Ontario spent its way into deficit danger
NationalPost.com – Full Comment – Kevin Gaudet: Ontario spent its way into deficit danger
Posted: October 31, 2008. Kevin Gaudet
Premier Dalton McGuinty and Finance Minister Dwight Duncan recently issued Ontario’s Fall Economic Statement, announcing that, despite being one of the last governments in the country to balance its books, Ontario will be one of the first to rush back to deficit financing. This holdup of Ontario taxpayers is unnecessary, was avoidable and could still be averted with little effort and no cuts to spending. Taxpayers should turn to four rules of fiscal sanity for needed protection from the McGuinty-Duncan gang’s nasty deficit deeds.
The first rule would outlaw spending over what was budgeted, even if revenues surpass expectations.
If the government had stuck to its spending target, there would be no deficit at all. The March, 2008, budget shows planned program spending at $86.2-billion. Yet, the McGuinty-Duncan gang is planning to break the bank by spending $86.9-billion — $700-million over budget. Their failure to meet their own spending targets is causing a deficit.
There is much talk lately, especially amongst pointy-headed economists, about whether so-called short-term deficits are acceptable. Premier McGuinty is trying to rely on part of this debate to justify holding up future taxpayers. But economists make it clear that deficits need to be paid off — and Ontario hasn’t done so. When Ontario tax revenues climbed by 42% in five years, only a paltry sum was paid back against the province’s $172-billion debt. Instead, almost every penny was spent.
In each of its completed budget years, the McGuinty government has increased spending by more than twice inflation and population growth — combined. This is unsustainable and a result, in part, of having imposed the single largest tax hike in the history of Ontario through a health tax which drains over $2.6-billion a year from the pockets of Ontarians.
The second rule is a cap that would limit spending to no more than the combined rate of inflation and population growth. Such a rule would have kept the revenue windfall from having been irresponsibly spent away. Instead, debt would be falling, interest charges would be too and we would be nowhere near a deficit.
The third is a taxpayer protection act that would require balanced budgets and outlaw tax hikes without voter approval.
Ontario used to have such a law. It was put in place by Mike Harris with McGuinty’s support. But when McGuinty became Premier, he gutted the law so he could raise taxes and run deficits. With such a rule taxpayers wouldn’t be facing the prospect of deficits for the unforeseen future.
Finally, the rule of holes: When you realize you are in one, stop digging.
For March, 2008, Ontario’s total debt was projected to be $162.9-billion. Six months later, in September, 2008, it had grown to $172.3-billion. That is $13,461 for each man, woman and child in Ontario. To service this substantial and increasing debt load taxpayers pay $8.9-billion a year — $1.02-million per hour. What do we get for this expenditure?
Simply put, nothing.
From every dollar of tax sent in to the province by Ontario taxpayers, 10¢ goes to bank charges merely to pay interest on the debt. The Ontario government spends enough money in interest charges to build nine new Rogers Centres — every year. And this doesn’t even take into account that the giant outstanding principal needs to be paid off at some point.
As if this weren’t bad enough, the McGuinty-Duncan gang are adding another $500-million to this burden, meaning even more money will go to the banks and not to programs or tax relief. Taxpayers need protection from these deficits deeds.
National Post • Kevin Gaudet is Ontario director of the Canadian Taxpayers Federation.