Study
| EST. READ TIME 2 MIN.B.C. government adding more debt over next three years than during COVID or the 08/09 financial crisis combined
British Columbia's Coming Debt Boom in Historical Context
Summary
- There has been a rapid increase in government spending in British Columbia in recent years. The province is now forecasting a dramatic increase in government debt over its current three-year fiscal plan, primarily due to this spending growth.
- Many British Columbians may not understand the scale of the projected debt growth. This bulletin attempts to rectify that by providing comparative historic context for the debt growth that is forecast to occur in the years ahead.
- Specifically, we compare the government’s current debt forecast to two recent historical periods of rapid debt growth. The first of these occurred in the years following the 2008/09 global financial crisis and recession, and the second occurred during the recession sparked by the COVID-19 pandemic.
- We show that the government’s forecast for debt growth greatly exceeds that which occurred during the two comparative historical periods. In its three-year fiscal forecast, BC’s government expects to add $5,315 per person in net debt (all figures in 2023 dollars). During the COVID-pandemic and recession, net debt increased by $1,680 per person cumulatively. In the years during and following the 2008/09 financial crisis, the debt increase was $3,438 per person.
- Not only is debt growing much faster in the government’s current fiscal plan, but in the two other periods of debt growth discussed here, interest rates were low and/or falling. As a result, debt service payments on those increases did not significantly rise during those episodes. This time, because interest rates are higher, the interest payments on BC’s debt are expected to increase by 36.7 percent over just three years.
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Ben Eisen
Senior Fellow, Fraser Institute
Ben Eisen is a Senior Fellow in Fiscal and Provincial Prosperity Studies and former Director of Provincial Prosperity Studies at theFraser Institute. He holds a BA from the University of Toronto and an MPP from the University of Toronto’s School of Public Policy and Governance. Prior to joining the Fraser Institute Mr. Eisen was the Director of Research and Programmes at the Atlantic Institute for Market Studies in Halifax. He also worked for the Citizens Budget Commission in New York City, and in Winnipeg as the Assistant Research Director for the Frontier Centre for Public Policy. Mr. Eisen has published influential studies on several policy topics, including intergovernmental relations, public finance, and higher education policy. He has been widely quoted in major newspapers including the National Post, Chronicle Herald, Winnipeg Free Press and Calgary Herald.… Read more Read Less…
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