B.C.’s sorry plunge from fiscal leader to financial train wreck

By James R. Coggins

Last month the Canadian Taxpayers’ Federation took its “Debt Clock” on a tour of British Columbia to draw attention to the province’s mounting debt. The debt is currently $112 billion and rising by $53 million per week – faster than any other provincial government’s. That’s $20,000 for every British Columbian. The NDP-run province’s credit rating is “plummeting,” according to outside experts, driving up the interest rate it pays on new debt. It is spending $4 billion a year on interest and will soon pay more.

This is remarkable – and remarkably bad – for a province that for many decades prided itself on fiscal responsibility. Mid-20th-century Social Credit governments ran balanced budgets for 20 consecutive years. Gordon Campbell’s Liberal government then outlawed operating deficits in 2001 – and made cabinet members personally accountable for the results – going on to all-but eliminate the province’s operating debt. True, the capital debt and debt of Crown corporations were allowed to increase, raising direct government debt to $43.3 billion and total government debt to $69.8 billion at the end of the Campbell era. High, but still quite manageable for a nearly $400-billion-per-year economy.

When the NDP gained office in 2017 under John Horgan, the new government initially did not deviate greatly from Liberal practice. Horgan’s first two budgets continued to promise balanced operating budgets and minimal increases in total government debt.

All of that changed with the Covid-19 pandemic in 2020. Revenues plunged while expenditures zoomed. As B.C. emerged from the pandemic, the economy improved and government revenues increased, but spending increased even faster. The 2023-2024 budget projected an operating deficit of $4.2 billion and total government debt rising to $107.9 billion.

When David Eby replaced John Horgan as premier and NDP leader in late 2022, things changed even more. The 2024-2025 budget announced in February called for an operating deficit of $7.9 billion and an increase in the province’s total debt to $123.3 billion. It forecast similar deficits the next two years, bringing total debt to $165 billion by the 2027 fiscal year-end.

Especially disturbing is that these deficits have no major upheavals to justify them. In 2020, the Horgan government suspended the balanced-budget law for three years to deal with the pandemic. A decade earlier the Liberal government had authorized deficit spending for two years to deal with the 2008 global financial crisis. The NDP permanently removed the balanced-budget requirement in 2022, so Eby’s government is free to ignore it. The projected 2024-2025 deficit of $7.9 billion – incurred in “normal times” – dwarfs any deficit during the previous two crises.

full story and videos at https://tnc.news/2024/08/12/op-ed-b-c-s-plunge-fiscal-leader/

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