboards.
I was speaking to a friend last week who had a brilliant idea for taking back control of the cities.
The key is municipal bonds.
Most city governments rely on bonds (loans) to cover tax deficits. These muni bonds are exempt from federal tax.
Big funds LOVE muni bonds for their low risk and tax advantages.
So if Trump repeals their tax free status by EO, city governments will find it much harder to paper over their financial mismanagement with cheap debt.
City governments will be forced to downsize and cut do-nothing jobs. The fiscal crises could provide impetus for political change and Republican mayors could win on reform packages.
In red states, bankrupt cities could even be placed into receivership by state governments.
The end effect would be to oust do-nothing blue governments, reform the cities, and make them livable again.
It starts with a full spectrum plan to squeeze blue city governments financially. Repealing muni bond federal tax exemption is a powerful step Trump could take next week.
What do you think?