And to preserve their independence, we must not let our rulers load us with perpetual debt. We must make our election between economy and liberty, or profusion and servitude.
— Thomas Jefferson
Debt and deficits seem to be taking a big share of the news these days both internationally and within Canada. Part of this is understandable in that we incurred the largest national deficit in our country’s history and no provincial government was able to balance the books. While stimulus spending was required to keep the economy solvent, places like Greece underscore the problems of public debt run amok.
On a local level, municipalities and regional districts are prohibited by law from running a deficit on operations. However, we do borrow for capital projects like water treatment plants and recreational facilities. All of our operating expenses and a good portion of our capital works are funded from the annual tax and utility draw.
Deficits and debt are just taxes you pay later with interest. At some point the other shoe will have to drop and debt will have to be addressed. We all would like a tax cut, but that can only happen in the context of a balanced budget. If a government cuts taxes and runs a deficit, they didn’t really cut your taxes so much as they borrowed them. Now, there are times where short-term deficits are appropriate to stabilize the economy. The big demon is when we have a structural deficit. This is when a government’s revenues don’t meet its expenses in periods of normal economic activity. Canada went through decades of structural deficits, which is where most of our national debt originates.
That said, one shouldn’t view all debt as being bad. Like any enterprise, improvement requires investment. When governments fund new roads, bridges or other infrastructure they create a framework for growth in the economy. Our nation was forged in an investment in a national railway. Upgrades to roads, water systems and other infrastructure are the base on which our economy rests. We couldn’t function as a modern society without building hospitals, schools, police stations and the like. As such, we should not view all debt as the squandering of tax dollars.
We see debt and deficits measured in various ways. There is the absolute amount of the debt, debt expressed as an amount per person and debt measured against the size of a national or provincial economy.
For the sake of comparison, I am going to use debt per person because ultimately this is the amount that taxpayers (or their grandchildren) are going to collectively have to pay.
The good news is that up until recently, Canada and the provinces had been doing a pretty good job of both balancing budgets and paying down debt. This has put us in a relatively enviable position with respect to our debt load as taxpayers.
According to the Canadian Taxpayers Federation our national debt clock is now over $500 billion and each one of us owes about $15,500 in federal debt. About 14 cents of every tax dollar collected is used to pay interest on amounts owing. While significant, this is less than our obligations were 1997 (even before inflation) mostly because up until recently, this clock was running backwards. To examine the full public debt picture we also need to review the debt load for our own province and area.
It turns out that while Canada is doing relatively well on the debt front by international comparisons, British Columbia is doing well relative to the other provinces. Only oil rich Alberta has a lower debt load but ours works out to about 29 billion dollars. This is about $6,500 per person so our provincial and national total is about $22,000. About three quarters of this debt is held by individual Canadians and Canadian companies. The rest is held outside our borders.
If we look at our regional district, the Municipal Finance Authority compiles statistics for municipal debt loads. All the member municipalities in the TNRD owe a combined total of just under $103 million. This represents a net reduction in total debt of about $6 million from the year previous. At $842 per resident, our regional debt load is well below the provincial average of $1,134 and significantly below what has been borrowed by districts in our region of the province. The other big difference is that all of this debt has gone towards building something versus funding the day-to-day operations of local government.
So, if you want to know your share of the total public debt, in round numbers it’s about $23,000. Greece, with a much less developed economy owes about $37,000 per head and has become an economic basket case. While I am sure all levels of government will happily accept your additional contribution towards their various loans (don’t all rush in at once), a growing economy and a steady stream of surplus budgets is the only real solution. It’s certainly not a problem we can afford to ignore.
