“Neither a borrower nor a lender be.” – my grandmother
In a recent column, I reported that Ontario’s Auditor-General, Bonnie Lysyk, has asked the people of Ontario to commence a serious conversation about paying down the debt. She has recommended Ontario work to cut Ontario’s debt-to-GDP ratio back to its pre-recession level.
Lysyk’s concerns are now mirrored in a Fraser Institute report titled Ontario’s Debt Balloon. The report explains growth in provincial spending using borrowed money is unsustainable.
In contrast to current government policy, I am a firm believer that any thought about spending our way out of Ontario’s toxic debt spiral defies common sense. Common sense tells us if this was happening within a family or in a business, we would have to stop spending immediately. But what is the response of our provincial government? Exactly the opposite – spend even more.
It is also important to point out Ontario does not have a revenue problem. According to the Fraser Institute, the growth in debt since the recession is due mainly to exceptionally high spending rather than weakness in revenues. By 2010-11, revenues were back above their pre-recession level but the gap between spending and revenues had grown tremendously.
The bottom line is when you borrow money, you have to pay it back – but with respect to the provincial debt, it won’t be us who will be doing it. Shamefully, this will be the legacy we will leave for our children. We splurge on credit and they pick up the tab.
I can make sense of using debt to finance spending on important infrastructure projects like hospitals and highways – physical assets than can generate benefits for decades into the future. However, according to Fraser, 66 per cent of the increase in provincial government debt since the recession has been primarily for day-to-day operating expenses, rather than capital investments.
Ontario’s high debt-to-GDP ratio is a recipe for unsustainability – aka disaster. Sub-national jurisdictions, like the Province of Ontario, do not have the flexibility of monetary tools to mitigate the burden of debt. The debt rating agencies can give us a bit of a break, because on the world stage of lenders, we’re seen as being under the protective wing of the Government of Canada.
However, most jurisdictions at the state/provincial or municipal level in North America are simply not allowed run up the kind of debt we’re now seeing provincially. The United States public debt at $18 trillion is subject to debt ceiling legislation.
Anyone reading my columns for the past 20 years would probably realize I am a fiscal conservative. And in my years’ involvement with the ‘dismal science’, I have yet to meet anyone who will admit to being a fiscal liberal.
Fiscal liberals are now in charge, with a majority government, and as a result, our province is going deeper into debt to pay for spending that today’s generation will enjoy while sending the bill to the next generation.
We all recognize the need for responsible government spending, but common sense dictates government cannot continue to spend more than it earns year after year. Passing an ever-increasing debt down to our children and grandchildren is not only bad policy it is reprehensible and morally wrong. It’s also counter to what my grandmother taught me.
Toby Barrett is a Progressive Conservative member of the Legislative Assembly of Ontario representing the district of Haldimand—Norfolk. Follow Toby Barrett on twitter: @TobyBarrettMPP