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From today\u2019s G&M, a tall of woe in the Province of Ontario. Financial columnist Neil Reynolds tells us that we\u2019re ten times worse off than Californians!: <\/span><\/p>\n \u00a0<\/span><\/p>\n \u00a0\u00a0\u00a0\u00a0 <\/em><\/span>Now, let\u2019s see. According to the state treasurer, who should know, California (population 36.4 million) has sovereign debt of $60-billion (U.S.) \u2013 $1,650 per person. Investors rate California\u2019s 10-year bonds as slightly less risky than Croatia\u2019s. Reputable academic analysts anticipate bankruptcy. (As Bill Watkins, director of the Center for Economic Research and Forecasting at California Lutheran University, put it: \u201cCalifornia is now more likely to default than it is not to default.\u201d )<\/em><\/span><\/p>\n \u00a0<\/em><\/span><\/p>\n \u00a0\u00a0\u00a0\u00a0 <\/span>On the other hand, Ontario (population 13 million) has debt of $220-billion (Canadian) \u2013 $16,900 per person \u2013 an economy with roughly one-third the people and roughly 10 times the per-capita debt. California would need more than $600-billion (U.S.) in debt to equal Ontario. So why does no one appear fussed by Ontario\u2019s record-setting accumulation of debt?<\/em><\/span><\/p>\n \u00a0<\/span><\/p>\n Reynolds focuses on what is the worst reality of our big government ways: <\/span><\/p>\n \u00a0<\/span><\/p>\n \u00a0\u00a0\u00a0\u00a0 <\/span>Ontario must now borrow more and more to accomplish less and less. It takes some sophistication to conceal this divergence. Ontario\u2019s effective interest rate \u2013 the rate it pays, on average, on all of its debt \u2013 is 4.5 per cent. Interest payments will thus cost the province $10-billion (Canadian) this year on its $220-billion debt. Ontario needs half its deficit to make its interest payments.<\/em><\/span><\/p>\n \u00a0<\/em><\/span><\/p>\n \u00a0\u00a0\u00a0\u00a0 <\/span>In 2000, Ontario\u2019s effective interest rate was much higher (8 per cent), its debt much lower ($114-billion). In 2000, interest payments cost $8.8-billion. Ontario, in other words, has used low interest rates to finance higher debt. Any increase in interest rates now will have profoundly disturbing consequences. Ontario Premier Dalton McGuinty conceded the other day (in another context) that his government has made \u201csome mistakes.\u201d Really? D\u2019ya think?<\/em><\/span><\/p>\n