SOURCE: The Fraser Institute

The Fraser Institute

February 18, 2016 05:30 ET

Fraser Institute News Release: Spending to Blame for Ontario's Chronic Deficits and Massive Debt -- Not a Weak Economy

TORONTO, ON--(Marketwired - February 18, 2016) -  Government spending -- not slumping revenues -- is responsible for Ontario's chronic budget deficits, finds a new study released today by the Fraser Institute, an independent, non-partisan Canadian public policy think-tank.

"According to a popular narrative at Queen's Park, Ontario's large deficits and massive debt are unavoidable consequences of the 2008 global economic downturn and other uncontrollable economic forces. But in reality, Ontario's years of rapid spending growth are to blame," said Ben Eisen, associate director of the Ontario Prosperity Initiative at the Fraser Institute and co-author of Spending is the Source of Ontario's Deficit and Debt Problem.

For example, between 2003/04 and 2015/16, provincial program spending (spending on day-to-day government operations) in Ontario increased by 71.6 per cent -- to $120.9 billion from $70.4 billion. During this period, program spending grew faster than 1) economic growth in the province, and 2) inflation and population growth combined.

In fact, had Ontario restrained program spending increases since 2003/04 to the rate of economic growth, the government would have a $10.7 billion surplus this fiscal year rather than a $7.5 billion deficit. Had program spending simply kept pace with inflation and population growth, the surplus would be even larger.

The current government has, over the past few years, slowed the rate of spending growth, which was unsustainably rapid in the years leading up to and during the recession. However, these steps have clearly been inadequate in addressing Ontario's fiscal problems, as the province continues to rack up debt.

Ontario has run 10 budget deficits in the past 13 years (with more to come) and the province's net debt (projected to reach $298 billion in 2015/16) has more than doubled since 2003/04.

"If successive Ontario governments had exercised greater control of spending, provincial finances would be in much better shape today," said Charles Lammam, study co-author and Fraser Institute director of fiscal studies.

"As policymakers at Queen's Park prepare to table this year's provincial budget, they should recognize the source of today's deficit and debt problem-government spending," Eisen said.

MEDIA CONTACT:
For interviews with Mr. Eisen or Mr. Lammam, please contact:
Aanand Radia, Media Relations Specialist, Fraser Institute
(416) 363-6575 ext. 238
aanand.radia@fraserinstitute.org
@FraserInstitute

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The Fraser Institute is an independent Canadian public policy research and educational organization with offices in Vancouver, Calgary, Toronto, and Montreal and ties to a global network of think-tanks in 87 countries. Its mission is to improve the quality of life for Canadians, their families and future generations by studying, measuring and broadly communicating the effects of government policies, entrepreneurship and choice on their well-being. To protect the Institute's independence, it does not accept grants from governments or contracts for research. Visit www.fraserinstitute.org

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