If Canadians tried this trick with their mortgages, they would default and lose their houses. Governments, on the other hand, simply raise taxes in an attempt to raise more money
Wynne Is Promising More Debt, Not Less
By Canadian Taxpayers Federation -- Aaron Wudrick, Federal Director——Bio and Archives--January 28, 2015
Ontario Premier Kathleen Wynne is ambitious. Government, she argues, needs to play a bigger role in “nation building.” To this end, on a recent visit to Ottawa, Wynne called on the federal government to commit to spending 5 per cent of Canada’s GDP on infrastructure projects.
Now, 5 per cent of anything might not sound like very much. Indeed, she argues, Canada already spends between 3 to 3.5 per cent of its GDP on infrastructure. What’s 1.5 per cent more?
As it turns out, 1.5 per cent more of GDP is about $30 to 40 billion dollars more. Per year. Every year. It’s triple the current deficit of the province she’s in charge of, and at least five times what the federal government has already committed ($70 billion over ten years) to spend on infrastructure. It is even more than what was spent during the first year of the ill-advised federal stimulus binge which began in 2009.
In short, it is a massive sum of money. And perhaps most troubling of all is that Wynne does not even feel compelled to tell us what the money should be spent on – merely that it needs to be spent! First commit to spending a certain amount, she says. We can figure out what to spend it on later.
One does not need a degree in economics to grasp how reckless this sounds. To the average person, hearing a politician who cannot even come to close to balancing her own books, encouraging another government to pile up massive debts for the purpose of building unknown things, must seem rather odd. And to their credit, the federal government, which has committed to balancing its budget this year, seems largely uninterested in “partnering” with a provincial government whose fiscal health is moving rapidly in the opposite direction.
There is no simply escaping the fact that every dollar – or billions of dollars, as is the case today – that is spent paying interest on debt is money we cannot, by definition, spend on something else instead. When governments borrow money, it is not from some undefined giant bank floating in the sky. It is from our own future – and from our children and grandchildren.
Sometimes politicians will suggest that money borrowed from tomorrow and spent today is an “investment” in the future. This is a clever rhetorical trick, but it skips over the fact that it shifts the cost burden forward onto other people – some who have not even been born yet – who often derive no benefit whatsoever from these “investments.”
Another example proffered by big spending politicians is the example of mortgages as “good” debt. It makes sense for people to borrow to buy a house to live in, they say, and pay it off over time. So why shouldn’t governments?
This is a disingenuous analogy, since the failure of government at all levels to pay down public debt is precisely the reason Canadians now find themselves drowning in it. If Canadians tried this trick with their mortgages, they would default and lose their houses. Governments, on the other hand, simply raise taxes in an attempt to raise more money.
And this is what Premier Wynne is really proposing: ignore your mortgage; take out a second one; and someday, down the road, somebody else will pay for it with ever higher taxes. The federal government ignoring this request is probably the politest thing they could have done.
