Ontar-I-Owe

Almost two years ago we started this blog and one of the early posts was Congratulations! You’ve Sold Your Kids and Grandkids Into Economic Slavery. In it we reviewed the debt position of Canadians and particularly Ontarians. We thought we would see where Ontarians stand after two more years of socialist government policy and corruption.

Finding the Data

As we went through our original essay to refresh our data, we encountered a number of broken links. Link and data updates are listed below:

  1. Statistics Canada no longer has a population clock so we use data from Quarterly Demographic Estimates (PDF version, 559kb). For June 30, 2013, the population of Canada is estimated at 35.158 MM and for Ontario, 13.498 MM.
  2. Wikipedia (new link here) lists Canada’s estimated 2013 national debt at $605.0 billion.
  3. The Canadian Taxpayers Federation (CTF)  embedded debt clock on our original page no longer works.
  4. From the  Annual Financial Report of the Government of Canada, 2012-2013, The Federal Accumulated debt is listed at $602.4 billion at March 31, 2013 or 33.1 per cent of GDP, slightly below the Wikipedia estimate. If we take the 2012-13 Federal deficit at $18.9 billion or $4.7 billion per quarter, we get an estimate of $606.5 billion for June 30, 2013.
  5. Dividing the total debt in point 4 by the population in point 1 we get a per capita national debt of $17,255.
  6. The Ontario Financing Authority shows a consolidated provincial debt of $288.1 billion for September 30, 2013. The referenced 2013 Ontario Budget – Schedule of Debt gives a total consolidated debt of $281.1 billion for March 31, 2013. The reason for the difference would be the 6-month growth in the debt.
  7. Ontario’s population by the Ministry of Finance (figures for July 1 of each year) under a reference scenario for September 2013 is 13.665 million interpolated).
  8. Dividing 6 above by 7 above gives a per resident provincial debt of $21,083.
  9. The City of Ottawa municipal debt at the end of 2012 was $1.180 billion. However, Note 8 to the Consolidated Financial Statement gives the net long-term debt as $1.436 billion. Note 9 shows $220.7 million in mortgage debt outstanding for a total of $1.657 billion.
  10. The city’s population estimate (interpolated) for 2013 is 944 thousand. This gives a per capita debt of $1521 per resident (excluding mortgage costs).
  11. The Economist global debt clock gives a per capita debt of $45,625, up from $36,898 in our original post but their population estimate is lower than Stats Can’s by a couple of hundred thousand.

Update Summary

It is difficult to produce an accurate picture of debt since data reporting periods vary and some figures that are necessary for calculations are estimates, notably population numbers. The gross results however are accurate enough to give a reasonable picture of the debt situations for residents of Ontario and Ottawa in particular. Using June 2013 as the date for calculation where possible, in the two years since our original post, the numbers have changed as follows:

Table 1. Per capita debt estimates by census area for 2011 and 2013 with percentage changes.

Census Area 2011 2013 Percent
change
Canada
(thousands)
$15,925 $17,255 +8.4
Ontario
(thousands)
$18,432 $21,083 +14.5
Ottawa $970 $1,521 +56.8
Total $35,327 $39,859 +12.8

Source for 2011 data: Congratulations! You’ve Sold Your Kids and Grandkids Into Economic Slavery

Where We Stand

The figure used by economists to assess the health of a counry’s debt is the debt/GDP ratio. Using GDP figures from the site Trading Economics, Canada’s GDP by mid 2013 would be about $1.835 trillion and the combined public debt for a resident of Ottawa about $895 billion for a debt/GDP ratio of 49%.

But that’s just the partial Canadian picture that we have examined in detail above. Macleans Magazine in March 2013, published an interactive map that shows total provincial debt at over $535 billion. This brings the total public debt figure to one that would generate the widely held figure of around 87%

The Financial Post in Canadian debt levels aren’t as they appear, gives Quebec a debt/GDP ratio of 87.0%  and Ontario 75.9%. The IMF’s 2013 forecast puts Canada’s gross combined government debt at 87% of GDP, or 13th highest among the 30 most advanced economies.

Conclusion

At an annual growth rate of 4.2%, Canada’s debt growth outstrips GDP or economic growth. The amount is not great but in the long-term is undesirable, particularly since we are supposed to be in the recovery period for the 2009 recession. The situation for both Ontario and the city of Ottawa are much more dire since their high debt growth rates must be viewed in terms of current proposed spending increases that are regularly being announced. In Ottawa’s case, the mayor is proposing multi-billion dollar transit expenditure increases.

In Ontario’s case, the province has just announced additional spending plus an $11.7 billion deficit (read: Liberals won’t worry about eliminating $11.7-billion deficit if economy slows or A Prosperous and Fair Ontario) laid out in the budget update tabled in the Legislature yesterday. That will bring the Ontario public debt to nearly $300 billion next year.

Fluff and Hot Air

We finish with some comments on the 2013 Ontario Budget. You know things are pretty bad when the governmetn goes to extraordinary measures to put lipstick on their pig. A note after Table 5.1 states:

The Province’s deficit for 2012–13 is now projected to be $9.8 billion — a $5.0 billion improvement compared with the 2012 Budget forecast.

This “improvement” is on a projection. It is easy to build in future improvements in any projection – just make sure they are on the wild side. This disguises the fact that they still spent $9.8 billion more than they generated in revenue. Considering that they now project overspending of $11.7 billion in this fiscal year, it is not moving them to their target of a balanced budget in 2017-2018.

Another obfuscation they practice is to cite  the figure of $272 billion as the province’s debt. The Ottawa Citizen of Nov. 7, 2013 (Ontario deficit holds at $11.7 billion) reports:

The fall economic update put the province’s debt figure at a whopping $272 billion, more than double what it was when the Liberals were first elected in 2003.

But this is a little – well maybe massive – white lie. This figure from Table 5.3 in the Ontario Budget is net debt. If you haven’t heard of it, that’s because no one uses it. It represents the total debt owed by the government to third parties minus any investments or finical assets that the Province is in turn owed. In other words it is an accounting entry.

The government does not pay interest on the net debt (see below). It pays interest on the total debt or simply “debt” as everyone refers to it. This debt represents the total in financial obligations that the government must pay interest on and must return the principal of to the debt holder on maturity.

Table 5.3 gives the (total) debt of the province as $281.1 billion at March 31, 2013 and projects $290.853 billion at the end of March, 2014. But even this figure is low. The current deficit projection of $11.7 billion should raise this figure to $292.8 billion. The lies my mommy told me!

A budget to the normal person is about numbers – what you plan to spend and what you want to spend your money on. You can’t prepare a budget unless you first produce a statement of your financial position, a tabulation of what you own and what you owe. Accountants call this a balance sheet. After a couple of hours of searching we were unable to find a balance sheet for the province. And the the critical numbers that do relate to the province’s financial position are all buried in the last section of the budget document. Most of the document is filled with glowing words and ideas of how our government is going to raise Ontario to new heights of prosperity.

When you read the Ontario Budget, you realize that this is an omnibus bill in the same way that the Federal Budget is an omnibus bill. It touches almost every area of our life. The main difference is that the Ontario Government is Liberal – the darling of the unions and the left-leaning intelligentsia. As such, they must be looking after our collective welfare (literally) whereas the Federal Conservative Government is secretly plotting to destroy our sacred entitlements and liberties, making their budget bad.

Technical Note

In the 2012-2013 budget documents, the term “interim” is widely used. An official at the Ministry of Finance explained the use of the term as follows. The budget document originally issued for 2012-2013 was a forecast of income and expenditure for the fiscal year ending march 31, 2013. At March 31 or shortly thereafter an update is reported giving initial year-end figures. Since it takes time for the various departments and ministries to compile and report actual final fiscal year numbers “actual” budget numbers are not reported until a Sept. 30 update. So interim numbers are generally as of March 31, 2013.

Also from the OFA by email on 20140218 (our emphasis added):

Thank you for your question regarding Ontario’s debt and interest on debt (IOD). For the table you are referring to, IOD is interest expense calculated on the total debts of the Province and net of investment income from the financial assets. Thus, IOD is not interest on net debt.

Unfortunately, monthly data regarding the Province’s debt is not available. The most recently published information, including Ontario’s total debt outstanding, can be found in the 2013 Fall Economic Outlook and Fiscal Review, under chapter 7 Borrowing and Debt Management.

Kind regards,
OFA Investor Relations

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