Budget Coverage

Responding to: Wynne's ploy to buy Ontarians' votes is admirably shameless: Robyn Urback

The author writes, "Few politicians would dare campaign on a platform so estranged from the principles of sound fiscal policy."

First of all, this is transparently false. Everyone is familiar with the pattern of 'election goodies' prior to a vote. There's utterly nothing unique about this.

More to the point, however, it is not unsound fiscal policy. We all borrow money and pay interest. I did it when I bought a house and a car and paid for my education. Interest payments cost me a lot too. But I did this in order to increase my earning power and reduce other expenses. I am much better off now as a university graduate in a nice house than I was as a busboy in a restaurant, even though my interest payments today are larger than my entire salary back then.

It's pretty hard to find in media reports, but the budget is based on revenues of $150 billion. Against that, paying $12 billion in interest costs is pretty good. Considering the investment and development we can leverage for that $12 billion, not spending the money would seem pretty foolish.

If borrowing money and paying interest were unsound fiscal policy, we would not see corporations engaged in the practice. But corporations borrow even more money than the government. The do research, they build infrastructure, they acquire smaller companies - all this on money they have not yet earned. They do it because they think (correctly) that they will make back the cost of borrowing plus the interest, and then some.

On the flip side, we've seen from examples that you can't cut your way to prosperity. When a company starts cutting expenses and laying off staff, its earnings drop more rapidly than its expenses. When countries engage in an austerity program, like Greece did, the economy collapses and the government still cannot pay its debts. If I sell my house then I have to pay rent and lose any equity I could be otherwise earning.

It's irresponsible to write a column and decry a common financial practice, one that lies at the root of our economy, as this column does. It is irresponsible to wave around one big number without giving us any other numbers for comparison. It's find to publish opinion, but opinion should be well-argued and reasonable, not just a political hit piece.


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