Franco Terrazzano
Canadian Taxpayers Federation
If you care about government services then you should care about Alberta’s growing government debt problem. That’s the message Premier Jason Kenney rightly articulated at his recent “100 days in office” address.
“I would say to public sector union members that the best way to preserve the services that they deliver … is to stop the reckless dive into debt because every extra dollar that goes to the bankers to finance the debt is a dollar that’s not going to support public services,” stated Kenney.
The premier is right on three important points. First, Albertans should be concerned about the province’s debt.
After more than a decade of overspending by the Progressive Conservatives and the New Democrats, the Alberta government’s debt has surpassed $60 billion and is going up by $1.7 million every single hour. University of Calgary economist Trevor Tombe’s projections provide a sobering warning for the future of Alberta. If things don’t change, the provincial government’s net-debt-to-GDP ratio could climb higher than any point in Alberta’s history, including the Great Depression when Alberta partially defaulted, by the early 2030s.
Second, more debt means more money wasted on interest payments.
In 2018, the Alberta government paid nearly $2 billion in interest charges. That’s over $450 per-person or $1,800 that’s leaving a family of four’s budget. And, instead of being used for something useful such as helping to build a hospital or buy new school textbooks, it’s going straight into the pockets of bond fund managers on Bay Street.
What’s really scary is just how fast the Alberta government’s interest charges have increased, growing by 821 per cent over the last decade. Eight hundred and twenty one per cent. The majority of Alberta’s $2 billion worth of interest charges were racked-up in the last four years, illustrating the all-too-real problem of deficit spending.
Alberta’s politicians should have heeded the warnings of former Liberal finance minister and prime minister Paul Martin.
“The debt and deficit are not inventions of ideology. They are facts of arithmetic. The quicksand of compound interest is real,” explained Martin in his 1995 budget address.
Third, government services suffer when debt soars.
When Greece ran into debt problems, its government had no choice but to significantly cut health care. Things got so bad in the State of Illinois that police were turned away from gas stations because the government wasn’t able to pay its bills on time.
These problems were also taking shape in Alberta prior to former premier Ralph Klein’s era of fiscal responsibility.
But with spending reductions, balanced budgets, a commitment to retiring the debt and a focus on economic growth, the interest on Alberta’s debt plunged to just three per cent of the money flowing into education and two per cent of the heath budget by Klein’s retirement in 2006. And even with the focus on fiscal responsibility, Alberta’s government workforce grew more than the rest of Canada.
This led finance epert Mark Milke to conclude in his book Ralph vs. Rachel that “Ralph Klein’s government saved health care and education.”
Alberta’s politicians can’t keep shoving their heads in the sand hoping the debt problem will magically disappear. It’s time to put the credit card away and kiss the days of overspending and higher interest charges goodbye.