B.C.’s deficit is spiraling out of control, but not because of what the government wants you to believe. Although the finance minister claims the return to deficit spending is because of a huge fall in revenue, a closer look at the books shows it is actually because of a huge increase in spending. If the government spending spree is not brought under control, current and future generations will be left with a legacy of debt and higher taxes.
B.C.’s new budget, released on September 1, shows the deficit spiraling to $2.8 billion in 2009-10. B.C.’s finance minister said this is because “we are facing a loss of $2 billion in expected revenues in the current fiscal year”. How interesting it is, then, to look at the B.C. budget and see expected revenues falling by only $720 million in the current fiscal year. Darn those pesky numbers.
So if revenues aren’t down by as much as the government says, just what is sending B.C.’s deficit to new heights? Out of control spending. Government spending has skyrocketed to $40 billion in 2009, up $2 billion from 2008. If the government had held spending at 2008 levels, the deficit would have been $642 million, not all that much more than the original estimate. So the massive $2.8-billion deficit is a result of a spending blow out, not falling revenue.
The deficit adds to an already huge debt, which is expected to balloon to $53 billion by 2013, up from $38 billion in 2008. This move in the wrong direction creates three problems: higher debt servicing costs; young people left saddled with a financial burden they didn’t create; and once the boomer generation retires, there won’t be enough taxpayers working to pay the taxes to finance the debt and pay the pension benefits of future retirees. This spending spree endangers the retirement security of the boomer generation.
Debt servicing costs are exploding. In 2009, B.C. taxpayers are paying $6 million per day to service the debt, and if spending is not brought under control, that will rise to almost $7 million per day in 2010, and almost $8 million per day by 2013. Hard-earned dollars that could go to pay for services people want, or better yet—left in peoples’ pockets—go to bankers and bondholders to pay the interest on the debt.
We can’t expect future generations to take on a massive tax burden for spending they didn’t vote for to get things, like billion-dollar convention centres or fast ferries, they probably won’t want. In 2008, each person in B.C. owed $8,341 for their portion of the provincial debt. In 2013, that will rise to $11,291. Is it right to leave a fiscal hangover to unborn children to pay for our free-spending ways?
The demographic reality is that we’ll have fewer and fewer young people paying into the system through taxes, relative to those taking out. According to B.C. Stats, the number of people aged 15-24 will drop by 2.5 percent between 2009 and 2029 while the number of people 65 years and older will almost double. Tomorrow’s taxpayers left to foot today’s bill will strain under an unsustainable tax burden unless spending is brought under control.
Dropping the fiscal fantasy shows the B.C. government has a spending problem, not a revenue problem. If we care about the well-being of our children and grandchildren and want to leave them with something other than a legacy of debt and higher taxes, we need to turn the direction of government spending around, get rid of the deficit, and start reducing the debt.
Maureen Bader is the B.C. director of the Canadian Taxpayers Federation.