4110 The Truth About Ontario's Debt Crisis. Prepare Yourself.
Throughout Canadian history, Ontario has always been one of the wealthiest provinces, and a driver of national economic growth. Over the last three years, Ontario’s net debt increased by $22.8 billion and over the next three years, the proposed budget calls for provincial debt to grow by an estimated $52 billion. The massive explosion in Ontario’s debt is completely unsustainable and there is no end in sight. Sources: http://fdrurl.com/ontario-debt-crisisYour support is essential to Freedomain Radio, which is 100% funded by viewers like you. Please support the show by making a one time donation or signing up for a monthly recurring donation at: http://www.freedomainradio.com/donate
So I first arrived in Ontario over 40 years ago, and I just fell in love with the place.
Fell in love with, I suppose, all of you.
I came from London, England, but there's a lot of class stratification.
Your opportunities, your mobility, the connection between work and reward are kind of stifled by all this historical snobbery.
And I loved the open vistas, the opportunities, the possibilities that existed in Canada and into Ontario.
I also loved the climate.
I came from that fairly bland, summer comes on a Wednesday, British, damp, clammy climate.
And I arrived in 1977, which I didn't know this at the time was an amazingly snowy winter.
And I just loved it so much and loved learning how to skate and toboggan and ski and all of these great things.
And the people, the robustness and toughness of the people was kind of shocking to me at the beginning.
I wasn't exactly a snowflake, but I wasn't quite as robust then as I am now.
And I really learned to love and embrace the toughness and hardworking nature of Ontarians.
And that affair, I suppose, that passion has continued ever since.
And I've seen a lot of Ontario, I think more than most.
I lived in the major cities and...
I've gone to school and graduate degree, my graduate degree is in Toronto.
But I've also gone to the wilds, to the backwoods, Nikina and beyond.
I lived in Thunder Bay for a while as a gold panner and prospector.
I have seen the things I have seen.
I have seen a lot of Ontario and...
That's what makes this particular presentation kind of heartbreaking.
I mean, I think things can be turned around, but we're going to talk a lot about the debt that has accumulated in Ontario.
Now, maybe just because I grew up poor, but the idea of going into debt unnecessarily was anathema.
You stay away from debt.
It's a hole that takes down entire families if you let it.
And it's a sopophoric.
It's a kind of drug.
It numbs you.
It turns you into a kind of unreal dependent on the next round of financing.
And it makes you kind of lazy debt.
It makes you complain a lot because you get used to a lower level of effort with a higher level of reward.
And it is the great opiate of democracy.
Because politicians can come to you and they can say, we're going to give you all this wonderful stuff, but they don't have to raise taxes immediately to give you all that wonderful stuff because they can just borrow it or they can print money or whatever, right?
So this issue with Ontario's debt as a father, as a...
Citizen, it is deeply, deeply troubling.
And it's also deeply troubling that it's not talked about more.
So we're going to talk about it today and I'm going to provide some solutions.
So let's get into it.
Throughout Canadian history, Ontario has always been one of the wealthiest provinces and a driver of national development.
Economic growth. A lot of entrepreneurs, a lot of business activity, a lot of wisdom, a lot of networks and connections.
I myself, in the software field, was an entrepreneur, co-founded and grew a company in the 90s, and it's a very, very powerful and positive place to do business.
Ontario's gross domestic product per person has usually been above the national average for years, decades.
In fact, after the Second World War, household incomes in Ontario remained 10% to 20% above the national average.
Now, in 2003, the leftist liberals take over Ontario, where they have remained in power ever since, and Like a lot of leftists, they drive up the debt, right? There's this old story of Socrates, and Socrates says, well, you have two politicians.
One offers the population sugar, and the other offers the population vegetables.
Well, which is the population going to choose?
Well, unless they're wise, they will choose the candy merchant rather than the person who gives you something slightly less tasty but far more expensive.
And Dalton McGinty was the first Liberal took over in 2003.
At that time, 2003, the province's debt was $138.8 billion.
Now, the current debt load of Ontario is $311.7 billion.
And that is a 124% increase.
And that's not adjusting for inflation.
A dollar in 2003 is worth about $1.30 now.
But no question that throughout Ontario's history, recently it has undergone the most prolonged and staggering period of debt accumulation throughout its history.
So 2003, the Liberals take over Ontario.
If you go from 2005 to 2015, Ontario currently ranks, well, as of 2015, ranks dead last in real median household income change.
We'll look into that in more detail.
But... Debt is the great deluder, because it says you can have something for nothing, but the liabilities and the interest accumulate and begin to suck you under, and then it's really, really tough to turn things around, especially when we still have a lot of politicians who aren't committed to addressing this issue of the accumulated debt of the past 15 years.
So let's look at some of how this data looks and I do want to thank members of the Fraser Institute for putting this information together.
The sources are below.
So this is average annual real per capita GDP growth rates 2007 to 2016 and these are some really astounding numbers and if you look at the very top here this is sort of lowest to highest There has been negative growth, a reduction in per capita GDP rates in Alberta in the time period mentioned.
Now, of course, lower resource prices, and from 2015 onwards, they've had a far-left government, the NDP, the Alberta New Democratic Party, which very, very left, I mean, Bernie Sanders territory, it seems like, from 2015 onwards, they have not helped this situation at all.
So they have had a negative growth, minus 0.4%.
Now, some of these numbers look the same.
They're a little bit different. Just there's a rounding stuff, and again, the source data is below.
So New Brunswick, annual real per capita GDP growth rates, 0.3%.
Not super high, but Prince Edward Island, 0.4%.
Ontario, 0.4%.
Remember, we were talking about how Ontario was the big, powerful 10 to 20% higher incomes, the economic driver.
Well, I think it's as of 2009, it's gone from a half province where there's this big redistribution.
It's an interprovincial welfare scheme to a have-not province, and it's actually receiving transfer payments.
Ontario 0.4%, Newfoundland 0.4%, Quebec 0.5%, Saskatchewan 0.7%, Nova Scotia 0.8%, British Columbia 1.1%, Manitoba 1.1%.
Average growth rate in private sector employment in Canada and provinces.
Private sector employment.
Nova Scotia, it's gone down.
This is from 2007 to 2016, minus 0.2%.
New Brunswick, flatlined, 0%.
Ontario, 0.6%.
PEI, Prince Edward Island, 0.6%.
Quebec, Manitoba, 0.9%.
All of Canada, except Ontario, is 1.1%.
So as you can see, the average, except for Ontario, is almost twice what Ontario was able to manage.
Newfoundland, 1.3%.
British Columbia, 1.3%.
Saskatchewan, 1.7%.
Alberta, 1.7%.
Real median household income, percent change, 2005%.
To 2015.
Now this is some chilling stuff.
So this is the decade, maybe it's been referred to as Ontario's last decade, which we can sort of see here.
So the decade of percent change of median household income.
Ontario ranks dead last.
It is at the very bottom of the pile at a truly anemic 3.8%.
So over 10 years, there's been virtually no change in real median household income in Ontario.
This is from the formerly great growth engine of the Canadian economy.
Now, when it comes to rational economics, if you're less than half of Quebec, you are in a pretty dismal place.
Quebec clocked in at 8.9%.
Growth?
Nova Scotia, 10.2%.
New Brunswick, 11%.
PEI, 11.1%.
British Columbia, 12.2%.
Manitoba, 20.3%.
Alberta, 24%.
Newfoundland and Labrador, 28.9%, and Saskatchewan clocking in at 36.5%.
So here you can get a sense of just how great the difference is.
That Ontario is about one-tenth the growth in real median household income as compared to Saskatchewan.
Now, maybe this has something to do with the fact that, certainly as of 2005, well over half of the immigrants to Canada settled in Ontario, the vast majority of them, in the GTA itself, and this was a little bit lower, and Harper tried to redistribute immigrants a little bit more to make things a little bit easier on the infrastructure and growth, and that's all changed.
Ontario is now clocking at higher rates of immigrants coming in, but very few of the immigrants, of course, are going to places like Manitoba and Saskatchewan, and maybe that has something to do with it.
Maybe the cost of immigration in these particular areas, particularly in terms of infrastructure, is retarding growth, but there could be any number of reasons.
I await your comments below as to your theories.
But the point is that Ontario has gone from a massive growth driver of the Canadian economy to an anemic last place, less than a tenth of the greatest increase in a province in Saskatchewan.
That is terrible.
Because this has been at a time when massive debt has been accumulated.
So massive debt has been accumulated at the same time as real economic growth has stalled to the point of being virtually non-existent.
This is over 10 years.
That is a terrible, terrible...
I mean, this coincidence or this intersection of massively increased debt with anemic economic growth is terrible.
So this is the change in net debt per capita from 2007 to 2016.
And these are in nominal dollars.
And here we can see that British Columbia has jacked up its debt.
$2,370.
This is change in net debt per capita over the decade 2007 to 2016.
Nova Scotia, 2808.
Saskatchewan, 3,012.
PEI, 4,749.
Newfoundland and Labrador, 5,627.
Quebec, 5,633.
Manitoba, 8,337.
New Brunswick, 8,774.
Ontario, 9,313.
Alberta, 12,074.
Now that is some astonishing numbers.
And it shows the horrifying situation when the government controls interest rates, when the Basically, it can type whatever it wants into its own bank account.
You do see in late democratic structures always this addiction to debt and the debasement of currency.
I remember this really vividly when I first came to Canada.
I could buy a candy bar for 10 cents.
And the price very rapidly went up.
And there was astonishing levels of the devaluation of the currency.
Massive amounts of money printing.
And it just got completely lunatic.
And it was relatively quickly that...
Candy bars were 50 cents, 75 cents, a dollar.
I still remember being able to go to the mall in Dome Mills and get a slice of pizza and a drink for a dollar.
A slice of pizza was 75 cents and the drink was 25 cents.
So the debasement of the currency that occurred in the 80s and 90s was just astonishing.
And that's been reined in to some degree, although we still see That from 2005, the dollar is now, well, cost $1.30 to buy what a dollar bought just a little about 13 years ago.
So yeah, this is still going on, but this is crippling stuff.
And if you can see, net debt per capita, okay, per capita is not who can actually pay.
Because that's just the general population.
That includes people who aren't working.
It includes people who are unwell.
It includes people who are injured.
It includes people who are home raising children and therefore not directly contributing to the immediate economy, but rather allowing the economy to continue to future generations and the culture in the country.
And this includes very, very poor people who don't have any assets with which to pay the debt.
So if you strip all of those people out, then basically I think it's you and I who are responsible for this debt.
I don't know. But it's going to be pretty bad.
Also, does this include, as it would, it includes all of the people who may be working for the government who would need to not work for the government in order to begin to tamp down on some of this debt and begin to repay it back?
And so we would want relatively wealthy private sector workers to actually shoulder the burden.
And, well, the numbers are far worse when you grind it through that kind of analysis.
So, as mentioned, Ontario owes 312 billion dollars.
22,919 per capita.
That is 37.6% of Ontario GDP. So, just to put this in context and perspective, Ontario's debt is larger than the gross domestic product of 75% of the world's countries.
Let me just back over that bump so we can see this again.
Ontario's debt is larger than the gross domestic product of 75% of the world's countries.
So, Ontario's debt is larger than the gross domestic product of New Zealand, Portugal, Ukraine, Kenya and Romania.
In 2011, Ontario owed $236 billion.
Well, that's quite a change now, isn't it?
In 2014, a report was published saying that Ontario's bonded debt, the debt issued in the form of bonds, outstripped even that of California.
Now, California, the left coast of America, is considered to be the economic basket case of America.
California is the most indebted state in the US and, well...
Let's just have a look at these numbers.
It's not a little bit more, it's a whole lot more.
So California, this is back in 2014.
California, per capita bonded debt was $4,200.
That's Canadian, $4,200. Ontario, $20,500.
So, California is the economic basket case of the laughing stock of any free market thinker in America.
And is considered to be massively indebted, particularly bonded debt.
Ontario has about five times the bonded debt of California.
Five times. California's debt to GDP is 7.6%.
Ontario.
40.9%. Again, these numbers are slightly different.
They've gotten a little bit better.
But whether it's 37.6 or 40.9, given that there's a spread of a few years between these two numbers, I think we can all agree that it's a whole lot larger than 7.6% of California, which is the most indebted U.S. state.
Over the last 10 years, 10 years only, Ontario debt has more than doubled.
More than doubled.
This is the accelerating nature of debt.
It starts off small and it snowballs.
You know that one little snowflake at the top of the mountain can wipe out a whole town at the bottom after momentum and acceleration and accumulation has taken place.
It's a death spiral. So Ontario now has the largest sub-national debt in the world.
And what that means, of course, is that any political entity below the national level, below the federal level, Ontario now has the largest sub-national debt.
Hey, number one in the world!
And Ontario continues to spend far more than it collects.
$12 billion this year.
Now, a lot of this is the Liberals do what they say they're going to do, which is spend a huge amount of money on the government.
And it's another way of employing a lot of immigrants is to put them into government work, but that is at the expense in general of the economy as a whole.
2003 to 2017, Ontario increased program spending at an average annual rate of 4.9%.
And we can see how quickly that accumulates.
Compounds. Over the last two years, this increased to 12.2%.
That's far faster than economic growth, inflation, and population growth.
So the government debt, government expansion, government accumulation does take on a life and a sinister logic of its own.
The Ontario government spends a billion dollars a year on corporate welfare and doesn't even bother to track whether the spending achieves any goals, meets any objectives, produces a return on investment.
It's just, well, it's a handout.
It's a welfare to the monocled monopoly owners.
Premier Wynne of Ontario recently announced she was gifting Toyota $110 million.
Well, of course, not her personally, and not you as a taxpayer, most likely, but in general, your children and your children's children, and so on ad infinitum.
Well, actually, no, not ad infinitum, because mathematically, that which cannot continue will not continue.
The previous year...
To when Premier Wynn gave $110 million to Toyota, Toyota made a global profit of $22 billion.
Now, of course, if you're in business and someone offers you $110 million for free, you have to take it.
But we all know this is not right.
Ontario, how sensible this is spending?
Well, it spent $70 million on a provincial pension plan that never came to being.
Famously, $1.1 billion of your money, your future obligations, were spent on gas plants that were never actually built.
And it's absolutely mental.
$37 billion has been spent on above-market rates for renewable power.
$93 billion has been spent on the fair hydro plan designed to fix the high hydro rates that have been caused by the Green Energy Act.
There's a million dollars on this electric vehicle discovery center, which was in North York.
People can... Test drive electric cars, get a free coffee, learn about taxpayer subsidies, but you can't actually buy a car there.
It's just, you know, for information.
Recently, Ontario paid taxpayers $47 million to subsidize their electric cars, including things like the $1.1 million Porsche 918 Spyder.
So it's a good thing they're getting those subsidies and a Tesla that costs $150,000.
Get your subsidies right here.
It just goes on and on.
But not all of the money is being spent wisely, as you can imagine.
I mean, it's a fire hose trying to fill up some cups.
You can't aim it well. Government growth.
Since 1997, the number of Ontario government employees has exploded by 403,100, or 43.1%.
The Ontario government recently reported that 10,600 jobs were added to the economy in March.
Yay! But the largest increase was in hiring government staff.
Not so yay. Now, government staff, not only do they take people out of the private sector, out of the remnants of the free market, but also, a lot of times, they stand in the way of productivity in the free market because government staff have to do something, so they pass resolutions, they make regulations, they actually stand in the way.
So it's a double whammy to economic growth.
Government employees in Ontario earn 13.4% more than private sector workers.
And better pensions and better benefits and job security and so on.
It adds up to quite a lot of benefit.
Since 1997, government staff in Canada have seen their wages grow by over 26%.
On average. On average.
And you compare that to some of the really low numbers we saw with a 3.8% household median income increase.
Well, that's a lot higher.
A lot higher. Ontario has 131,741 government employees making over $100,000 a year, which went up almost 7% year over year.
That's 518 Toronto Transit Commission vehicle operators, 25 summer school teachers making $100,000 or more a year, two janitors, 14 Toronto parking enforcement officers, and almost 8,000 staff at Ontario Power Generation.
So... Debt servicing.
It's the money you've got to pay on the interest, the money you've got to pay on your payments.
We all know this. You've got your visa thing.
It's probably your minimum payments.
But debt servicing is now Ontario's fourth largest cost after healthcare, education, and social services.
It costs more than double Ontario's justice system.
It consumes 88% of the $13.9 billion in annual Ontario corporate taxes.
And corporate taxes are high.
And... Almost all of it goes to just servicing the debt rather than providing any actual services to employees.
Ontario's debt is actually as much as the annual revenues of Canada's eight largest companies.
Interest payments on the debt are exactly half of the $24 billion education budget.
Now, some of Ontario's debt is locked in at low rates, right?
Because one of the things that happens when rates go down is governments like to borrow more and it seems like it's kind of free stuff.
You know, like the...
You ever see those ads?
I'm sure you've seen those ads where it's like introductory interest rate of 0.9% for your credit card, right?
And then if you read the fine print, after six months it goes to 18, whatever it is, right?
And this, of course, was one of the big problems with the housing crash and crisis in the United States that people got...
Low interest rate loans for their houses but variable rate mortgages then kicked up when the interest rates went up and they couldn't afford their homes.
Now, if you borrow a lot of money at low interest rates, your payments creep up.
But what happens is there's a huge whiplash effect when the rates go up a percentage point or two percentage points, which they always do inevitably, because if you keep crushing interest rates low, you stimulate economic growth in the moment, but you depress savings.
And because there's fewer savings, there's less money available to invest in raising worker productivity, growing businesses, and so on.
And so what's happened is a huge amount of money has been borrowed.
Because of these low interest rates.
And those interest rates are going to go up, and that doesn't just affect new borrowing, that affects what has already been borrowed, right?
So some of Ontario's debt is locked in at low rates, but up to 40% of Ontario's $311.7 billion debt will come due during the next governmental term.
And people should be asking politicians about this.
But they're not, which is kind of what I said, that debt makes you kind of lazy and distracted and irritable and dependent and whiny and complainy and avoidant and, you know, all that kind of stuff.
Ontario's debt-to-GDP ratio has exploded.
So 1980 to 1981, it was 9.1%.
9.1%.
Not great, but manageable, right?
Now it's just under 40% at present.
So debt to GDP has gone up more than four times over the last couple decades.
Now the NDP, the National, sorry, the New Democratic Party, want to increase program spending to $164 billion by 2021-22.
It's about $5 billion more than the Liberals.
And I just, you know, sidebar, I just want to point out how incomprehensible this is to me.
That you are already massively in debt.
Interest rates are going to do an uptick.
You've got to refinance a whole bunch of that debt at higher interest rates and you just want to keep piling on the spending and building up the debt.
I fundamentally don't understand.
I mean, isn't that just a general desire to wreck any remnants of the free market system?
Implementing the new democratic plan in Ontario would mean program spending in 2021-22 would increase by 26% in nominal terms over the five-year period starting 2016 to 2017.
And every dollar you borrow is multiple dollars you'll have to pay back in the future.
It's a drug, you understand, it's like a drug.
Rather than dealing with problems and becoming happy organically, You just take cocaine.
And it's like, hey, I've solved my problems.
Got a toothache? Eh, just take cocaine.
Toothache feels better now, doesn't it?
But the rot gets deeper, and this avoidance of basic reality, which is a collusion.
It's a collusion between the media, the politicians, the general public in particular.
The general public seems pretty aware of these issues.
But there's this weird collusion that goes on.
Mutually assured destruction.
Well, we won't talk about your overspending.
Well, we won't do this. Everybody's just colluding to kind of hide this stuff because it's become so bad.
That the kind of changes that would be required have become what many people would consider so radical that everybody's just stepping around this big giant debt-ridden elephant in the room.
We've got to stop that.
I mean, we have to stop.
The Liberal budget aims for a 6% increase in program spending this year.
It's all spending outside of government debt interest payments.
Last year, the increase was close to 6%.
So spending grows by 12.2% in just two years.
Projected operating deficits will be just less than $7 billion in each of the next three fiscal years.
That's income that doesn't cover spending.
Astounding. So another way of putting this is the pace of debt accumulation will double and then some.
So this year the Ontario government plans to add $16.8 billion to the province's net debt, a measure that adjusts for financial assets.
Very similar increases are expected in the following three years.
This brings Ontario's net debt to $377 billion.
Over the last three years, Ontario's net debt increased by $22.8 billion.
Over the next three years, the proposed budget calls for provincial debt to grow by $52 billion.
Now, I'm aware in the election that the Liberals have conceded, but this is the proposal, this is what they wanted, and we need people who are going to deal with this problem.
So between the fiscal years of 2008 to 2016 Ontario, had uninterrupted deficits and added about 130 billion dollars in new net debt.
Now, of course the government Every year, pretty much, or certainly every election cycle, said, oh, these deficits are temporary.
The budget is going to balance itself.
And don't worry, by 27 and 2018, everything's going to be hunky-dory.
We're going to kick the can down the road.
Magic is going to occur.
Pixies are going to deliver the gold dust that's necessary to snort into the addiction of debt.
And we're just going to solve everything.
Everything's going to be great. Now, of course...
This time has come, and it's just getting worse.
So the debt-to-GDP ratio in 2008 was 26%.
Now it's 38% today.
So all of the promises, right?
All of the promises. Of course they're never delivered, right?
This is the horrifying thing that happens.
Okay, let's do our full screen here.
So this is the horrifying thing that happens.
And... There's no way around it, given the way the system works at the moment.
Politicians promise free stuff to people, and you can see this in all the political programs.
We get free daycare, we're going to get free this, we're going to get free that, subsidize this, maternity leave that.
Everything increases for public sector workers, more pensions, more spending on this, more spending on that.
And then the government... He borrows the money and spends it, and it looks like there's this net increase in the economy.
But you're just, you know, it's like if you don't work and you just start running up credit card bills, you're like, wow, this guy's really got it made.
He doesn't have to work and he's got lots of money, but all he's doing is setting himself up for future problems.
Now, because the debt is intergenerational, because the debt is long-term, I think it was Nova Scotia that have bonds that are like more than 50 years.
Well, if you're in power, if you're a politician and you get that money for free and you kick the can 10, 20, 30 years down the road or more, then what happens is you provide benefit, quote benefit, to the voters and then by the time the bill comes due, you're long retired.
You're out of the game. You're done.
So who could possibly say no to such an unholy bargain?
The taxpayers can't seem to say no.
The politicians have no incentive to say no.
And the generally left-leaning mainstream media has no incentive to hold the politicians' feet to the fire and ask, what are you going to do about the debt?
And there's this weird, like we're separated from the love we might have for our children.
You cannot burden the unborn, the young, the no taxation without representation was the cry of the American revolutionaries, right?
How on earth is it just or fair to ladle and laden down children with this much debt?
They didn't choose. They didn't vote.
They're not asking for it. They got to pay the bills.
And this is alienating us from our love for our children.
As a father, I care where my daughter is going to grow up.
And we all know. I mean, this is deep down.
We all know this. This is absolutely wrong.
This is absolutely immoral.
To use the next generation as collateral to feed our greed in the here and now.
And then people say, I've seen these ads too.
Ah, the conservatives in Ontario, they want to fire nurses and teachers.
Well, female-centric occupations, of course.
And it's like, well, this is terrible.
We can't have any sacrifices.
This is what I mean. The toughness in the people in Ontario that I first encountered in the 70s seems to have faded just a smidge or two because now it's like, well...
There was this massive amount of spending, this massive amount of debt accumulation, and you can only party for so long before you've got to end up waking up with a hangover, right?
And so now, yes, some sacrifices are going to have to be made and they're not going to be fun for a lot of people, of course.
But this idea that you have to make sacrifices, you know, men get yanked off to war and come back in a body bag or in a wheelchair or traumatized.
Men get yanked off to war and that's just the way things go.
But now we have a lot of people who are going to have to take reduced circumstances, who are going to have to deal with moving from the public sector to the private sector and all of the Attendant increases in requirements and discipline and so on.
People are going to have to get real jobs and suddenly they say, we can't have that sacrifice.
Yeah, we can send a billion men off to war, but we can't possibly reduce government spending.
Why? What happened to our toughness?
What happened to our capacity to make sacrifices for the greater good?
What happened to us no longer being democratic vampires feeding on the unborn to prop up our incomes in the here and now?
This is predatory, people.
This is intergenerational piracy.
This is wrong! This is wrong!
We're going to have to take those sacrifices.
We're going to have to learn this lesson.
We're going to have to stop doing this stuff.
We're going to have to find ways to prevent it from happening again.
