Inasmuch as readers of this blog typically follow developments in both the United States and Canada, I thought it might be instructive to share the main results of a new study I co-authored for the Fraser Institute (a free-market Canadian economic policy think tank). Specifically, the study compares the government debt loads of the province of Ontario versus the state of California. Readers may be surprised to learn–I know I was!–that on any metric we choose, Ontario’s debt is much higher. This is ironic, because for many Canadians (as well as people in the United States) California epitomizes a big-spending “liberal” government.
As the graphic illustrates, total gross bonded debt is $144.8 billion in California, compared to a whopping $267.5 billion for Ontario. (These data refer to Fiscal Year 2011/12, the latest for which California’s numbers were available on some of the criteria.) Yet since Ontario is so much smaller than California, the simple total understates the discrepancy. In terms of the economy (state and provincial), California’s debt is 7.6%, while Ontario’s is 40.9%. Another way of gauging the burden is that California’s state government devotes about 3% of its revenues to servicing the debt, while Ontario’s provincial government must devote more than triple that.
The report surveys the history of each government to explain how they each got into their current predicaments. The report also provides a general explanation–accessible to the lay reader–as to why citizens should be wary of growing indebtedness, beyond the obvious principled objection to government spending programs per se. Finally, the report walks through the theory and historical evidence for reforms that cut spending, rather than increase taxes, in order to solve the looming debt crisis.