Jobs and Economy
The Problem With Debt
(Queen's Park Report - April 1, 2010) There is an enormous problem when a government racks up gigantic deficits and debts. The impacts of such measures are such that every Ontarian who cares about better hospitals, safer communities, stronger infrastructure, enhanced education and job creation should be genuinely concerned. Those who argue that deficit spending is necessary to uphold these public services are sorely mistaken.
If you think that spending is necessary to maintain services, think again. Interest payments on provincial debt will rise from $10 billion to $16 billion. That's $6 billion more in interest per year that will go to banks instead of schools, hospitals and public safety. To finance this year's deficit, 51% of the new debt was borrowed in international capital markets. That means most of the interest money goes to Hong Kong, Switzerland and the United States.
If interest rates go up we'll have a severe problem. As of today, Ontario's average interest rate is 4.57 per cent. A one per cent increase in interest rates would cost Ontario an additional $480 million. Again, that's more money for foreign banks instead of local healthcare. If rates were to rise to 10.14 per cent, as they were in 1993, then we're in trouble.
How does McGuinty's $6 billion in new interest payments effect services? Let's put it in perspective. $6 billion is the same amount the province spent on the entire Ministry of Training, Colleges and Universities last year. The government spent $8 billion to finance every social program in the province and yet they're spending $6 billion in new interest payments.
If the Liberals hadn't gone on such a spending spree over the past six years, imagine how we could have used the $6 billion in new interest payments to make investments in public services and to reduce taxation.
Make no mistake about it; Dalton McGuinty has no revenue problems. The government is projecting record returns this year totalling over $106 billion - more revenue than any other year in our history. Nonsense is what you could call McGuinty's grovelling about the province's finances being hit by a global recession.
Ontario's finances are in shambles because the guy who holds the purse strings just got off the phone with the shopping network where he bought every new toy that caught his fancy, without any view towards affordability.
Since 2003, Dalton McGuinty has increased government spending by 70%. Is this new spending due to a one time injection of fiscal stimulus? The short answer is no. This outrageous spending began in 2003 when he first got hold of the provincial credit card.
If we are ever to have hope of reducing taxes and investing in public services than the government must get its fiscal house in order. Interest on our debt alone will hurt our pocketbooks and damage public services.
It's time for a new fiscal manager. Dalton McGuinty just proved he's not up to the job.