The Ontario government owes now or will soon owe $300 billion. With a population of around 14 million to be responsible for it, that is a lot of money.
There is an argument that no one needs to pay it back so why worry. Partly right. It is like a golf club. While playing, I cannot tell if the course is paid for or heavily financed. My enjoyment is measured in how it plays not by how it is financed.
The risk for heavy debt is if rates go up, will maintenance be curtailed? Will the clubhouse hours be shortened? Will there be no hot water for the showers? Then what?
The potential problem can be addressed by anticipating what will be lost and if that is a concern, what should happen now to minimize the problem?
The total amount is a concern, but I don’t know if it is too big, small or in between. I have intuition that $21,000 per citizen may be a little rich, but who knows. What I do know is if interest rates double, the money to pay will come from somewhere. Either from program reductions or new taxes. Probably both. Tell me how and when and maybe I will stop caring about the debt.
Part of the problem is that no one understands billion. It sounds like million and that is not so terrifying. A billion is nothing like a million. Brazilian sounds like too and is also unrelated.
A billion is 1,000 million. If I count to a million at one number per second, 24 hours per day I get there in about 12 days. I get to a billion in about 32 years. If Jesus had started counting on the day of his birth, he would be barely 21% of the way to $300 billion. Like I said, you cannot understand $300 billion. It is just a number with unknowable emotion.
300 billion seconds ago the ice age had just ended.
I suppose governments are faced with problems similar to those people face. Sometimes you need to borrow. People seem to get the idea that owing money minimizes their future. Probably because they intend to pay it back. Governments have so many ways to get more money that they seem to have lost the concern to pay it back. That loss will be a problem eventually because every new tax reduces the ability of the economy to create wealth. Every program reduction reduces the faith the people have in their governments.
You fear debt because you know it has a future cost and you cannot borrow as much as you might ever need. Government finance is not a lot different than for your family. Except, they have no fear yet.
You have fear because you know the government has no money of their own. Every dollar of their debt is a dollar from your future.
Don Shaughnessy is a retired partner in an international public accounting firm and is now with The Protectors Group, a large personal insurance, employee benefits and investment agency in Peterborough Ontario.
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