Study
| EST. READ TIME 2 MIN.Comparing the Debt Burdens of Ontario and California
To many in the United States and Canada, California represents the epitome of irresponsible government spending coupled with poor cash management. However, the province of Ontario is carrying a much worse debt burden than the state of California. This paper uses a host of measures to compare Ontario's indebtedness to California's.
For instance, in a comparison of the outstanding gross amount of debt in the form of government-issued bonds, California (in the most recent year for which the data are available) carried US$144.8 billion, while Ontario carried CAD$267.5 billion, almost double California's amount. This figure understates the disparity between the two regions, because California has a much larger economy and government revenues than Ontario. The gross debt in the form of bonds is 7.6% of California's economy, while it is a whopping 40.9% of Ontario's economy.
Per person, Ontarians currently owe $20,166 (Cdn) compared to $3,844 for Californians more than 5 times the per capita level of debt. Consequently, Ontarians shoulder much higher debt servicing costs: 9.2% of budget revenues in Ontario are devoted to interest payments compared to 2.8% in California.
The solution to government debt problems are the same as for a household: spending must be brought in line with income. Fortunately, no harsh cuts are needed in Ontario's case; restraint in the growth of provincial spending will return the province to financial security. Ontario can be put back on a solid financial footing if spending growth on programs (not counting interest payments on the debt) is limited to 4 percent per year. This recommendation sounds modest, but represents a much tighter rein on spending growth than has been the case in Ontario over the last decade. The solution sounds simple, but the problem is very real. Ontario?s current financial trajectory is unsustainable. Serious curbs on spending growth may be uncomfortable now, but they will avert the possibility of a much worse budget crunch later on.
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Robert P. Murphy
Senior Fellow, Fraser Institute
Robert P. Murphy is a Senior Fellow at the Fraser Institute and Chief Economist at Infineo and author of the widely acclaimed book,Choice: Cooperation, Enterprise, and Human Action. He is also a Senior Fellow with the Mises Institute. He received his Ph.D. in economics from New York University. Previous positions include Research Assistant Professor with the Free Market Institute at Texas Tech University, Visiting Assistant Professor of Economics at Hillsdale College, Senior Economist at the Institute for Energy Research, Visiting Scholar at New York University, Research Analyst at Laffer Associates, and Senior Fellow in Business and Economic Studies at the Pacific Research Institute. Prof. Murphy runs the blog, Free Advice and hosts the podcast, The Bob Murphy Show. He is the author of The Politically Incorrect Guide to Capitalism, The Politically Incorrect Guide to the Great Depression and the New Deal, The Study Guide to Man, Economy, and State with Power and Market, The Human Action Study Guide, The Study Guide to The Theory of Money & Credit by Ludwig von Mises, and Lessons for the Young Economist. He has also written hundreds of economics articles for the layperson, has given numerous radio and television interviews on such outlets as Fox Business and CNBC, and is active on Twitter (@BobMurphyEcon).… Read more -
Milagros Palacios
Director, Addington Centre for Measurement, Fraser Institute
Milagros Palacios is the Director for the Addington Centre for Measurement at the Fraser Institute. She holds a B.S. in IndustrialEngineering from the Pontifical Catholic University of Peru and a M.Sc. in Economics from the University of Concepcion, Chile. Ms. Palacios has studied public policy involving taxation, government finances, investment, productivity, labour markets, and charitable giving, for nearly 10 years. Since joining the Institute, Ms. Palacios has authored or coauthored over 70 comprehensive research studies, 70 commentaries and four books. Her recent commentaries have appeared in major Canadian newspapers such as the National Post, Toronto Sun, Windsor Star, and Vancouver Sun.… Read more -
Sean Speer
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Jason Clemens
Executive Vice President, Fraser Institute
Jason Clemens is the Executive Vice President of the Fraser Institute and the President of the Fraser Institute Foundation. Hehas an Honors Bachelors Degree of Commerce and a Masters Degree in Business Administration from the University of Windsor as well as a Post Baccalaureate Degree in Economics from Simon Fraser University. Before rejoining the Fraser Institute in 2012, he was the director of research and managing editor at the Ottawa-based Macdonald-Laurier Institute and prior to joining the MLI, Mr. Clemens spent a little over three years in the United States with the San Francisco-based Pacific Research Institute. He has published over 70 major studies on a wide range of topics, including taxation, government spending, labor market regulation, banking, welfare reform, health care, productivity, and entrepreneurship. He has published over 300 shorter articles, which have appeared in such newspapers as The Wall Street Journal, Investors Business Daily, Washington Post, Globe and Mail, National Post, and a host of U.S., Canadian, and international newspapers. Mr. Clemens has been a guest on numerous radio and television programs across Canada and the United States. He has appeared before committees of both the House of Commons and the Senate in Canada as an expert witness and briefed state legislators in California. In 2006, he received the coveted Canada’s Top 40 Under 40 award presented by Caldwell Partners as well as an Odyssey Award from the University of Windsor. In 2011, he was awarded (along with his co-authors) the prestigious Sir Antony Fisher International Memorial Award for the best-selling book The Canadian Century. In 2012, the Governor General of Canada on behalf of Her Majesty the Queen, presented Mr. Clemens with the Queen Elizabeth II Diamond Jubilee Medal in recognition of his contributions to the country.… Read more