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Age of reckless spending is upon us

Recently the Government of Saskatchewan released their quarterly budget review, and while the news was generally good, something stood out to me. For those of you who know me, you will know that I am what some people would refer to as a cheapskate.
Chris Lee

Recently the Government of Saskatchewan released their quarterly budget review, and while the news was generally good, something stood out to me.

For those of you who know me, you will know that I am what some people would refer to as a cheapskate.

I have a rather hard time parting with money.

So you will know that when it comes to government and their spending I am not a fan.

So naturally when the government released their latest budget update it got me thinking.

There was one particular aspect that leaped off the page at me.

“At mid-year, the 2017-18 deficit projection is $679 million, $6 million less than the budget estimate of $685 million.”

To some that seems like good news.

And to a certain extent it is.

The government is saving money.

But the issue for me is that our deficit projection for this budget is $679 million.

How is it that we can run such an extreme deficit?

Now we have to give the Saskatchewan government the benefit of the doubt, in that all governments are currently running a deficit, but that is actually my problem.

Why are all governments running a deficit?

Is it just me or is that poor financial skills?

According to a report released by the Fraser Institute in January 2017, the net combined federal and provincial debt in Canada has increased from $833 billion in 2007/2008 to $1.4 trillion in 2016/2017, a total of $526.6 billion or 63.2 per cent in just nine years.

“This combined debt equals 67.5% of the Canadian economy or $37,476 for every man, woman, and child living in Canada.”

Think about that for a minute.

If a resident in Saskatchewan worked 40 hours a week at minimum wage, they would make $22,796.80, nearly $15,000 less than our current debt, and that is before tax.

Not only does that put unnecessary burden on our economy but it also creates a problem where we spend exorbitant amounts of money on interest payments.

According to the Fraser report, the Canadian governments, including local government, collectively spent $62.8 billion on interest payments in 2015/2016.

“This is well above the $57.4 billion spent on pension benefits through both the Canada and Quebec Pension Plans (CPP and QPP). It is also close to the country’s spending on public primary and secondary education ($63.9 billion in 2013/14, the latest year of available data),” said the report.

That works out to be more than $5 billion a month in interest payments.

“That works out to 8.1% of their total revenue that year and $1,752 for each Canadian or $7,009 for a family of four. The total amount spent on interest payments is approximately equal to Canada’s total spending on public primary and secondary education ($63.9 billion, as of 2013/14, the last year for which we have finalized data).”

How on earth can we justify spending more on interest than we do on education?

That is one of the largest problems with growing debt, we end up taking away money from important servicing costs, including healthcare, education, and social services to pay the interest on our debt.

Growing up as a kid I thought, ‘geez, I don’t remember our deficits being this bad,’ and I was actually right.

According to the Fraser report the federal government was able to reduce their debt by $92.7 billion between 1996/1997 and 2005/2006.

“But in 2008/09, the federal government began running budget deficits, contributing to the $211.2 billion in added debt from 2007/08 to 2016/17. In other words, the federal government reduced debt for 11 years, but in just nine years has accumulated more than double the amount of debt it cut in those 11 years.”

In Saskatchewan, our net debt has increased 55.5 per cent rising from $5.9 billion in 2007/2008 to $9.1 billion in 2016/2017.

Currently, our interest repayment for debt in this province is $530 million, or $44.17 million a month, and in this country, an incredible $24.9 billion or more than $2 billion a month.

“This represents about three-quarters of the revenue collected from GST alone ($33.5 billion),” says the report.

“The amount spent on debt servicing costs is considerably larger than the $21.0 billion the government expects to spend on Employment Insurance benefits. It is also more than what the federal government expects to spend on transfers to Canadian families in the form of Child Benefits ($21.8 billion).”

The scariest part of all of this, according to the Fraser report is there is no signs of our over spending slowing down.

“Debt is poised to continue growing for the foreseeable future as several governments continue to project budgetary deficits and finance capital projects with debt,” noted the report.

“In fact, several Canadian governments lack a plan for returning to a balanced budget. A notable example is the federal government, which has not established a target date for deficit elimination. In its latest projections (for the period 2016/17 to 2021/22), the federal government has planned cumulative deficits totaling $129.5 billion. Similarly, governments in Alberta, Manitoba, and Newfoundland & Labrador have no plans to eliminate their deficits.”

The report went to note that while a number of governments have a target date set for a balanced budget, some of those are not on track.

“For instance, there is doubt that the Ontario government will be able to achieve a lasting budget balance by 2017/18, which is its stated timeline (FAO, 2016). Other provincial governments, including New Brunswick and Prince Edward Island, have at some point in recent years pushed back their planned date for deficit elimination.”

Yikes.

It is time we start holding our governments fiscally responsible, after all we are the ones paying for all of this.