Sooner or later, the bill comes due

Opinion

Hey there, time traveller!
This article was published 07/12/2023 (643 days ago), so information in it may no longer be current.

It is a gob-smacking amount.

$1.612 billion — the new number for the province’s deficit released in the second-quarter fiscal update on Tuesday.

Let’s have a little fun with that number: slap it into the TD Bank’s mortgage calculator with the current three-year fixed rate of 6.73 per cent, and you’d find that paying it off would take 25 years — encompassing 300 monthly payments of $11,023,280. (The total payout would be $3,306,984,000. Of course, something like $1,694,984,000 of that would be the cumulative interest payout, but that’s another story.) You could bring your monthly payment down to $10.787 million a month by going with a five-year fixed mortgage at 6.49 per cent.

Thank goodness it’s not your mortgage.

But wait: it is. It’s both your mortgage, and your kids’ mortgage as well.

We’ll get back to that later.

First, to the fiscal realities here: it has become almost a provincial political tradition in Canada for every new administration to get into office and say that they’ve discovered the financial situation they’ve inherited is far, far worse than they expected. It helps to tamp down expectations (which a new government always faces plenty of), and it gives the new administration a bit of elbow room: cue any government minister, solemnly intoning, “We have to put some things on the back burner while we deal with this urgent fiscal calamity.”

Former premier Heather Stefanson’s take is that the NDP government is blowing things out of proportion: “They’re going to try and inflate those numbers as much as they can so that when they come out in the spring, they’ll come out with better numbers.”

And she’s probably not completely wrong in that analysis.

There are reasons to throw every possible thing, including the cost of 11,000 surplus kitchen sinks if you happen to have them, into the deficit numbers, because there’s nothing for a new government to lose.

All a government has to do is to look at the worst-case scenario for every budget subhead — because what we are looking at here is projections for the full year’s performance, based on the first six months — and if things get better by budget-time, then you can soak up the credit.

If things get worse, you can still blame the former incumbents: “It’s such a fiscal mess that cleaning it up is taking far longer than we ever could have imagined.”

The absolutely accurate number in the projections is certainly more than Stefanson would like us to believe — because Premier Wab Kinew gave details of unbudgeted expenses run up by the former government, along with stats on a substantial decline in tax revenue ($419 million) — but also almost certainly less than Tuesday’s numbers.

But that doesn’t mean we shouldn’t worry.

The problem is who is holding the mortgage — and, as we pointed out above, that’s every single person in Manitoba, as well as all of our kids.

The Manitoba government may not be paying 6.73 per cent interest — the expected rate on provincial borrowing in 2023/24 was expected to be 4.3 per cent, for example — but the money we borrow to cover off deficits has to be paid back, along with interest.

And with the kind of public debt Manitoba is now carrying, a one per cent increase in interest rates corresponds to an additional $32.9 million in interest being paid, money that otherwise could have been used for anything from health care improvements to helping the homeless. Those interest payments are also money that simply leaves the province, providing no gain to the provincial economy.

Think of it this way: the exact size of the forecast deficit may depend on political math.

But in the end, we have to pay for what we borrow.