[crs1026]

Your house isn't an economy. You'll die one day, states don't. That (among other things) changes everything regarding personal vs. government finances.

The difference is - since my house is paid off, when I die, my kids will inherit it free and clear. Whereas with government, they will inherit my share of the provincial debt and have to carry it, as well as paying for whatever services that they get from government.

If you look at where the debt is being spent, an awful lot is going to services for an "aging population". I.e. - people who will die before paying it all back.

How is adding new debt at a faster rate than paying off old debt a good thing, in the long run?

Exactly. I don't have a problem with government borrowing to build, such as to create infrastructure.... provided there is a paydown schedule and the asset doesn't reach zero value before it's paid off. Just racking it up debt for things that don't hold value is less prudent.

- Paul

 

[Amare]

The deficit reduction has been consistently outperforming the government's expectations, if I'm reading this correctly.

That's actually pretty surprising. I guess I was wrong in my earlier assessment.

But on the other hand this shows they havent had a lot of urgency in the past in reducing the deficit, they've just been chipping away at it with their forecasting as if they can take the next 30 years to reduce it.

 

[LNahid2000]

In contrast, the interest on the provincial debt is increasing, meaning that any paying down of the principal is being overwhelmed by adding new principal (i.e. new government bonds). This growing interest burden decreases the fiscal flexibility of the government, edging out other important government priorities like health care and education. That's the problem.

This isn't really an issue if GDP (and thus tax revenues) are increasing faster than the increase in absolute interest expenses. Looking at absolute debt and interest expenses is pointless.

 

[pstogios]

This isn't really an issue if GDP (and thus tax revenues) are increasing faster than the increase in absolute interest expenses. Looking at absolute debt and interest expenses is pointless.

If the tax revenues from growth in GDP are put towards debt pay-down, sure, then that's relevant.

But if they aren't, we will be paying (wasting) $11B per year ad infinitum.

Are you ok with wasting that huge sum of money, forever?

 

[LNahid2000]

If the tax revenues from growth in GDP are put towards debt pay-down, sure, then that's relevant.

But if they aren't, we will be paying (wasting) $11B per year ad infinitum.

Are you ok with wasting that huge sum of money, forever?

Like I said before, looking at absolute numbers is pointless. Please compare the $11 billion to something. I don't know whether that's actually a huge sum or not without comparing it to anything.

Also, we'll be in a surplus eventually, so it's not forever.

 

[CodeMonkey]

The loans officer at the bank kept feeding me a similar line whenever I paid down my mortgage. Oddly, my standard of living improved greatly once I paid it off altogether.

Ontario is not doing itself any favours by allowing itself to be the nation's queen of debt. It won't take much of an uptick in interest rates for the chickens to come home.

- Paul

Yes, an "uptick in interest rates" would first result in National Post and Toronto Sun filling for bankruptcy. Half (if not all) Canadians, cost to cost, will default first, because they bought million dollar homes on low interest rates will become unmanageable for most if an "uptick" will occur.

If anything, this is the perfect time to take out a loan for the province. The bonds will be locked in to the low rate and interest rates will be manageable in the future when the economy improves....unless the U.S. elects Donald Trump, then debt or no debt, we're doomed.

 

[Johnny Au]

States are eternal. Unlike you and the rest of us mortals, states never stop working (generating money), and because they don't die, there's never a point where states have to stop taking on debt or have $0 in debt. Comparing state debt to your own personal finances is nonsensical. States and individuals are fundamentally different.

States come and go.

States can vanish out of the world map. New states can appear on the world map.

TTM, what happens to debt if states become newly established or disestablished? Money is a finite resource after all (because printing too much money would lead to disastrous consequences (note Weimar Germany and Zimbabwe)).

 

[CodeMonkey]

States come and go.

States can vanish out of the world map. New states can appear on the world map.

TTM, what happens to debt if states become newly established or disestablished? Money is a finite resource after all (because printing too much money would lead to disastrous consequences (note Weimar Germany and Zimbabwe)).

Difference is, Ontario doesn't create money that lead to problems in Germany and Zimbabwe and since we're an export economy, we're more at risk if other nations are disestablished, or crash or fail, etc etc. And most countries of those where the result of wars and unstable governments to begin with.

 

[EnviroTO]

We need to be sure our revenues have no issue paying for all the operational costs of government, state of good repair, interest, and asset depreciation over time. Taking on debt to build new assets is fine as long as the longer term ability to pay for everything else isn't being jeopardized. Having some years where not all the non asset costs are paid for is fine but only as long at very conservative economic forecasting models show that over a ten year period the non asset costs will be fully covered by revenues.

 

[pstogios]

Like I said before, looking at absolute numbers is pointless. Please compare the $11 billion to something. I don't know whether that's actually a huge sum or not without comparing it to anything.

http://news.nationalpost.com/news/c...ncome-families-and-31-things-you-need-to-know
"Simply servicing the debt remains the province’s third-largest single line item in the 2016 budget, behind only health care and public education."

If that's not too much debt, I don't know what is.

 

[LNahid2000]

http://news.nationalpost.com/news/c...ncome-families-and-31-things-you-need-to-know
"Simply servicing the debt remains the province’s third-largest single line item in the 2016 budget, behind only health care and public education."

If that's not too much debt, I don't know what is.

You're still looking at an absolute dollar value. How much is that as a percentage of the provincial budget? How much has it been as a percentage of the provincial budget in previous years? I did some research:

Doesn't look so bad now to me.

 

[crs1026]

Like I said before, looking at absolute numbers is pointless. Please compare the $11 billion to something. I don't know whether that's actually a huge sum or not without comparing it to anything.

Also, we'll be in a surplus eventually, so it's not forever.

Okay......so let's put it this way. We could build an entire new DRL Long every year for the money that goes in interest payments. With enough left over to fund a teaching hospital.

A surplus eventually? Every budget since 1970 has claimed that. That statement is used constantly by politicians and governments. That's the issue. We incurred deficits in 2008-2009 because the economy tanked. We said the stimulus would pay off in a few years. Now we have an oil price crisis. So, in the years we were suposed to have a surplus, we have more deficit spending. There will be new economic crisis, or a war, or something, every few years. The only time period we control is the present.

We are also in a decade of unusually low interest rates, clearly at the bottom of a cycle. We can't assume this is normal. That $11B will rise dramatically one day.

- Paul

 

[LNahid2000]

We are also in a decade of unusually low interest rates, clearly at the bottom of a cycle. We can't assume this is normal. That $11B will rise dramatically one day.

How do you know this? If we stop borrowing when interest rates go up, how will our interest payments increase? Bonds have a fixed interest rate.

Also, you don't know if there will always be a new economic crisis. You're making assumptions here.

 

[kEiThZ]

The sad thing is the deficit could be slayed with a judicious level of spending restraint, particularly on wages and a modest increase in taxation, e.g. 1% increase in HST, as politically unpopular as it maybe. If one is so keen on the debt issue, one should consider the amount of tax reduction over the years instead of doing the doom and gloom but when push comes to shove, prioritizes additional tax cuts that would only shrink the pie further.

AoD

I keep saying this. I wish the Liberals had sucked it up and just raised the HST 2% as Harper was cutting back. That would have given them the revenue needed. No trying to find sneaky ways to raise revenue like this non-neutral cap and trade.

 

[k10ery]

I keep saying this. I wish the Liberals had sucked it up and just raised the HST 2% as Harper was cutting back. That would have given them the revenue needed. No trying to find sneaky ways to raise revenue like this non-neutral cap and trade.

When Harper cut the GST, Ontario went from RST to HST, which had the effect of raising taxes on consumers almost as much as a two point bump in the rate. So good news, you got your wish already.

Cap and trade and/or carbon taxes is the only sensible way for tax policies to go in the future. Of course, the OLP is botching it more than a little, but they're moving in the right direction.