By MPP Toby Barrett
Ontario’s debt has doubled over the past ten years. We spend nine cents of every dollar in revenue just to cover the interest. As a result, interest payments on the debt have become this government’s fastest-growing expenditure -much more than the spending growth in health care
And, according to Canada’s Fraser Institute, Ontario’s debt now consumes 39.3 per cent of our provincial economy, up from 27.5 per cent 10 years ago.
Ontario does not have a revenue problem – it has a spending problem! High spending is the real cause of our current deficits and accumulated debt. Take Ontario’s so-called stimulus spending, for example – a draw on taxpayers, a full six years after the economic downturn of 2008.
Granted, economist John Maynard Keynes theorized economic activity could be boosted during a downturn by temporary tax cuts and spending increases. But he also advocated an end to stimulus spending once a recession ends. But, Ontario has not stopped its stimulus program – let alone its taxing and borrowing. The current government is now poised to ramp up spending even more. However, studies show as government spends and grows beyond a certain size, it begins to slow economic growth, thereby lowering living standards for all of us.
Our indebtedness is worse than California, whose own debt woes earned it a reputation as a fiscal basket case. California’s debt is $144.8 billion, but its population is more than all of Canada. Ontario’s debt is $267.5 billion. As a percentage of GDP and per capita, Ontario’s debt is about five times greater than California’s.
We also have another problem. Even at a debt servicing charge of nine cents on the dollar, Ontario is borrowing at historically low interest rates. If rates were to rise above the government’s projections, interest payments would grow even faster. This would require further spending on the provincial debt – not on important programs like health, education and social services. As well, tax hikes on Ontario families and businesses could result.
Multiple rating agencies have warned about, or already downgraded, Ontario’s credit worthiness, which could also result in Ontario paying higher interest rates on the debt.
The Fraser Institute warns “recent trends have put Ontario on an unsustainable trajectory of ever-higher debt.” And now we see further evidence the current government seems poised to push its target to balance the books by 2017-18 into the future. The government’s own hand-picked economist Don Drummond never did believe the books would be balanced by fiscal 17-18. He projected Ontario would go another $30.2 billion in the hole, for a total projected debt in 17-18 of $411.4 billion.
As reported by Opposition Finance Critic, Vic Fedeli, we’re being misled by this government with respect to their acceleration of debt spending. One 2013 Ministry of Finance document stated that for 2014-15 and 2015-16, Ontario is “not on track to meet 2012 budget deficit targets.” The documents also show the government was at least $3.6 billion off the pace needed to balance by 2017-18. Cabinet, well aware of that fact, knowingly decided to increase the shortfall to $4.5 billion at its recent March pre-budget retreat.
As these deficits continue to accumulate, I am reminded of Charlie Pride’s line “Another day older and deeper in debt”. Ontario’s crushing debt will only continue to balloon.