Another Canadian Debt Ranking

Statistics Canada has released provisional estimates of the Canadian Government Finance Statistics (CGFS) for financial flows and the balance sheets of general government and government business enterprises for the period 2007 to 2012. The net liabilities per capita picture for provincial and territorial governments has changed since the 2008 global financial crisis.

In 2007, Newfoundland and Labrador had the highest net liabilities per capita at $13,505 dollars while by 2012, Ontario posted the highest net liability position per capita. (See Figure)  Ontario’s grew from $9,849 in 2007 to $17,734 in 2012, an increase of 80.1%. In contrast, in 2012 the net liability position per capita of Newfoundland and Labrador ranked seventh, at $9,175 dollars, a 32.1% decline compared with 2007.  Alberta, Yukon, Northwest Territories and Nunavut were the only jurisdictions to record a per capita net financial asset position.

While Ontario now has the highest per capita net provincial government liabilities, its growth rate of 80.1 percent was actually third – after British Columbia at 139.5 percent and Nunavut at 87.7 percent.  Of course, what is more interesting is what is driving these performances. In the case of Ontario, it is argued by Jean-Francois Wen that its debt is fueled by high spending - rather than weak revenue growth.  Moreover, this spending is mainly from operating deficits rather than capital investments.  And, if you want to know where things might be going for Ontario as it strives to balance its budget, here is a short progress report on why Ontario is unlikely to balance its budget.

Comments

[Bob Smith]

We're number 1! We're number 1!

What, not good?

[Andrew F]

Doesn't Ontario have among the lowest per capita program expenditures of all the provinces? Not following how the Ontario debt increase is attributable to high spending.

[Colin Percival]

"While Ontario now has the highest per capita net provincial government liabilities, its growth rate of 80.1 percent was actually third – after British Columbia at 139.5 percent and Nunavut at 87.7 percent."

Relative growth rates like this are meaningless, because the denominator is not bounded away from zero. If you look at the superprovince of BC-Alberta-Saskatchewan-Manitoba-New-Brunswick-Nova-Scotia-Yukon-Northwest-Territories-Nunavut, you'll see that its net financial debt increased by 6315% from $671M to $43.05B over that same five year period, even though none of the 9 individual provinces and territories had anywhere near such a dramatic increase in debt, simply because the assets and debts almost exactly cancel at the start of the period.

To meaningfully answer the question "how much has Province X's debt increased" you should be subtracting, not dividing; it looks to me like NWT comes "first" here, at about $9000 per capita, with Ontario closely behind at about $8000 per capita, while BC's debt increase of around $3000 per capita is one of the smaller values.

[Bob Smith]

Andrew,

I think it's fair to say that Ontario's debt arises from high spending relative to income (namely because Ontario has some of the lowest tax rates for the middle class in Canada). Since no Ontario political party has any appetite for serious tax increases (which, I think, is a fair statement. A willingness to increase taxes that don't raise much in terms of revenue - corporate taxes, a tax on the "rich" isn't a serious tax policy), Ontario has a spending problem.

[Andrew F]

That sounds like a revenue problem, to me.

[Bob Smith]

Right, but unless you're willing to increase taxes, you have a spending problem. If you're unwilling to cut spending, you have a revenue problem. If you're unwilling to do either, well, you're the current government.