Ford needs to end the debt and inflation cycle

By Jay GoldBerG

It turns out endless spending does come with a hangover: soaring interest rates. Ontario’s finances have been awash in red ink since Jays star Vladimir Guerrero Junior was in diapers.

Former premier Dalton McGuinty took over Queen’s Park and started Ontario’s debt train in the mid-2000s. Since then, provincial debt has increased by some 171 per cent.

Each and every Ontarian now owes $32,000 in provincial debt, not to mention the tens of thousands per person racked up by Ottawa.

Canadians, and Ontarians, are now paying the price. Food bills for families rose $1,000 last year. Hundreds of thousands of Canadians are relying on food banks. And mortgage payments have spiralled by hundreds of dollars for many families as the Bank of Canada battles inflation with higher interest rates.

The Ford government, to its credit, has been honest about how rising interest rates will impact Ontario’s finances. Because the province has a whopping $475 billion of debt, a hole is blown in the province’s budget every time the Bank of Canada hikes interest rates to fight inflation.

According to the finance ministry, for every one per cent interest rate hike from the Bank of Canada, interest charges on the provincial debt will rise by about $650 million. Because the Bank of Canada has increased interest rates from 0.5 per cent to 4.25 per cent in just the last 10 months, debt interest payments this year will rise by some $2.4 billion.

Because of soaring tax revenue, the Ford government balanced Ontario’s budget last year for the first time in nearly 15 years. That’s a good thing. But Ford has already indicated he plans to take Ontario back into the red.

To do so would be extremely reckless. Ontario is poised to spend at least $14.5 billion on debt interest next year. Hardworking taxpayers can thank the careless policies adopted by Ontario’s last few governments for that high figure. But it’s only going to get worse.

Ontario is already spending more than $1 billion per month on debt interest, and interest rate hikes will worsen that figure. Costs went up by $2.4 billion thanks to 2022 interest rate hikes alone. And more could be on the horizon.

If there ever was a time for politicians to stop digging, it’s now. More taxing, borrowing and spending will only fuel the inflation fire and cause interest rates to get worse. While Ontario Premier Doug Ford didn’t start Ontario’s debt binge, he’s joined in on the action.

To stop the vicious debt and inflation cycle, the Ford government needs to keep the books balanced. Only with prudent spending can we start confronting the realities of high inflation and interest rates.

Jay Goldberg is the Ontario & Interim Atlantic Director for the Canadian Taxpayers Federation.

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