Now that the Dust has Settled… it’s the DEBT

So we had an election with a record low voter turnout and we saw some shuffling of a few party seats in the provincial legislature. What was all the fuss you ask?

Evidently not much!

The Liberals didn’t do anything bad enough to have voters turf them out and the Conservatives didn’t do anything good enough to sweep them in to power. And the NDP most likely picked up their added seats as a result of the “Layton” factor.

No matter, it’s over – the dust has settled and we’ve got what we’ve got. And in London’s case, we’ve got two cabinet ministers (we think) along with a new PC member in Elgin Middlesex and a new NDP member in the London Fanshawe riding. Hmmm? Is this reminiscent of London’s old “We’re All Mixed Up” theme all over again?
Time will tell how well this mixed bag of representation works for either London or the entire province, but one thing is certain – legislators of all stripes have some really serious issues to deal and chief among these issues is the 400 pound debt gorilla in the room which seemed to have escaped the priority list of any of the party platforms. Sure we want to hear about jobs and the economy but we have to start focusing seriously on debt and deficits or jobs and the economy may be rendered moot.

The debt of the Ontario government now stands at an unprecedented $236 billion on which we pay $40 billion in annual borrowing to finance that debt. This on top of a federal debt of $567 billion – which by the way, if you are not already nauseated, places every man, woman and child in this country nearly $17,000 in debt before you ever start adding the debt of the provinces.

Equally worrisome is the province’s Debt-to-GDP ratio (the commonly accepted standard by which jurisdictions measure their indebtedness). This Chamber has lobbied for years that the provinces Debt-to GDP should never exceed 25%. And in 2003/04 we came oh so close to achieving that at 28%. Sadly at the end of the 2009/10 fiscal year we were at 33.5% and very likely headed towards an unsustainable 35% to 37%.

In fact Ontario’s debt, with the exception of Quebec and Nova Scotia is the highest Debt-to-GDP in the country. And the projected $16 billion deficit this year will only make matters worse as each year’s deficit gets added to the accumulated debt.

Ontario’s appetite for debt is a bit like an average homeowner paying more on credit card interest each month than on food and shelter, transportation, clothing and entertainment combined. So why is the debt so high and the cost to service that debt getting higher? Well without beating this horse to death (apologies to the horse), it’s purely mathematics. We simply can’t keep spending more than we take in or we could very easily slip into the same ugly predicament that many European countries are experiencing.

Annual budget deficits in Ontario are not only worrisome for you and I, they exposes the budget to the risk of higher interest rates, as was the case in the early 1990s and they leave a huge burden for Ontario’s next generation who will doubtless face either drastic spending cuts, increased taxes, or a combination of both to get the province’s house in order.

And who can we blame for this mess? -that’s an easy one as the Liberals, PC’s and NDP all piled on plenty of debt as they took turns in power and all have since washed their hands of it and pointed the blame at their political rivals. Well finger pointing won’t get us out of the hole and all three parties now have a shared responsibility and an obligation to clean up their mess.

While there are many arguments in favour of continuing to run relaxed fiscal policy during the coming fiscal year, it is imperative that the government move to credibly outline a plan to balance the budget by fiscal year 2015-16 (2017 latest).

There is no avoiding the fact that any plan will involve tough choices. Some simple calculations clearly illustrate that the Ontario government would have to hold expenditure growth to less than 1.7 % per year over 2012-2016 to get to a balanced budget.

What they can’t do is to address the deficit through cuts to existing municipal transfer payments, nor reducing investments in education and training and needed infrastructure which will promote our competitiveness and economic growth in the future.

In particular, the government has no alternative but to seriously explore ways of reducing the growth rate in health care expenditures – either by promoting efficiency “measures” or by allowing for more direct billing for some services. Tough choices – You bet!

But shockingly, in the time that it took me to write this article (about 1 ½ hours) the federal debt rose another $5 million. That’s about $1,000 per second. Ontario’s debt is about 40% of the federal debt…..need I say more? Houston we have a problem and the Ontario government – you have a job to do.


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