Ah, budgets don’t balance themselves, and it’s also true that budgets don’t deficit themselves either. Both require choices. And voters have to ask that, in a period of economic growth, why the heck are we ballooning our debts and deficits by so much? If we can’t make the tough choices when times are reasonably good, we sure as heck won’t be able to make them when times are tough. But that’s somebody else’s problem, right?
Here’s the truth: budgeting in Canada is an illusion to begin with. Case in point: Ontario’s deficit is expected to be $6.7 billion this year, but our debt is rising by about $12 billion. Why is that? It’s because governments long ago separated their capital spending from their operating spending, and really, showing debts and deficits in this way is a shell game. If you want a better looking deficit, place more expenses on the capital budget ledger. When Canadians hear about hundreds of billions of dollars in infrastructure spending over the next decade, they should know that this is hundreds of billions of dollars being added to the debt.
Then, there’s the BS of debt-to-GDP ratios as a measure of how strong a province’s fiscal management is. In Ontario, the debt-to-GDP ratio as reported by the government is hovering around 37%. That is the size of the debt relative to the size of our economy. By most measures, a debt-to-GDP ratio under 40% isn’t horrible. However, what’s so ridiculous about measuring fiscal management by this measure is that Ontario is a sub-national government. That means that the Ontario economy not only needs to prop up it’s sub-national debt obligations, but also its portion of national debt obligations. Combining the sub-national and Ontario’s portion of the national debt, the Ontario economy’s debt-t0-GDP ratio is getting closer to 70%. This gets you in the territory of shaky European countries that are struggling.
As I write this, I’m reminded of an e-mail chain that was going through Ontario’s Ministry of Finance. These bureaucrats were mocking the government’s fiscal prudence, but were ultimately tasked with providing advice on how to present the budget to Ontarians. The emails show that the projections were a fabrication. FAKE NEWS, if you will. There were about a dozen recommendations presented to the Finance Minister. The very last option was to not present medium to long term fiscal projections. The option came with the recommendation that this option “would not be acceptable in the post-Drummond era.” What did the government choose to do? It chose to not publish medium to long term fiscal projections. For years, we were not privy to the government’s economic projections. FAKE NEWS to hide the truth. By the way, the Minister of Finance had to plea with our committee not to release these sensitive e-mails exposing this debauchery. Right. Transparency at its best. Open government loses again.
So this is the major point. What budgeting has become is an illusion of truth. What governments are telling us is the best spin hoping we’ll be distracted by the goodies to not bother to look at the mess. David Copperfield would be proud. Governments are going to tell voters that not proceeding with all its new spending will be the end of life as we know it. However, the truth of the matter is that government budgeting is in massive need of a correction. It’s in a bubble, and it’s distorting what’s really happening in the economy. Governments have become self-absorbed. It is caring more about its own internal pet projects than the public it serves, and that leads to decisions that get us to a spot we are in right now. Unchecked spending with no sign of relenting.
The sooner we get out of this mess, the better off we will be in the long run.