Because we pay interest on it. If the debt is incurred to fund construction of a truly productive asset that yields a future benefit stream it makes sense. If it’s used to fund current consumption then it doesn’t. So borrow once to build a hospital, sure. Borrow year after year ad infinitum to operate it, not so much. Even if the principal will never be paid down, there’s the ever increasing interest bill to consider. There’s a strong likelihood that rates will rise and recessions will continue every once in a while. So it’s imprudent to plan for large deficits when we’re at the top of the economic cycle and the near-bottom of the rates cycle. Sure, Ontario borrows mostly fixed, but every year we’re going to refi $30 to $40 billion of maturing obligations, and higher rates will eventually make this a painful exercise.
I think the key to resolving this though is to get a consensus across party lines and ideology.
Let's agree to raise taxes, and make government more efficient and between the two run a modest surplus in good times which will reduce the absolute debt modestly and the debt to GDP substantially.
- Raise sales tax by 2 points to 15% generate roughly 6.5B in annual revenue allowing for elasticity. Add normal, modest, GDP growth and we're back to balance, give or take the hydro issue.
- Merge the Separate and Public school systems, AND abolish school boards all together, as Quebec is doing. Its mostly run by the MOE anyway, why pretend otherwise.
This should, conservatively, produce a net savings of 1.5B per year (up to 2.5 is realistic).
Let's use that to actually pay down debt.
Then when actual savings accrue from lower interest payments, split the benefit 1/2 to social programs and 1/2 to a lower taxes.
What often gets missed by those w/Conservative leanings is that you require by-in from those who favour robust social programs, environmental protections and the like, which aren't free.
Those on the left, might be rightly accused of not understanding the 'middle' lacks enthusiasm for a hectoring nanny-state (see Beer Stores amongst other issues.) and values fiscal probity.
When Harper proposed raising the retirement age to 67 he was proposing something incredibly sensible; but failed to achieve buy in, because he wanted to bank 100% of the savings, rather than reinvest some in more generous pensions/retirement income support.
I think splitting the difference would have been political genius and good public policy. Take half the savings from a higher retirement age and use them to add $100 a month to OAS and raise CPP to cover 37% of income instead of the 33% its now moving to.
Use the rest of the savings to reduce payroll tax of individuals and business. Win-Win.
Where parties and ideologues refuse to accommodate the desires or concerns of a plurality or even majority of Canadians they harm their own political interest and general social interest too.
