Raise the Hammer

That was certainly a hyperbolic, one-sided opinion piece with lots of bold statements:

There is no shortage of stories of Quebec’s exodus over the years.

But nothing to really back any of them up... besides opinion.

You also got me thinking about economies and how we judge economies. What is a "healthy" economy? What are the metrics we use to determine that? How effective are our traditional economic metrics for determining the social health and vibrancy of a city? Mr. Thompson seems ready to hang the out-of-business sign around the neck of Quebec solely based on a population shift to the west… a dubious starting point for some trite Quebec-bashing.

I assume you're quoting from and referring to the opinion piece Jason is writing about, and not Jason's article, since the quote you've provided above is not in Jason's article itself.

Ya sorry, should have made that clearer Robert.

Excellent response to a really dumb Spectator opinion piece that is essentially resentment that francophones want to work and live in French when possible. I go to the occasional national conference where it is consistently embarassing to find that English-capable francophones usually outnumber their French-capable anglophone colleagues - not that it seems to keep anyone from exchanging views and advancing the agendas. Montreal and Quebec are ahead in a lot of ways, and Ontario in some others ie we are somewhat DIFFERENT from one another - which after all is the point of the arrangements.

Re: Economic Vitality

"In its 2010 budget, the Quebec government presents a clear and honest view of the dire fiscal situation that the province currently faces. For fiscal year 2009–10, the province is slated to post its largest deficit—$4.3 billion—since the recession of the early 1990s, and that number will rise to $4.5 billion in 2010–11. More troubling, Quebec expects its gross debt to rise to more than half of provincial GDP through the near term, peaking at 55 per cent in 2012. By 2011–12, debt-servicing costs will eat up nearly $8 billion of Quebec’s provincial budget.
In the face of a rapidly aging population (and the resulting shrinking tax base), the 2010 budget squarely addresses the challenge of fiscal sustainability. Health care—easily the largest spending component—will see growth capped at 5 per cent going forward. Furthermore, new health-care funds will be generated through the introduction of a “health contribution” that will raise $1 billion a year by 2012. A second consecutive 1 percentage point increase in the Quebec Sales Tax (QST), valued at $1.6 billion, will be effective January 1, 2012. Additionally, minor tax increases on mining royalties and compensatory taxes for financial institutions will also add to revenues. At the same time, the Quebec government has set itself the daunting task of restraining total program spending to 2.2 per cent annually after 2011–12. If these measures can be implemented as described, Quebec could return to fiscal balance as early as 2013–14. Regardless, delaying a return to fiscal equilibrium any further is simply not an option for Quebec.

Among the Canadian provinces, Quebec is arguably in the most precarious fiscal situation. The provincial net debt now stands at $129 billion—equal to 43 per cent of provincial GDP. (Two decades ago, Quebec’s net debt-to-GDP ratio was only 22 per cent.) According to figures released by the Organisation for Economic Co-operation and Development, Quebec is in the fifth-worst position in terms of fiscal debt burden in the western industrialized world. Only Italy, Japan, Belgium, and Greece have higher debt-to-GDP ratios. Between 2009–10 and 2011–12 alone, debt-servicing costs will rise 29 per cent, providing a strong incentive for Quebec to curb its spending growth."

http://www.conferenceboard.ca/topics/economics/budgets/quebec_2010_budget_EN.aspx

Fun facts...

In 1998, debt charges for Quebec were 16.75% of revenue. As of 2011, they were down to 11.47%.

In 1998, debt charges in Ontario were 16.6% of revenue (2.43% of GDP). For 2011, they were down to 8.97% (1.60% of GDP).

Since the onset of the Great Recession, Ontario's debt charges have increased from 1.47% to 1.60%, or 2.86%/year.

At that rate, it would take another 18 years to hit the 2.61% of GDP that we saw in 1999-2000.

FWIW, Ontario's debt-to-GDP ratio was around 35% in 2010-2011.

Interesting stats....If I'm reading them correctly Ontario's debt-to-GDP ratio has doubled in the past 2 decades, while Quebec's has almost doubled? Not a very good trend.

If someone isn't going into debt, whether that is: governments (i.e., taxpayers), citizens, or corporations, there is no "growth economy". So expect that trend to continue until we realise a "growth economy" is a noose around all our necks.

Government debt, specifically, federal debt, is not actually debt at all, regardless of what our leaders tell us.

Here is a quote from a paper put out by the Parliament of Canada...

"It should be noted that the absence of sales of government bonds or treasury bills in the context of a prolonged fiscal deficit would cause the Receiver General account cash balance to go into overdraft. The central bank may object to this approach, however, because it might give the public the perception that the federal government is financing its spending using a “line of credit.” Nonetheless, the approach is sensible from an operations standpoint.

Did you catch that?

From an actual operations standpoint, the federal government COULD keep spending, even WITHOUT bond sales. That would occur because the Bank of Canada could just keep crediting money to their account.

Here is how the paper describes the role of federal debt...

"2.2 The “Traditional” Tool: The Bank of Canada’s Open Market Operations

Open market operations consist of withdrawing cash from the economy by selling government securities to financial institutions, or injecting cash into the economy by buying government securities from financial institutions.

The target for the overnight rate dictates the interest rate at which the Bank buys or sells these securities. If the overnight rate is trading above the target – a sign that there is not enough cash available to lend in the interbank market – the Bank will intervene by adding liquidity to the private economy through the purchase of government securities.

Conversely, if the overnight rate is trading below the target rate – a sign that there is too much cash available to lend in the interbank market – the Bank will intervene by withdrawing liquidity from the private economy through the sale of government securities."

Federal debt is just a tool to control interest rates. It is not something our children EVER have to pay back, it is not a moral issue, it is just a reserve drain AND is actually a prime source of savings for Canadians.

The ONLY reason why Canadians think public debt is bad, is because it is called PUBLIC DEBT. It just sounds bad.

In reality, the federal debt is just the amount of money the feds have put into the private sector and not taxed back out of circulation.

Bigger federal deficit = Higher private savings

Larger federal surplus = Higher household debt

That's why as the federal debt has been reduced the past decade, household debt has soared. The feds, in paying down their debt, have simply drained private savings from the banking system, forcing people to borrow from the banks.

With unemployment at 7.6%, the feds should cut taxes, run a larger deficit, which would allow Canadians to spend more and also pay down bank debt. The fact that this is not happening is because people still believe that the feds are spending constrained. However, according to the Parliament of Canada, this just isn't true.

Here's 1990 to present:

http://www.ofina.on.ca/borrowing_debt/borrowhistory.htm

Jason, I am curious who took the photos used in your article. Crediting 'Flickr' does not answer that. I will assume that Shutterstock has allowed your use of their image also.

Why does it matter? Because I may have been the one who took one of those photos...

Montreal has gone from being the financial and corporate capital in Canada to being the best University town in Canada. This is the model you want to follow? No thanks.

Billions in equalization payments seem to make the Quebec dream a reality and possibly put the lie to talk of separation. If the province had to look after itself, the picture would change considerably. (This may be part of the reason why there is such a stark difference in post-secondary tuition between Ontario and Quebec.)

http://www.thestar.com/news/article/1126602--canada-s-wealth-sharing-plan-is-unconstitutional-study-says?bn=1

The same might be said of Hamilton. As good-paying manufacturing jobs have evaporated in recent decades, the city's economy has become increasingly reliant on public sector job creation in sectors like health care and education, two areas that dominate the local economy and also where control resides with other levels of government.

Now Ontario is wading into battle with teachers and doctors because politicians have woken up to the fact that the current model is unsustainable.

You need to properly credit the Hamilton Photo! Its not taken by Flickr!

http://www.flickr.com/photos/gods_eyes/6213018028/in/set-72157606678715482