Hooked on credit

The Compass - - Editorial -

What they won’t say is the sim­ple truth: the money’s run­ning out be­fore the bills are paid.

Don’t think of it as deficit spend­ing, or as liv­ing be­yond our means - even though it’s ex­actly that.

In­stead, stop and think about what this prov­ince’s on­go­ing cur­rent ac­count debt would mean if the prov­ince was a house­hold.

Let’s think of it as if we can’t af­ford De­cem­ber. In fact, we’re just go­ing to put that en­tire month and more - on the credit card.

Last Tues­day, pro­vin­cial Fi­nance Min­is­ter Tom Os­borne re­leased his midyear fi­nan­cial statement and re­vealed that the prov­ince is slip­ping even fur­ther into debt than pre­dicted. In­stead of go­ing $777.6 mil­lion in the hole, the newly ex­pected debt fig­ure is more like $852.4 mil­lion.

If you av­er­age out, on a daily ba­sis, the $8.112 bil­lion the pro­vin­cial govern­ment ex­pects to pay out this year in ex­penses, it comes to $22.2 mil­lion or so a day. Each day. Ev­ery day.

Given that the govern­ment is only go­ing to take in $7.26 bil­lion, we’re go­ing to come up a lit­tle short.

And that means the money will run out - and if you were to move the spend­ing to a cal­en­dar year, it would run out on Nov. 23rd.

After that, we’re es­sen­tially run­ning on credit at $22.2 mil­lion a day un­til Dec. 31.

That might not be so bad if we were ex­pect­ing some kind of wind­fall in the new fis­cal year that would let us pay down that bor­rowed money. But we’re not.

About the best thing Min­is­ter Os­borne can come up with as a pos­i­tive is that the peo­ple who lend us money still think that we’re not bank­rupt, and are will­ing to keep bail­ing us out for the 38 days this year when we will have not one penny.

Imag­ine you were run­ning your house­hold like that, putting a full month’s ex­penses into new debt ev­ery year. You’d be lucky to make it through your third year.

Look­ing at govern­ment debt this way is a cal­cu­la­tion that was first put for­ward by France’s In­sti­tut Moli­nari - the point be­ing to make the dif­fer­ence be­tween rev­enue taken in and ex­penses paid out sim­ple and clear. As com­men­ta­tor Matthew Lynn pointed out in Bri­tain’s Tele­graph, us­ing that method, you can see clearly how Euro­pean cen­tral govern­ments are ex­haust­ing their rev­enues. France ran out of cash and be­gan liv­ing on bor­rowed money on Nov. 7. For Spain, it was Nov. 11th. Italy will be us­ing credit ex­clu­sively as of Nov. 26. The list goes on, vir­tu­ally across Europe.

The prob­lem is that we’re con­di­tioned to govern­ments bab­bling on about cur­rent ac­count deficits, about “(con­tin­u­ing) to take a bal­anced ap­proach, with a fo­cus on de­liv­er­ing pro­grams and ser­vices that are im­por­tant to the public in a smarter and more ef­fi­cient way,” and such­like.

What they won’t say is the sim­ple truth: the money’s run­ning out be­fore the bills are paid.

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