Facts are facts. The facts on Manitoba’s debt should worry you. They should worry the government, too, but they’re not paying attention.
Fact: our total provincial debt is long-past record levels, and growing. The Moody’s credit agency is worried, they changed the outlook on our credit rating to “negative” making it more expensive to borrow. Whether debt costs are reflected in taxes or higher Hydro bills, it is still us who pay.
Fact: none of the three New Democrats running for premier expects to rein in their borrowing. They haven’t even got a plan to balance the government’s annual accounts, ever.
The line you hear lately about government debt is that it’s cheaper than ever to borrow. But at the rate Manitoba is borrowing that’s like saying it’s cheaper than ever to get addicted to heroin. Economists say it’s smart to borrow in hard times and have surpluses in good times, but this Manitoba government racks up debt in good times too — putting hard times around the corner.
For three decades, interest rates have been dropping. That’s the only reason why the carrying costs for Manitoba’s debt, including Hydro, has yet to explode.
But interest rates are sure to go up eventually, they have been kept artificially low only by the concerted efforts of national central banks worried about the global economy. And, interest isn’t the only problem with government debt. Over time, as every year passes, the full debt principal on another year’s borrowing comes due. Not being able to repay that principal, we have to refinance.
Interest rates are now so low that even a small tick up will mean a big increase in debt servicing costs upon refinancing current debts. Suppose a future government has to refinance at a 6.5% rate in 10 years’ time. Taxpayers and ratepayers would suddenly be paying twice today’s interest rates for another 10 or 20 years, just to cover the damage from 2014-15 deficit and borrowing.
Whether interest rates stay low for the next few years or begin their inevitable rise, every new dollar the government borrows is costing us now, and will cost the future more.
It doesn’t have to be this way. If Premier Selinger, Premier Ashton, Premier Oswald or their successors would simply promise to use early retirements and normal attrition to cut the size of Manitoba’s over-blown bureaucracy down to the national average, the provincial budget could be balanced quickly without forcing a single civil servant out before their time.
The NDP isn’t listening — yet. The way they’re piling on more debt is like the cliché of the frog who starts out in a cold pot of water on the stove. The frog’s temperature adjusts enough as you turn up the heat that it doesn’t know it’s boiling until it’s too late.
Science has proven that delaying escape doesn’t work with frogs. But it’s still trying to work that way with the Manitoba government. It’s now government policy to sit and wait until the pot boils before doing anything to jump out of it. Worse: the candidates for NDP leader are already saying they want to let that water boil for longer than we once thought possible.
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