Till debt us do part

Dear Newfoundland and Labrador: you’re overdrawn.

Your account currently shows a negative balance of $21,770,800,000, and it seems that you plan to continue to spend more than you make …”

Imagine that in a letter from your bank.

But that’s where things were forecast to be today, at March 31, 2018: a total public sector debt of $21.8 billion (up $4.3 billion from 2017), a total provincial direct debt of $13 million (up $1.1 billion from 2017).

This year alone, the government is set to add an additional $683 million in debt — less than last year’s $812 million deficit, but substantial just the same.

The numbers are dizzying. In fact, they’re downright confusing. The provincial government rolls out terms like “total debt” and “net debt,” and, in most instances, uses whatever number that will make the financial pit we’re in look the best it can.

The truth is that our eyes are bigger than our stomach — and more importantly, bigger than our wallet.

The government obviously feels it has to continue to spend money to keep the wheels of the province’s economy turning; at the same time as the provincial government keeps its foot on the gas, though, our ever-growing debt has a foot on the brakes.

Debt charges and financial expenses are now the second-largest expense on the government’s books, accounting for 18.6 per cent of the province’s entire budget. Last year, it was only 14 per cent.

That means that, this year, $1.4 billion will be spent on debt and financing, much of it fleeing the province to satisfy the people who lent us money. (That number was $956 million last year.)

That’s money that never comes back, that never gets a chance to move through our economy, powering business and coming back as tax revenues.

That’s the brake, slowing us down.

And it’s going to get worse.

Even at its most optimistic, the government doesn’t foresee doing anything but borrowing more money until possibly reaching a balanced budget five years from now. By the time we reach that balanced budget (something that can only be seen as the rosiest possible gaze into the future), the government expects to add $2.1 billion in new debt to the total — essentially, a 10 per cent increase in public sector debt even if none of the province’s other agencies borrow another dime.

We’re clearly overdrawn, and while the government likes to talk about “a balanced approach,” balancing the competing needs of the province and its ability to pay, that balance — especially as we near the next provincial election — is clearly tipped towards appeasing voters, despite the clear, long-term financial impacts.

When close to 20 per cent of your income goes to address the financial charges on your debt, and you plan to keep borrowing for the next four years, balance is the least of your worries.