Debt overload: A double whammy of provincial and federal debt will burden Ontarians
The Wynne government is finally promising to balance Ontario’s operating budget next year after nine consecutive deficits. If anybody thinks that means an end to growing government debt in the province of Ontario, they should think again.
The fact is the province plans to continue adding billions of dollars in new debt, and once you factor in the growth in debt the federal government has planned, the burden carried by Ontarians will actually continue to grow even faster than before.
Over the past few years, Ontario's budget deficit has gradually shrunk. As a result of reducing the deficit, the provincial government has managed to slightly reduce the amount of new debt it adds each year to the outstanding pile, which is now over $300 billion.
Make no mistake, the province is still adding substantial debt as a result of ambitious debt-financed capital spending plans. Nevertheless, annual debt is expected to increase less quickly in the future compared to the recent past.
In the three year period between fiscal years 2013 and 2015, Ontario added $16.3 billion in new debt, on average, per year. Between fiscal years 2016 and 2018, the province expects to add slightly less per year, $10.3 billion on average.
Now let's be clear- $10 billion in new debt per year is still worrying, especially in a province as heavily indebted as Ontario. But still, the provincial government is planning to accumulate less new debt per year in the years ahead.
Unfortunately, these baby steps forward at the provincial level are being completely wiped out by a marked increase in the pace of debt accumulation at the federal level.
Consider that between fiscal years 2013 and 2015, federal government increased net debt on average by about $6 billion per year.
That pales in comparison to the amount of federal debt that is planned from 2016 to 2018. Over this stretch, Ottawa projects to add $29.2 billion to the federal debt each year, on average, according to last year’s budget.
What are the implications of this rapid run-up in federal debt for Ontarians? It's important to recognize that Ontario taxpayers not only have to service provincial debt; they are also responsible for a portion of federal debt. So the growth in combined provincial and federal debt should matter a great deal to Ontarians.
Considering that about 40 percent of the burden of any new federal debt ultimately falls on Ontario taxpayers, the implications of the rapid run-up in federal debt become clear.
Once you include both provincial debt and Ontarians’ share of the federal debt, the overall increase in public debt in Ontario from 2013-15 averaged $17.5 billion per year. In 2016-18, that number is expected to rise to $22 billion per year. The rate of debt accumulation (provincial and federal combined) is clearly not slowing down – if anything it is speeding up.
Ontarians are already buried under a veritable mountain of provincial government debt which will continue to grow in the years ahead. But now the federal government is also planning to pile on tens of billions in additional debt each year onto the shoulders of Ontarians.
This spring, expect a series of upbeat news releases from Queen's Park celebrating the arrival, at long-last, of a balanced operating budget. But don't be fooled- government debt is still growing in Ontario and now there are two levels of government adding quickly to the pile.
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