Canada's Crisis (part 4) –Ontario’s Debt Crisis

"To put Ontario’s debt in perspective, we recently compared Ontario's indebtedness to that of California. After all, the Golden State has gained international notoriety for its deficits and government dysfunction. In fact, California now has the lowest bond rating in the United States and its own Treasurer, Bill Lockyer, called California’s finances “a fiscal train wreck".  Unfortunately, U.S. states do not measure net debt, which is a standard measure of indebtedness that compares total debt adjusted for financial assets. To compare Ontario and California, we examined what is referred to as “bonded debt.” This is basically the debt of the province (or state) that remains outstanding in the form of marketable bonds. On every measure of indebtedness, Ontario is markedly worse than California. Ontario’s debt is almost two-thirds larger than California’s bonded debt even though California is a much larger jurisdiction in terms of both the size of its economy and its population. Specifically, California’s bonded debt is $143.9 billion as of 2011 while Ontario’s is $236.6 billion, two-thirds larger than California.  As a share of the economy, Ontario’s debt (38.6 per cent) is more than five times larger than California’s debt (7.7 per cent). Ontario’s per capita debt ($17,922) is over four-and-a-half times that of California ($3,833). Think about that – Ontarians are handing their children a debt load between four-and-a-half and five times that of Californians.  And there is a real cost to this debt today. Ontario spends a little over three times the amount of revenues on interest costs as California: 8.9 per cent versus 2.8 per cent. More specifically, Ontario spends roughly $10 billion a year on interest costs, about $750 per Ontarian per year just paying the interest on already accumulated debt. That’s money not spent on health care, education, roads, or public safety. The official response from the Ontario Ministry of Finance is one of denial, which echoes the lack of response by the government to the warnings of the Drummond Commission. Indeed, other sections in our report come to the same conclusions as the Drummond Commission: the status quo in Ontario will lead to marked increases in debt that could put the province in harm’s way.  Across every comparable indicator, Ontario’s indebtedness is decidedly greater than California. For those Ontarians who look at California in puzzlement over its inability to solve its deficit and debt challenges, the Ontario-California comparison suggests Ontarians look inward. The time for Wynne and her government to act on spending and deficits is now, so that more dire choices in the future are avoided" 

"For the comparison with Greece, the report says that country’s net debt-to-GDP ratio was 37% in 1984, “exactly where Ontario’s [ratio] stands today.” Greece, one of the European countries most battered by the global recession, now has a debt-to-GDP ratio of a remarkable 163%. The report argues that if Ontario continues with policies that only serve to slow the rate of spending growth, 'Greece offers a cautionary tale”

EVEN THOUGH GREECE WAS IN DEBT by 37% (where Ontario is presently), GREECE STILL BORROWED, PAID FOR, AND HOSTED THE 2004 SUMMER OLYMPICS. ONTARIO IS BORROWING, PAYING FOR, AND HOSTING THE 2015 PAN AM GAMES.  GREECE HOSTING THE 2004 OLYMPIC GAMES SPED UP THEIR ECONOMIC DECLINE BECAUSE IT MADE PROFITS FOR A FEW, PUT THE CITY INTO DEBT, AND MUCH OF THE JOBS ASSOCIATED WITH THE OLYMPICS DISAPPEARED ONCE THE OLYMPICS ENDED.

Southwestern Ontario cities dealing with growing numbers of empty or abandoned structures:

http://www.theobserver.ca/2013/07/17/testament-to-southwestern-ontarios-grim-economy-many-cities-are-dealing-with-growing-numbers-of-empty-or-abandoned-structures-that-send-out-all-the-wrong-signals
“Many Southwestern Ontario cities dealing with growing numbers of empty or abandoned structures.  Nothing screams an economy struggling more than empty or abandoned buildings. They tell of jobs and tax revenue siphoned away, and so little demand for new development that worn-out shells of the past can be left standing instead of being knocked down and replaced by new buildings”