Dances with debt: Ontario just parties on

Managing deficits and debt hasn’t been a strong point for Ontario’s Liberal government, but if anyone asks, it has an answer. The deficit has been eliminated after a heroic, decade-long battle. There is still the debt, but not to worry, the government has a plan to bring that under control as well.

The Fraser Institute looks at that debt-control plan in some detail in a new report entitled Wishful Thinking. The think-tank finds a few sizable holes in the government’s approach, which assumes the economy will keep growing robustly indefinitely and that the government will suddenly switch from being a debt accumulator to a debt reducer.

The government is promising to pare its net debt back to 2006 levels by 2030, a 24-year-odyssey to get back to where we started. To be clear, this is not the elimination of the debt, but merely taking it down to a relatively more affordable level.

If the government were serious about reducing debt, it would stop accumulating debt now, but that’s not what it is doing. The plan calls for debt to increase by an average of $11.4 billion a year for the next three years. That’s just a little bit less than the average of $11.6 billion over the last three years. Even though the budget is said to be balanced on a yearly basis, significant long-term capital expenditures continue to be added to the debt.

After that, the government forecasts small annual reductions in debt relative to the size of the province’s economy. Then, the rate of debt reduction will miraculously triple. There is no plan to show how this might be achieved. It has the feel of a projection that starts by asking the

The $11.6 billion our government will spend this year on debt interest could have been used for better health care, help for seniors or keeping our schools open. Instead, it will go to banks. Randall Denley When it comes to government spending, the deficit is the party and the debt is the hangover.

question “how fast would we have to go to hit our target?” then saying that’s the speed that will be reached.

It’s a bit like me asking how fast I would have to run to get to Toronto in one day, then projecting that I could run that fast.

When it comes to government spending, the deficit is the party and the debt is the hangover. Voters like it when government gives them more stuff, but deficits become a problem when they are large and go on year after year. Since Ontario began its deep dive into debt a decade ago, the province’s net debt has nearly doubled.

That has real-life consequences. The $11.6 billion our government will spend this year on debt interest could have been used for better health care, help for seniors or keeping our schools open. Instead, it will go to banks. Two years from now, interest on our debt will have climbed by another $1 billion, even though the government tells us it’s doing a swell job of managing our money.

The Liberal government is fond of saying it has a plan. No doubt it’s more reassuring than saying it does not. However, a plan to solve a problem 13 years from now is not a real plan without credible steps to get there. Instead, it’s a promise to let some other government solve the problem, some other time.

The institute points out that Quebec has done much better. It balanced its books two years earlier than Ontario and has stopped adding to its debt, which would seem an obvious first step to reducing it. Ontario continues to build its debt mountain while pretending it can stop later on.

Don’t expect to hear much about deficits and debt in the next election. The Liberals would rather talk about all the wonderful new spending they have planned and the Progressive Conservatives learned in the last election that the public becomes alarmed when parties talk about controlling spending.

Maybe the political parties are right in tune with the public. After all, Canadians elected a federal government that promised deficits and the plan was widely hailed as fresh new thinking. When you get down to it, for Ontarians wishful thinking is definitely more pleasant than reality.