Rick Nicholls, the Progressive Conservative Party MPP for Chatham-Kent-Essex, posted an interesting comment in the Windsor Star on April 9, 2013. It is reproduced below.
Guest column: Debt and deficit
Apr 09, 2013 – 6:27 PM EDT
Last Updated: Apr 10, 2013 – 5:19 AM EDT
By Rick Nichols
Do you know the difference between our debt and deficit? The truth is Ontario is facing a debt and deficit crisis and many Ontarians are unaware of the scale of the province’s problems.
Allow me to clarify and put this into perspective.
The provincial deficit is the difference between the amount of money the government takes in and what the government spends in one year. When a government runs a deficit, then it must borrow money to make up the difference. The provincial debt is the total amount of accumulated deficits. If the government continually runs deficits, then its debt will continue to grow.
For 2012-13, the deficit for the province of Ontario is forecast at $12 billion and the total provincial debt is forecasted to reach $275 billion. Since 2003, that is an increase of 220 per cent in the last 10 years of government. In my opinion, that is totally unacceptable and as a province we MUST do better or face bankruptcy.
The State of California is one jurisdiction which has gained international attention due to its debt and fiscal problems. But Ontario is substantially worse than California. Our debt is approximately 75 per cent larger, but since our population and economy are much smaller than California, our debt/GDP ratio is considerably higher (38.6 per cent to 7.7 per cent).
In fact, our troubled fiscal situation is now approaching that of Greece. Ontario and Greece are both marked by a long-term imbalance between revenues and expenditures, with little attempt to narrow the gap. Greece, with a similar population to Ontario, had a debt/GDP ratio of 37 per cent back in 1994 exactly where we are today, but has since risen to 66 per cent in 1994 and to 163 per cent today.
The government now spends over $10 billion a year in interest payments just to service the huge debt. To put it in perspective, paying the interest on the debt is the third largest provincial government expenditure next to health and education.
Record debt levels in Ontario could translate into even higher borrowing costs to further compound our fiscal difficulties. International credit rating institutions, Standard & Poor as well as Moody’s have both recently downgraded Ontario’s credit outlook and cut the province’s credit rating. And on an even gloomier note, an increase in interest rates by just one per cent will mean Ontario taxpayers will have to pay an additional $500 million in interest payments with nothing to show.
To make matters worse, rather than addressing the fiscal crisis in Ontario, there has not been a commitment to reduce spending and it has even been hinted at raising taxes to pay for all the borrowing. I believe that’s the wrong path.
Urgent action and a new approach are required to protect the things we value most – like health care, education and job creation.
Spending beyond our means cuts off our capacity to pay for the things we care about. This is the great irony of those who oppose the difficult decisions and bold ideas. We can talk all we want about compassion, but the overspending approach has robbed us of the ability to be compassionate in the first place.
Our PC approach is aimed specifically at getting Ontarians back to work, creating jobs, getting rising energy costs under control and improving efficiencies where we can do more with less. That way we can balance the deficit and begin to pay down the debt. Our future and the future of our children and grandchildren is dependent on the success of a PC government implementing its strategies.
Rick Nicholls is the Progressive Conservative Party MPP for Chatham-Kent-Essex.