Raise the Hammer

>> the city is still too small downtown to support such a huge $800 million expenditure realistically.

If you're worried about taking on more debt, consider the costs of having too little government debt...

1) Canada's dollar has gone from 67 cents US in 2000, to the current $1.05US. In that time frame, Canada has seen its net exports go from over 5.7% of GDP, to being a net importer of around 1% of GDP. Less exports = less manufacturing jobs.

2) The average home in Canada has gone from $163K to $375K, while mortgage debt has increased from around $400B to $965B (2000-10). In 2000, per capita GDP was $34.7K and it is now $49.2K. That means that the ratio of house price to income has gone from 4.69X in 2000, to 7.62X.

So while the government is in better shape, average Canadians are worse off. More debt, less manufacturing jobs and less projects that voters want, but don't get, because they have been told by government that "we" can't afford them.

Between 1992-98, Canada's federal debt was never under 60% of GDP (currently around 32%). In that time frame, our productivity averaged 1.86%/year and inflation averaged about 1% per year. From 2000-08, as our national debt was being reduced, our productivity has averaged only 0.72%/year, while inflation is now over 3%.

In 2000, the yield on a 10 year bond was around 6.5%, today it's only 2.87%. In Japan, where government debt is over 200% of GDP, the yield is only 1.09%

At the end of 1980, U.S. federal debt was around 33% (GOOD), yet the 10 year bond yield (the rate at which people lend to the government) was around 13% (BAD). Today, when everyone (except lenders) is worried about the U.S. debt approaching 100% of GDP, the bond yield is only 2.91% (GOOD).

The only way we will ever truly know if we have taken on too much debt, is if people stop lending to us. That event has NEVER occurred and if it does, so what? For most of the past decade we have been running surpluses and our economy has performed reasonably well.

But saying that we can't afford something, especially when investors are almost begging us to borrow money, is simply not accurate.