Say goodbye to Ontario’s ‘lost decade’ of debt and economic pain
The 2010s are drawing to a close. Unfortunately, it was a disastrous decade for the Ontario government’s financial health. It’s worth looking back at the damage to help us understand the importance of not repeating the same mistakes in the 2020s.
Let’s start with one of the most obvious measures of failure; that the decade will end without the provincial government balancing a budget—not even once. Some years the budget deficits were bigger and other years they were smaller, but operating deficits were a constant fact of economic life in Ontario this decade. Deficits ranged from a low of $2.4 billion in 2016/17 to a high of $17.3 billion in 2010/11.
Of course, all these deficits caused rapid growth in government debt. Between 2009 and 2019, provincial debt has increased by $166.4 billion and is forecasted to reach $360 billion this year. For context, that’s $24,900 for every man, woman and child in the province.
Consequently, annual debt-service payments on Ontario’s government debt have increased by 46.1 per cent in a decade, and will reach a forecasted $13.3 billion this year. This increase means debt-service payments are eating more and more money that could otherwise be available for health care, education and tax relief for Ontario taxpayers.
These developments over the past 10 years have fundamentally changed Ontario’s place in Confederation with respect to government debt. For example, Ontario now has far more debt per person, and more debt relative to the size of its economy, than Quebec, a once nearly unthinkable situation.
But while it’s been a rough decade for the province’s government finances, despite some green shoots here and there, it’s also been tough times for the provincial economy with weak or non-existent inflation-adjusted per-person growth in most years.
And even this understates the pain that’s been felt in large chunks of the province. Ottawa and Toronto have fared comparatively well, but research from the Fraser Institute shows that job-creation in every other region of the province has been tepid at best.
Meanwhile, businesses and residents across Ontario spent much of the decade worrying about high electricity prices, which strained household budgets and made it harder for businesses in to survive, much less thrive and grow.
If you take all this into account, it’s reasonable to characterize the 2010s as a “lost decade” for Ontario’s economy.
It is, of course, important to keep all this in perspective. Ontario is still a wonderful place to live, with a well-educated workforce and other advantages that should make us optimistic about the province’s future. For Ontario to meet its full economic potential in the future, however, it’s critical that policymakers understand what went wrong in the 2010s so the decade can at least provide some painful lessons. Here’s to avoiding another lost decade in Ontario, and indeed, to thrive and prosper in the 2020s.