How Ontario squandered a debt-free future

How did the province stray so far off course?

Reading Time: 3 minutes

Jay GoldbergThe numbers are a bit shocking: if successive Ontario governments had been just a little prudent with money, the province’s massive debt would be exactly zero.

Instead, Finance Minister Peter Bethlenfalvy announced a few weeks ago that Ontario’s government debt now exceeds $400 billion.

Rather than being the envy of other provinces, Ontario today is the most indebted sub-national unit in the entire world.

How exactly could Ontario have been debt-free? How did the province stray so far off course?

Many people in their golden years look back on a moment that represented a turning point in their lives.

For Ontario’s finances, the moment was the winter of 2005. That was the last time Ontario’s political leaders balanced the provincial budget.

In 2005-06, the McGuinty government, then still serving its first term, proposed that the province spend roughly $84 billion to cover the province’s expenses.

Had the McGuinty government and its successors simply increased government spending at the rate of inflation plus population growth annually between then and now, government spending this year would be $61 billion lower.

Compared to an inflation plus population growth baseline, Ontario governments have overspent over the past sixteen years to the tune of $429 billion. That’s $2 billion more than the provincial debt today.

Had Ontario followed this path, the province would be debt-free with a $2 billion rainy day fund.

Some might argue that keeping government spending in line with inflation plus population growth should be considered underspending.

But take the argument to the individual level.

Many Ontarians receive annual cost-of-living raises to keep up with inflation. They then spend that additional money to keep abreast of rising costs.

Government can, and should, operate the same way. As taxpayers earn and spend more money to keep pace with rising costs, the result is government revenue growth. The government should, in turn, increase spending at a similar rate, just as households do.

Increasing government spending at the rate of inflation plus population growth, therefore, is essentially maintaining government services at the status quo.

Are there many Ontarians out there who think that the quality of government services this year is $61 billion better than it was in 2005?

Rather than keeping government spending in line with inflation plus population growth, McGuinty, Wynne and Ford have increased spending over the past 16 years at an average rate of 8.5 per cent.

Keep an Eye on Ontario

That means government spending today is higher than it was in 2005 by over 126 per cent.

What if the province had stuck to spending the money it actually had? Since 2006, revenues have gone up by a healthy 5.4 per cent every year. If the government contented itself with spending every penny, but resisted the urge to grab the credit card, the debt would be a quarter of a billion dollars lower.

Click here to downloadThe bottom line is that Ontario’s politicians have been on a 16-year spending binge. Taxpayers, and future generations, are paying the price.

With such massive government overspending, the Ford government should not reject spending cuts.

Ontario Premier Doug Ford continues to rule out spending cuts to help balance the province’s books.

But if Ontario ever wants to get back on a path toward fiscal sanity, prudent reductions in government spending need to be on the table.

Three successive governments here in Ontario should be blamed for trading away a debt-free Ontario for $400 billion in government debt.

Ford can point out that much of the fault lies at the feet of his predecessors, and he wouldn’t be wrong.

But Ford is in the premier’s office today. If the province is to correct course, he needs to lead the charge.

Jay Goldberg is the Ontario Director for the Canadian Taxpayers Federation.

Jay is a Troy Media Thought Leader. For interview requests, click here.


The opinions expressed by our columnists and contributors are theirs alone and do not inherently or expressly reflect the views of our publication.

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Jay Goldberg

Jay Goldberg spent most of his career in academia, where he was most recently a policy fellow at the Munk School of Public Policy and Global Affairs at the University of Toronto. He holds an Honours Bachelor’s Degree in Political Science from the University of Toronto, and a Master of Arts Degree in Political Science from the University of British Columbia.

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