The Fraser Institute

The Fraser Institute

February 04, 2015 06:26 ET

The Fraser Institute: Ontario's Borrowing to Fund Day-to-Day Expenses has Government Debt Growing at an Unsustainable Rate

VANCOUVER, BRITISH COLUMBIA--(Marketwired - Feb. 4, 2015) - Ontario's provincial debt has grown by $117 billion since the recession, largely because of government borrowing to fund day-to-day expenses - not investments in infrastructure - finds a new study released today by the Fraser Institute, an independent, non-partisan Canadian public policy think-tank.

"Governments typically borrow money as a means to finance long-lived assets such as roads, schools or hospitals. In Ontario's case, the province has gone deeper into debt to pay for day-to-day expenses such as the salaries and pensions of government employees and is passing the bill on to future generations," said Jean-François Wen, study author and professor of economics at the University of Calgary.

The study, Ontario's Debt Balloon: Source and Sustainability, calculates that 66 per cent of the increase in debt since the 2008/09 recession is directly attributable to day-to-day expenses exceeding revenues on an annual basis.

Since the recession, the per-person debt burden has grown by $7,800 for each Ontarian. By the end of the 2014/15 fiscal year, Ontario's net debt is expected to total $287 billion, representing 40 per cent of the provincial economy or $21,000 per person.

The study concludes that the growth in debt is unsustainable and will require a change in fiscal direction including a marked reduction in spending.

"If the Ontario government fails to change course, its unsustainable fiscal policies could provoke further credit rating downgrades, higher borrowing costs and spiralling interest payments," said Charles Lammam, Fraser Institute associate director of tax and fiscal policy.

"Already, in 2014/15, more than nine cents of every revenue dollar goes to debt interest payments and not towards government programs or pro-growth tax reductions."

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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 measure, study, and communicate the impact of competitive markets and government intervention on the welfare of individuals. 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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