IEDM: After doubling its debt per capita, is Ontario the new Quebec?

Montreal, August 11, 2016 – Whereas the Quebec government has finally started to put some semblance of order in its public finances, Ontario has been following the old Quebec model for over a decade, leaving its population poorer in the process, as shown by official statistics presented in a publication released today by the MEI.

For some time now, Ontario has been underperforming compared to the rest of Canada. And in many respects, the province is walking the path that ended up putting Quebecers at a disadvantage for decades:

• Ontario became more like Quebec in 2009 when it began receiving equalization payments.
• While Quebec’s program spending per capita was higher than Ontario’s in 2002-03, the Ontario government now spends more ($8,765 vs. $8,042).
• Ontario’s net public debt per capita has almost doubled in size since 2002-03, with total debt increasing by $163.5 billion compared to Quebec’s increase of $91.5 billion.
• In an attempt to deal with rising government spending and rising debt interest costs, the Ontario government has also raised taxes, with revenues rising slightly faster than in Quebec.

“Some might respond that Ontario’s higher spending ‘bought’ desirable outcomes like higher economic growth, say, or more jobs. However, this is not evident when comparing Ontario to the national average, or to British Columbia, the country’s third most populous province,” says Mark Milke, independent policy analyst and co-author of the study. “On the contrary, Ontario has been lagging compared to the national average in terms of both economic growth and job creation.”

Moreover, employment income in the province has barely kept pace with inflation, shows the publication. All real gains in median family income came from additional government transfers, which increased faster than in the rest of the country.

“The economic and fiscal policies of their government have already hurt Ontarians, with real consequences in terms of income and standard of living,” says Youri Chassin, Research Director at the MEI and co-author of the paper.

“The Ontario government is now an equalization recipient, it’s running deficits like there’s no tomorrow, and it has been downgraded by credit rating agencies because of its debt load,” says Mr. Chassin. “Once the economic engine of Canada, Ontario’s economic policies are turning it into the federation laggard.”

The Viewpoint entitled “Is Ontario the New Quebec?” was prepared by Mark Milke, independent policy analyst, and Youri Chassin, Economist and Research Director at the MEI. This publication is available on our website.

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The Montreal Economic Institute is an independent, non-partisan, not-for-profit research and educational organization. Through its studies and its conferences, the MEI stimulates debate on public policies in Quebec and across Canada by proposing wealth-creating reforms based on market mechanisms.

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Interview requests: Pascale Déry, Senior Advisor, Communications and Development, MEI / Tel.: 514-273-0969 ext. 2233 / Cell.: 514-502-6757 / Email: pdery@iedm.org

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