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Is Ontario a province laden in potentially life-strangling debt?
To most, the answer to that question is an emphatic yes, as under successive Liberal governments the debt skyrocketed from $138.8 billion to more than $320 billion in less than fifteen years, bringing the province the largest sub-sovereign debt in the world.
To some partisans though the province is not spending enough, even as it surpasses $346 billion mark in terms of outstanding debt. For perspective, that is roughly a debt per capita of $24,000 and more than the GDP of 146 countries.
To the happy tax-and-spend progressives the province’s rapidly growing debt is just a fear mongering tool used by the fiscal conservative to push spending cuts.
No I’m not kidding; here is Jennifer Keesmaat a former candidate for Toronto Mayor lambasting the Ford government for cutting spending while Ontario remains the last province in total spending, ranking 10 out of 10.
While the province of Ontario does maintain relatively low spending levels, the idea that increasing them would be a good thing is in my opinion outlandish at best.
Other provinces in the country are either far smaller and lack scale efficient which Ontario should have access too, have access to resource wealth like Alberta(something which progressives normally want to put an end too), or rely on subsides from resource provinces to pay for their services in the case of Quebec.
In the case of Quebec, the province receives more than 10% of its revenues from equalization payments which come largely from the taxbase in the west.
Other provinces according to the Canadian Taxpayer Federation’s debt clock also have far less current debt.
Put together the debt of Quebec, B.C., and Alberta, the total is around $300 billion, less than Ontario’s current debt load. The three provinces also have a combined population and GDP which is significantly higher than Ontario’s.
With so many factors clearly showing that Ontario’s debt is a problem, politicians need to show a path forward.
That logically involves either spending cuts, tax increases, or a combination of both.
To Progressives, it seems the only real option is increased taxes or ignoring the problem, both of which are are global non-starters.
With the personal and corporate tax-burden reaching new lows in our Southern neighbor, any large increase in the tax rate would just see investment flood out of the province due to the absolute ease of moving capital between Canada and the United States. We already saw this occur in 2018, when the head of RBC warned that investment dollars were already flowing to the United States in areas like energy.
At the same time, continued blindness to the growing debt pile could lead to economic catastrophe should interest rates rise, or the province go through a serious recession.Worryingly the last serious recession occurred 11 years ago, historically placing us smack-dab in the tail-end of an artificially extended business cycle, meaning we should expect a coming recession soon if not in the next few years.
With so much risk on the horizon, politicians need to come to account with the fact that we can’t spend what we don’t have, and we cant ignore what we already owe.
What do you think about the provinces debt burden? Is it a serious issue?
Join the conversation by commenting below!