For years we have been listening to right-wing politicians, bankers and other busybodies complaining about debt. It seems to be their constant mantra that debt is bad, tax cuts are good, small government is better and environmental controls are bad business. While the ignorant try to sell these silly ideas, any smart business person can tell you that debt is just another useful tool in the economic tool kit.
Debt is also a critical tool of government. How do you think your various levels of government get the money needed to build infrastructure such as water works, bridges, schools, highways and sewers. These systems all have life cycles and paying off the capital costs over some part of the time of use makes sense. The public gets the use of the facility earlier than it would if the governments saved their money until the full funding was available. Saving money until you have the cash for infrastructure would not only be poor strategy but would strangle economic growth.
There can also be too much debt. You always have to beware of what would be too much debt to be trying to manage. Ontario Hydro is a good example of bad debt management. The power utility went into debt to build nuclear reactors and between cost overruns, operational problems and a shorter than expected serviceable life for the plants, Hydro’s debt spiralled out of control. It has ended up in a serious problem because of the decision to build more nuclear plants while still paying for the first batch. For well over 100 years, Ontario politicians have been trying to figure out how to control Ontario Hydro’s debt. No party has ever produced a workable solution.
But that hardly means Ontario is drowning in debt. Our Auditor General was wringing her hands the other day and complaining about Ontario’s ‘heavy’ debt load. She is forecasting that by the 2017-18, the provincial debt will average $23,000 for every person in the province. That is no big deal when you consider the $36,455 average annual income and you can take many years to retire the debt—especially while the prime rate is at one per cent.
And there is no reason that the Ontario Treasurer should not be looking at new or increased revenue streams. Companies can come up with new ways of earning money, what is wrong with our politicians? Do we only elect stupid people? (Don’t answer that!)
Copyright 2014 © Peter Lowry
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