« "Cyclically-adjusted deficit" is not a macroeconomic concept | Main | Why politicians court the middle class »


Feed You can follow this conversation by subscribing to the comment feed for this post.

With regards to Manitoba, it might have been the floods which fiscally impacted them quite heavily.

Professor, per-capita numbers might be more useful, depending on what you are aiming to show. Ontario and Quebec, after all, represent about 63% of the Canadian population.

This is not the provincial debt post I was expecting! I thought that you (or maybe Mike) would comment on this: http://www.macdonaldlaurier.ca/files/pdf/Provincial-Solvency-October-2012.pdf.

Well Phil, that MacDonald Laurier report by Marc Joffe on provincial solvency is quite interesting. I've been going to conferences over the last week and was in the process of digesting it but this is as good a time as any to provide a quick summary. As the summary states: "Due to population aging, the provincial models forecast lower labor force participation, less economic growth and higher health spending in later years. Depending on how quickly interest rates revert to their post-World War II means provinces are at risk of encountering solvency crises over the next 10-30 years if fiscal policies do not change." The crucial threshold based on a review of the historical evidence is spending more than 25% of your revenues on debt service and no province is near this point at present or expected to be in the near term. The long run of 10-30 years out is a different matter. According to this report, Ontario apparently has one of the highest risks of default in the longer term due to its large annual deficits as does Alberta. The interest rates facing the provinces are quite low and uniform and do not appear to reflect the risks because there seems to be an expectation that the federal government will assist the provinces if they run into difficulties in meeting their obligations. That however is not a sure thing. There seems to be some debate as to whether or not the federal government is obligated in any way to bail out provinces.

I looked at the Manitoba situation and apparently a good bit of the later run up in debt was a huge expenditure related to flooding in 2011. Nearly a billion in costs related to that.

Interestingly none of the things blamed for debt run up in PEI (above and beyond stimulus and cyclical budget issues). Here they're blaming a slowdown in transfer growth, losses in provincial pension funds and continued capital spending on a development plan.

Agree that per capita or per GNP growth would be helpful. If Alberta were to add a billion of debt the growth rate would be stratospheric but untroubling.

The comments to this entry are closed.

Search this site

  • Google

Blog powered by Typepad