WSJ: Provincial Debt Unsustainable

The sirens are now going off south of the border that Canada’s provincial governments (namely Ontario and Quebec) are spending beyond their means and endangering their future taxpayers to a mounting tax headache.

Here is the Wall Street Journal’s news column: Canada’s Budget Watchdog Says Provincial Debt Unsustainable

The WSJ writes:

Canada’s budget watchdog Tuesday warned that the federal government’s push toward a budget balance masks a serious fiscal threat at the subnational level, where the country’s provincial governments are accumulating debt at an unsustainable pace.

The Canadian provinces’ fiscal performance has deteriorated since the onset of the global financial crisis, and the Office of the Parliamentary Budget Officer has issued other warnings on provincial government debt. But its latest report comes after major bond credit-rating firms this month downgraded their ratings on Canada’s most populous province, Ontario, and neighboring Manitoba.

In this article, WSJ identifies the largest culprits of Canadian debt.

Ontario and Quebec, the two biggest provinces by population, are carrying the biggest debt loads, with net debt-to-GDP ratios of roughly 39% and 49%, respectively. Quebec, after taking some austerity measures, projects a balanced budget this year.

Elsewhere, in Canada’s Financial Post, a headline today reads:
With twice the debt of California, Ontario is now the world’s most indebted sub-sovereign borrower

FP puts Ontario’s debt pile nightmare into context:

While Ontario’s population is about one third of California’s, its debt load is more than double that of the biggest U.S. state.

Is it not time for Ontarians to demand more of Premier Wynne and her Liberal Government than their tax-and-spend-and-spend-some-more approach to the province’s finances?

(ed. – Surely, we won’t accept that the answer is to wine and complain that the federal government must give Ontario more tax transfers? Should we not start with the notion that we begin to live within our means?)

Big Gov Stats

Public administration expert Donald Savoie calls ‘em as he sees ‘em.

In a recent study he has published, Savoie views the federal public service as (ed. -get ready for this vivid imagery!!)“a big whale that can’t swim.”

The whale-like simile is on account of the federal government having too many management layers and oversight bodies and spending far too much time churning out performance and accountability reports.

Fact: Canada’s public service has seven levels of executives. There are 6,500 executives at the first five levels (Ex 1-5) with associate deputy ministers and deputy ministers at the top of the heap.

Fact: The assistant deputy ministers – known as Ex 4s and Ex 5s – earn between $179,000 and $200,000 a year. Of the now more than 400 ADMs we have in the federal service, about seven of them a year will be promoted into deputy minister ranks.

This is an alarming number, given that the role of ADMs became smaller as the executive cadre grew over the past 25 years.

Overall, Savoie reveals, the executive numbers of the federal bureaucracy has soared nearly 50 per cent in the last 25 years, outpacing 12-per-cent growth in the overall public service. The big surge came in the 2000s when the size of the bureaucracy grew 35 per cent. The number of ADMs shot up 49 per cent while the numbers of those at Ex 1 to 3 levels jumped 68 per cent. The number of deputy ministers, led by new associate deputy minister positions, increased 25 per cent over the past decade.

Here are numbers relating to the federal ADMs as compiled by the Ottawa Citizen:

54: Average age of Ex-4s and Ex-5s
20: Average years worked in the public service
12: Years spent as executive before promoted to ADM
40: Percentage of ADMS who are women
50: Percentage who held three of their last four jobs in the same department
87: Percentage of ADMs in the National Capital Region
42: Percentage of ADMs who work in programs, services or operations
15: Percentage of ADMs who work in central agencies
8: Percentage working in policy
3: Percentage working in communications
7: Average number who get promoted to deputy minister annually
10: Percentage who retire each year
59: Average age at retirement

The full Ottawa Citizen article on ADMs can be seen here: ADM’s role diminished as top executives have become too insular and inexperienced – study

Equalization Payments and Ontario

Equalization payments are Canadian governments’ grand design to ensure all its citizens can live in a Province that will have the resources necessary to deliver similar levels of public services. This system has the Federal Government redistribute payments from those Provinces that are richer to those Provinces that are poorer. So, tax money is taken from the “Have-Provinces” and given to the “Have Not-Provinces” (sort of like a Robin Hood).

(An important note to make here is that, even with this redistribution of wealth, citizens across Canada do not enjoy similar levels of service. It falls to the respective Have-Not Provinces to responsibly administer the equalization payments received in order to meet their health care, education and infrastructure demands.)

This year, Ottawa will pay $17.3 billion, unconditionally, to six have-not provinces for the fiscal year that began on April 1. They are the Provinces of Nova Scotia, New Brunswick, Prince Edward Island, Quebec, Ontario and Manitoba.

Did you know?? 20 cents of every dollar that is raised by federal government taxes goes directly and unconditionally to Provinces – and this amount is at a 20-year high.

Ontario will get $20.4 billion from Ottawa in 2015-16 for health, social services and equalization (this total is up $1.3 billion from $19.2 billion last year). When looking at the increases paid to Ontario, the equalization payment to this largest of Canada’s Provinces has risen 88% since federal Conservatives have been governing the redistribution of payments in 2006.

Yet, for the Ontario Government, which has now recorded 10 years of deficits and are being squeezed by $11 billion of debt payments annually – of course, the equalization cheques are never enough. The Provincial Government refers to federal payments as inadequate and the Ontario Premier has repeatedly openly criticized the Federal Government for not giving Ontarians their fair share.

Surprisingly, many Ontarians think they are being short-changed with the whole equalization scheme. A recent poll found that 48% of Ontarians insisted their province paid into the pot when, in fact, it does not.

Yet the debt hole that the Ontario Liberal Government has dug for itself is so deep that it will take years of austerity for this Have-Not Province to turn things around. How bad is it? Well consider these four facts:

  • The McGuinty – Wynne Liberals have increased Ontario’s public debt to almost $300 billion, or by 115% since taking power in 2003.
  • The Liberals are raising spending by $2.4 billion this year – offering no specifics on how they plan to reduce the deficit.
  • With this year’s $10.5 billion deficit announcement, the province’s debt is still on track to balloon to $325 billion by 2018 (that is $23,000 per person in Ontario).
  • Ontarians pay $11 Billion per year for to service their interest on the Province’s debt. in 2014/15, more than nine cents of every revenue dollar collected in Ontario goes to debt interest payments and not towards government programs or tax reductions.

With this type of spending piled onto the out-of-control debt levels, no amounts of increased equalization payments will be enough to sustain the Ontario Government (mis)management of its economy.

 

Ontario’s public sector bounty

On the heels of the damning report from CFIB of earlier this week that revealed there was a growing disparity between private and public sector salaries and benefits, there comes a new Fraser Institute study that exposes just how wide the pay gap has become in Ontario.

The Fraser Institute released today: “How Compensation Spending Consumes Provincial Government Resources in Ontario.”   It notes the following facts:

  • Compensation for Ontario Government workers skyrocketed by 47% in less than a decade with the many generous public sector settlements awarded by the Liberal Government.
  • The 47% increase in salary and benefits for Ontario public sector workers grew at a significantly faster rate than either inflation (15.1%) or the provincial economy.
  • Overall program spending (the amount Ontario spends every year after paying interest on debt and not including capital investments) rose 42% during that same period, from about $80 billion to over $115 billion. Spending on things other than compensation rose 39 per cent. And the number of government jobs increased by about 11%.
  • Now, in Ontario, because of the high public sector pay and benefits awarded, up to three-quarters of all new spending on programs goes to cover staff pay.
  • Prior to the 2008 recession, the Liberals doled out generous increases to teachers, doctors and other stakeholders. (Since 2008, compensation increases have slowed with the Government trying to come to terms with the year-over-year deficit. Today, the annual deficit is at $12.5 billion, which is amplified as a result of declining revenues in the Province’s slowing economy).

Lead author Charles Lammam made the point in releasing the report just because we are spending more on provincial bureaucrats does not translate to Ontarians getting more bang for the buck.

“It’s not entirely from new nurses, police officers, teachers or whatever… our analysis suggests it’s not necessarily going to improve new or better quality services in the province. When governments spend more it doesn’t necessarily translate into more and better services.”

This is precisely the rub. The ever-increasing costs of big government’s bloated workforce and out-of-control spending is at the heart of the arguments in many of By George’s previous “big government” posts.

Our bloated bureaucracy exposed (yet again)

The Canadian Federation of Independent Business’ (CFIB) released a telling report yesterday on private vs public sector jobs that confirms yet again the increasing advantage our government workers enjoy with their salaries and benefits.

The CFIB report “Wage Watch” exposes the bloated bureaucracy in Canada, documenting a 10%-15% “wage gap” between higher paid public sector workers and their private sector counterparts performing the same jobs.

The findings show workers in the private sector earn $8,150 a year less than their public sector counterparts, and work six hours more per week – for working the same job. The report notes that there is “a huge wage and benefits advantage for public sector workers over the rest of us.”

The Canadian public sector includes 3.6 million employees, which represents more than one in five jobs. With the math as it is, every 4 working Canadians are taxed extra to pay for the fifth government worker.

The CFIB comparisons use the National Household Survey, which represent average full-time employment earnings for more than 7.2 million Canadians. Important to note – the report excludes jobs such as police officers, firefighters, government deputy ministers, university professors and military personnel, for which there is no private sector equivalent (ed. – if the salaries and benefits of these occupations were included, expect the gap to be even greater!).

At 2010 pay levels, the gap is biggest in the federal government, where employees hold a salary premium of 13 per cent, which swells to 33.2 per cent when you factor in benefits.

This “overpayment” of Canada’s bloated public sector costs taxpayers $20-billion annually. For cash-strapped governments that is money that could be used to build roads, bridges and schools, fund health care or energy programs.

CFIB spokesperson Marilyn Braun-Pollon stated in media reports yesterday, “Our research findings point to huge wage and benefits advantages for public sector workers over the rest of us. It’s the elephant in the room when it comes to setting public policy across the country.”

“There aren’t the same market forces in the public sector. The government has monopoly power. Canadians in the private sector see their tax dollars paying for these wages and benefits that they can only dream of. Policy-makers need to start reining in these misaligned costs.”

The ever-rising costs of big government is a train-wreck-in-the-making that By George has been pining away on for years…. in articles tagged “big government”

The highest of costs we pay for big government

biggovernmentIn speaking from the standpoint of a libertarian, we must be ever-weary of those who argue for government controls, education and intervention “to fix” a societal problem. Most often, the programs and services conjured up will inevitably encroach on a citizen’s rights much like the proverbial camel’s-nose-in-the-tent. Big government will beget bigger government – values and rights be damned.

In Canada today, big government attempts to deliver cradle to grave counsel and services. We are now paying for public institutions that hold pre-schoolers to seniors, and for government services that “manage” all problems within our communities. We pay dearly for the barrage of public information we are subjected to on every issue under the sun. All of this government activity is developed and run with no respect to what may be differing views and values of individuals.

The most recent, egregious case of this Big-Brother-knows-best approach to life is the Government of Ontario’s ramrodding the new sex ed curriculum into primary school classrooms without an open public consultation.

In this case, there are a few (government sponsored) interest groups who applaud the government actions. For instance, People for Education, a public education advocacy group, supports an updated curriculum stating that there is “strong” evidence indicating that age-appropriate education has impact. PFE executive director Annie Kidder commented on the new curriculum, “The evidence is very strong and pretty unequivocal that talking to kids about a whole range of information to do with their bodies and relationships (early on) makes a difference in terms of their ability to keep themselves safe, to have healthy relationships.”

Ms. Kidder’s observation may well be universally acknowledged today. However, what is most upsetting for Ontario parents is not the fact there is a dialogue about sex in schools, but rather the sexual content that has been chosen to be taught at younger-than-ever-aged school children. This frustration can be seen in the wording of the petition launched by Ontario Catholic parents group Parents as First Educators that reads: “We do not believe that prepubescent children should be overloaded with explicit information about sex,” and demands “an end to plans” to update the sex-ed curriculum. “The values of self-control, morals and marriage are not considered in this program and the emotional consequences of loveless sex, with no commitment, are not addressed.”

At question is the same sex-ed curriculum that the Ontario Liberal government previously attempted to update in 2010 – until it backed off after backlash from religious leaders. So there is no doubt about what is being talked about, this new sex-ed program will teach kids about use of body parts in Grade 1 (age 6), homosexuality and same-sex marriages in Grade 3 (age 8), encourage discussions about puberty and exploring masturbation in Grade 6 (age 11), and talk about preventing sexually transmitted diseases, and oral and anal sex in Grade 7 (age12).

And there is a great deal more to this controversial program by the Ontario Government.

Campaign Life Coalition is but one group in the Province that has raised the siren cry that this curriculum was written while Ben Leven was the Education Department’s Deputy Minister. They point out that this fact is most disturbing:

     It’s important to consider the fact that this curriculum was also written under the direction of an alleged child pornographer, Mr. Benjamin Levin. He was the Deputy Education Minister at the time, serving under then Education Minister Kathleen Wynne. Levin was charged by police with 7 counts of making and distributing child pornography.

     Levin was charged by police with 7 counts of making and distributing child pornography. Although the man has not yet been proven guilty in a court of law, many people are questioning whether “grooming” could have been a reason for introducing these explicit subjects at such delicate ages. If the allegations are true, could it be that the curriculum was designed to “prime” children, so as to make them sexually available?

     When it is found that an alleged pedophile was in charge of writing what many parents perceive to be graphic, age-inappropriate Sex Ed curriculum, parents cannot be blamed for wanting no part of the curriculum. Should warning bells be going off when we learn that an alleged pedophile oversaw the writing of curriculum which gets 6 year olds talking about their genitals, encourages kids to masturbate, and wants to get 13 year olds thinking about oral sex and anal sex?

     The safety of children is too important to ignore Levin’s hand in this curriculum.

Although the current Education Minister states that Ben Levin was not directly involved in developing the curriculum, is there any doubt why parents who have not seen the curriculum, nor have had any opportunity to comment on it, would be concerned? Premier Kathleen Wynne is belligerently adamant in the face of parents’ anxiousness that this sex ed curriculum will be in Ontario primary schools starting in September 2015.

Ontario’s sex-ed curriculum is an excellent case in point for libertarians’ concerns about Canadians’ increasing dependency on government. It is exactly the price we pay for accepting Big Brother’s “helping hands.” Individual’s rights and values are wholly compromised and there is little to no recourse for the average citizen. It is the highest of costs we pay for big government.

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SOURCES:

http://www.cfra.com/news/2015/02/18/ontario-premier-says-new-sexed-curriculum-online-within-weeks
http://www.campaignlifecoalition.com/index.php?p=Sex_Ed_curriculum
http://www.torontosun.com/2015/02/18/levin-not-involved-in-new-sex-ed-curriculum-sandals

Ontario public sector: our fat cats

Did we need further proof that Ontario’s public sector enjoys much more than “the rest of us”? Not really, though here it is: a Fraser Institute study just released says that “Government workers in Ontario receive higher wages and likely more generous non-wage benefits than their private sector counterparts.”

Niels Veldhuis, president of the Fraser Institute, says in a released statement: “As the Ontario government grapples with a $12.5 billion deficit, it has identified government-sector compensation as a way to restrain spending. Indeed, in light of ongoing collective bargaining negotiations, now is an opportune time to scrutinize the compensation of government employees, which consumes over half of program spending”

The main finding of the study reveals that, on average, government workers in Ontario, including federal, provincial, and local government workers, receive 11.5 per cent higher wages than comparable workers in the private sector.

And wages are only part of an employee’s total compensation. Non-wage benefits — including pensions, early retirement and job security — can represent an important portion of an overall compensation package. Here we find our fat cats have a cushy life indeed. Here are the non-wage benefits the Fraser Institute study examines:

  • Pensions: In 2013, 77.3 per cent of government workers in Ontario were covered by a registered pension plan compared to only 25.6 per cent in the private sector. Of those covered, 97.1 per cent of government workers enjoyed defined-benefit pensions (i.e., guaranteeing a certain level of benefits in retirement) compared to 46.9 per cent of private-sector workers.
  • Early retirement: Between 2009 and 2013, Ontario government workers retired 1.4 years earlier, on average, than the province’s private-sector workers.
  • Job security: In 2013, 3.8 per cent of those employed in the private sector experienced job loss in Ontario, compared to only 0.8 per cent of those employed by government.
  • Absence rates: Full-time employees in the province’s private sector were absent due to personal reasons for an average of 7.2 days in 2013; the average government worker was absent 10.4 days.

In a Financial Post piece economists Charles Lammam and Niels Veldhuis make the point that the fat public sector pay cheques are both “unfair and unsustainable”. They write:

The Ontario government is currently deep in negotiations with public sector unions including those representing bureaucrats, teachers, and police officers. On compensation costs, finance minister Charles Sousa said: “We must continue to provide for net zeros in the negotiations … to ensure that we continue to curb our spending.”
      As Sousa’s government stares in the face of a $12.5-billion deficit and mounting debt, any belt-tightening initiative must involve the compensation of government employees, which consumes more than half of provincial government program spending. And it’s not just an issue for the provincial government. Municipalities also pay wages and benefits to government workers above those of comparable private sector positions.
      This is about more than just economics. It’s unfair for government workers to receive a premium paid for by private sector workers who receive less overall compensation for similar work.

Yet the fat cats are screeching

Yet hundreds of public sector workers from across Ontario gathered at Queen’s Park this week to warn Premier Wynne that any type of government austerity program will result in a strike. Union president Smokey Thomas is quoted as saying: “Come to the bargaining table, get all those Draconian concessions off the table, bargain fairly (and) you will get a contract. Wynne has come with something worse than Tim Hudak or Mike Harris or any right-winger could have ever dreamed up. I truly believe Kathleen Wynne thought ‘we can make OPSEU fold up real fast’ and they were wrong… We didn’t pick this fight but we will damn well finish this fight.”

These union claims of entitlement would be farcical if it wasn’t so real. Ontario Liberals have a lot to answer for as they successfully belled the cat in last year’s election. Recall, Kathleen Wynne and OPSEU (and all other unions across the Province) were in bed with one another to secure a Liberal vote and the return the Ontario Liberals to power. Promises were made. Expectations raised. Votes delivered. Is there any surprise that today unions feel cheated by the Premier and her Liberal Party?

So, the unions are screeching and the Premier is secure to do anything she wants with her 4-year majority. On one hand we have this union-Liberal tango and, on the other hand, we have the growing gap between public and private sectors’ pay and benefits. And Ontario taxpayers are left with a sideline view of this fat cat fight.

Related Posts:

The Ontario debt problem is serious

Ontario’s the 2015 political battleground

By George posts tagged “big government”

SOURCES:

Fraser Institute study
Financial Post column
News re union protests

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The Ontario debt problem is serious

Surprisingly, there are folks who don’t seem to be bothered by the debt load the Ontario government has incurred. For many Ontarians, it just doesn’t matter. But, here’s why it should. Simply put: Interest payments on government debt eat up revenue at the expense of other priorities.

Interest payments on government debt in Canada consume a sizeable share of government revenue, leaving less money for public priorities such as schools, hospitals, highways and lower taxes. This is best explained by the Fraser Institute (an independent, non-partisan Canadian public policy think-tank) – which, by the way, is sounding a siren on Ontario’s debt load.

A recent Fraser Institute study showed that in Ontario, the provincial government in 2013/14 spent $10.6 billion on interest payments, or 9.1 per cent of overall revenue, eclipsing the entire budget for the Ministry of Community and Social Services ($10.1 billion), and nearly topping the province’s total infrastructure spending ($10.8 billion).

“As Ontario struggles to rein in deficits and growing government debt, interest payments chew up big chunks of taxpayer money at the expense of priorities such as health care and education or potential tax cuts,” said Charles Lammam, study co-author and resident scholar in economic policy at the Fraser Institute.

More on this study here: Ontario burdened with debt
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In an earlier report, the Institute calculated that Ontario has more debt than California – the poster child for fiscal irresponsibility.  Here are the numbers: Despite the province’s smaller size, Ontario’s $267.5 billion (Cdn) outstanding government debt is higher than California’s $144.8 billion (US). As a share of the economy, Ontario’s bonded debt (the part of a government’s debt represented by bonds) is 40.9 per cent compared to California’s 7.6 per cent.

Put in another way: Ontario’s debt relative to the size of its economy is more than five times larger than the same measure for California. So, every Ontarian owes $20,166 (Cdn) compared to $3,844 (US) for every California resident.

The Fraser Institute identifies the culprit has been the overspending of the Liberal government over the last decade. Charles Lammam and Mark Milke of the Institute write:
     How governments manage their finances matters a great deal. Spend and borrow too much and the result is a spiral of increasing deficits that create ever higher debt. Then ever-more tax dollars end up spent on debt interest — not on education, healthcare, administering provincial courts, or other areas in which provincial governments are involved.
     In a recent study examining how well Canada’s premiers are managing government spending, taxes, deficits and debt, it turns out Ontario’s Premier Kathleen Wynne has one of the worst records in the country. In contrast, now-departed Newfoundland and Labrador Premier Kathy Dunderdale ranked above all her counterparts on as the most fiscally prudent, in relative terms…
     Wynne has a poor ranking because Ontario’s spending increased faster than economic growth and also more than inflation plus population growth. She also ran the largest average deficit among the premiers and increased government debt…
     Wynne, of course, is the premier of Canada’s largest, most populous province; continued fiscal imprudence on that large of scale is simply reckless.

Finally, the Canadian Taxpayers Federation has listed 10 Facts About the Ontario Debt – facts that should concern us all.

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Radical thoughts (for today) on taxes

A recent article in The Objective Standard quotes the President of the United States making the following observation about taxes:

     “Taxes take from everyone a part of his earnings and force everyone to work for a certain part of his time for the government. . . . I want the people of America to be able to work less for the government—and more for themselves. I want them to have the rewards of their own industry. This is the chief meaning of freedom. Until we can reestablish a condition under which the earnings of the people can be kept by the people, we are bound to suffer a very severe and distinct curtailment of our liberty.”

The magazine then states that “obviously those are not the words of Barack Obama, from whom such a statement would be unthinkable.  Although Obama may cite “middle class tax cuts,” he does not seek to cut taxes. President Obama seeks to merely to prevent certain taxes from increasing.”

And, as the editorial points out: “In today’s absurd political lingo, the lack of a tax hike is a “tax cut.””

So, who made the priceless observation above? These words are from former U.S. President Calvin Coolidge in the year 1924. In his speech, President Coolidge pointed out the insanity of class-envy taxes that punish the most successful Americans: “The wage earner . . . makes his contribution, perhaps not directly but indirectly, in the advanced cost of everything he buys. The expenses of government reach everybody.”

The Objective Standard editorial takes the current President to task:  “Obama’s tax-and-spend policies constitute “a very severe and distinct curtailment of our liberty.” It is time for Americans who care about their liberties to recognize that fact, to state it openly, and to advocate their right to the “rewards of their own industry.”

This American commentary applies directly to a few governments north of the border – Ontario’s provincial government the prime culprit of overspending and unconscionable taxation in our country. (ed. – Next week By George will look at the tax-and-spend-and-spend-and-tax-some-more Ontario Liberals and inspect what impact this government may have on the 2015 election.) 

To read the full Objective Standard article, go here.

To read the full speech from President Calvin Coolidge, go here.

 

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Libertarian views on government

For many libertarian-minded people, Ronald Reagan’s observations on government probably comes closest to their perceptions of “government.”  Former U.S. President Reagan stated:  “I believe the very heart and soul of conservatism is libertarianism. I think conservatism is really a misnomer, just as liberalism is a misnomer for liberals… The basis of conservatism is a desire for less government interference or less centralized authority or more individual freedom, and this is a pretty general description also of what libertarianism is.”

Here are a dozen quotes, from some of history’s great thinkers, that best describe the biases libertarians hold against big government – well, government in general:

  • All government is an ugly necessity. – G. K. Chesterton
  • That government is best which governs least. – Henry David Thoreau
  • In a healthy nation there is a kind of dramatic balance between the will of the people and the government, which prevents its degeneration into tyranny. – Albert Einstein
  • Government is not reason; it is not eloquent; it is force. Like fire, it is a dangerous servant and a fearful master. – George Washington
  • Government can’t give us anything without depriving us of something else. – Henry Hazlitt
  • You can’t give the government the power to do good without also giving it the power to do bad – in fact, to do anything it wants. – Henry Browne
  • The government solution to a problem is usually as bad as the problem. – Milton Friedman
  • Government does not solve problems; it subsidizes them. – Ronald Reagan
  • Which is the best government? That which teaches us to govern ourselves. – Johann Wolfgang Von Goethe
  • Government is the great fiction, through which everybody endeavors to live at the expense of everybody else. – Frederic Bastiat
  • For in reason, all government without the consent of the governed is the very definition of slavery. – Jonathan Swift
  • Man is not free unless government is limited. – Ronald Reagan