Guest Column: Politicians are not money managers
By Medicine Hat News Opinon on October 12, 2019.
Did you know that there are about 34 million people in Canada and that each and every one of us owes approximately $34,000 as our share of the debt accumulated by our federal and provincial governments? The total is almost $1.3 trillion. That does not take into account money that municipal governments may owe. It also does not take into account the financial liabilities created by the money owed civil servants to pay defined benefit pensions and does not account for Canada Pension Plan liabilities. The annual interest paid by the federal and provincial government is about $7,000 annually per family of four. In other words, governments must collect $70 billion in taxes to pay interest on money we borrowed before they collect a nickel of taxes dedicated to the annual operating budget each year. At the present time under our current government debt is increasing about $940 every second. Each year around the middle of June, we have tax freedom day. That means that we have worked almost six months and finally have earned enough to cover the taxes that we must pay the various levels of government each year. For the next six months we work for ourselves. With our remaining income, must pay for housing, food, clothing, education, entertainment and various other needs and wants of life. Many people have mortgage debt and that is one of the few good types of debt because the value of the property purchased and the interest payments are mitigated by inflationary pressures, and by market value increased over time. There is good potential to build value and equity through this form of debt as opposed to paying monthly rent. Bad debt is borrowing to finance consumables and expendables like trips, cars, clothing and other items that have no chance of increasing in value. We are paying for things that no longer exist. The most common forms of this type of debt are car loans or credit card payments. The only people who benefit from this type of borrowing is the lending institution and they do extremely well. Virtually all government debt is this type of debt. Governments are simply borrowing on the future to spend today usually in an effort to look good for the next election. Our current government has increased the debt by nearly $100 billion and has added about $5 billion to the annual interest payments that we must make far into the future. This amounts to borrowing in order to pay interest on previous years of over spending. They will argue that as the economy grows, we are justified in borrowing and owing more. Canada and particularly Alberta have less debt than most other jurisdictions in the world and that is a good thing but we still are burdening our future generations with crippling debt that will come home to roost at some point. Instead of increasing our borrowing and debt as inflation and the economy grows, why not reduce government spending, pay as you go, eliminate our deficits and use inflation to slowly reduce our burdensome debt responsibilities? Dealing with household finances in this way would be considered smart but many finance ministers would argue countries are different and it is acceptable for governments to carry debt as long as it is in an acceptable ratio to the country’s GDP. I consider this to be political hogwash because when I went to school two plus two equals four no matter who is doing the calculation. Governments are wasting money on interest payments and should pay as they go like every smart family does. We can spend our money smarter than any government can and more of our money should be left in the hands of the taxpayer. The fact is that most politicians need glasses as they will not see past the next election. They have their own interest ahead of those who elected them. Government is renowned for making any project cost more and mismanaging the resources. They need to cut spending, cut services and cut their involvement in our lives. Governments and public service unions have no incentive to work efficiently or save money. Leave the money in the hands of the people who will find economical and efficient ways of getting the services they want and need. The private sector is more efficient and competition keeps prices down. We need to understand that even if the saving are small, people earning a profit providing services to the public is better than allowing our governments to turn potential profits into waste. Paul McLennan moved to Alberta more than 20 years ago as a member of the RCMP. He remained in Alberta after retirement in 2002, taught driving part time and settled in Medicine Hat in 2011. 10-9
