It’s called numero-phobia, fear of big numbers. Mine flared up big time last week as I stared at tables and graphs in the budget room at Province House. I was feeling OK until I came across the figure $14,002,000,000. Gaaaaaaaaah! Yes, that’s the size of Nova Scotia’s debt, over 14 billion loonies, each 1.75 millimetres thick. I happened to know that one loonie is the thickness of 15.9 US dollar bills, and since, according to The Physics Factbook, a billion American dollars stacked in a neat pile would reach 271.4 miles into the sky, a tower of 14 billion loonies would soar more than 60,413 miles, or over 97,225 kilometres. So, there I was cowering in the Red Room picturing a tower of loonies beside Joe Howe’s statue, stretching a quarter of the way to the moon. And then I thought, what if the wind comes up? Gaaaaaaaaah!
“Don’t panic,” I told myself. “Numbers are only abstractions; interest payments on the NS debt may bite us in wallet and purse, but the towering debt can’t literally topple over and crush us.” A government official informed me that in the last decade, the debt has never fallen below $11.2 billion. Like the poor, the NS debt is always with us and somehow life goes on. By the time finance minister Graham Steele breezed in to answer questions, I felt calm. Steele talked confidently about how he’d cut $200 million here and raise $200 million there to balance the provincial budget by 2013-14. If his plan works, the NS debt would no longer grow every year after that. It would be stopped in its tracks at a measly $14,878,000,000—equivalent to a tottering tower of loonies 103,323 kilometres high. Gaaaaaaaaah!
Dr. Freud prescribed a pint of tequila to relieve the symptoms of numero-phobia. If tequila isn’t handy, he said, the panic can only be held at bay by posing logical questions. Having no booze, I was in a tight spot. “So, why do we have this permanent debt?” I asked myself nervously. “Is it because of legions of overpaid civil servants? Politicians’ generous expense accounts?” I thought hard about those 14.8 billion loonies. Then glancing up, I spied an invisible elephant in the room. It winked and trunk-held-aloft, signalled that I should “follow the money.”
Eureka! I quickly flipped to the budget table showing government expenses: $3.6 billion for health; $1.3 billion for education; $971 million for social supports such as welfare, money for poor kids and public housing. All that added up to more than $5.8 billion or almost two-thirds of Steele’s $9 billion budget. Health, education and welfare must, therefore, be largely responsible for the elephantine NS debt, I concluded.
My reasoning stirred more nagging questions. Why does our technology-driven health system put expensive band-aids on the ailments of affluence—heart disease and stroke, cancer and diabetes—-when real health depends on things like adequate nutrition, loving relationships, plenty of leisure and a decent income? Ka-ching! Why do we coop young people up in classrooms for at least 15 years memorizing stuff they could learn in half the time and saddling them with serious debt in exchange for the paper credentials required to get a good job? Ka-ching! And could it be that we spend almost $1 billion every year supporting people who fall through the cracks because we’d rather maintain an expensive poverty system than work toward shrinking the income gap between richest and poorest?
Tequila’s nicer for numero-phobia than rational inquiry. I groaned miserably as I realized that our beautiful seaside province doesn’t have the tax base to support our wasteful and inhumane health, education and welfare systems. Maybe that’s why we depend on almost $3.2 billion in federal transfer payments every year to cover a third of our budget. Maybe that’s why we need a $14,878,000,000 credit card.
Thanks for the insight, Jumbo. Gaaaaaaaaah!
This article appears in Apr 15-21, 2010.
You’ve discovered the secret behind the Swiss Space Elevator project. They’re investing heavily in glue.
It’s because we just love spending beyond our means.
The word ‘No’ is rarely used by a politician.
We’re $14 billion in debt, almost $15,000 for every person alive in NS with no way out. Few can afford more tax hikes, tax hikes that history has shown will do nothing to fight the debt. It’s an economic albatross around the necks of every person and business in NS. We run annual deficits paying the interest without touching the principle, the debt keeps adding to itself. Any kind of tax increase to realistically deal with the debt is out of the question, we’re tax poor now and any hike will adversely effect business. The Superintendent of Bankruptcies sees no legal reason it can’t be done, it’s up to a bankruptcy court. At the very least I think it’s time the province was placed in receivership and an honest, transparent financial picture be given the tax payers. Something we never get from government. The other option? Every person sits down today and writes a check to Graham Steel for $15,00 times the number of family members. I don’t have that kind of money. Do you? My great-great-grandchildren will have politicians lying their way into power promising to deal with this debt same as we do. Drastic problems call for drastic measures.
Declare Bankruptcy and start clean?
Hey BruceD: You too, poor fellow, seem to be suffering from a severe case of numero-phobia. Yes, the NS Debt may amount to $15,000 per person, but that’s a needlessly scary (and misleading) way of measuring it. No one anywhere is suggesting that every Nova Scotian will have to cough up that amount anytime soon.
Your suggestion that the province declare bankruptcy and start clean looks a lot like evidence of blind panic. As a fellow numero-phobe, I sympathize, but you really do need to get a grip.
The best way to measure the seriousness of the NS Debt is to compare it to the size of our provincial economy — the total value of the goods and services we produce each year as reflected in our Gross Domestic Product (GDP). The size of the economy reflects ability to carry the debt much as the size of a family’s income reflects its ability to carry a mortgage.
By the debt-to-GDP measure, the NS Debt will amount to 39.6% of GDP in the coming year. (It is projected to rise to 40.2% next year, then fall gradually after that to 38.9% in 2013-14.)
That percentage of debt to GDP is remarkably low by international standards. Japan’s debt is around 227% of its GDP; Germany’s is around 80%, while France weighs in at around 86%. The US debt-to-GDP ratio is nearly 98%. Canada has one of the lowest debt-to-GDP ratios at around 77% of its GDP. See: http://www.finfacts.ie/irishfinancenews/ar…
I’m not arguing in my editorial that Nova Scotia is going bankrupt because of its $14 billion debt, but that we don’t have a large enough tax base to afford high-tech health care, for example, without having to borrow to pay for it. Even Ontario, with its large manufacturing base, faces problems paying its rising health care costs. So I would say that Ontario (and every other province for that matter) should shift the emphasis from technology-driven medical care, for example, to measures that ensure everyone has a decent income — long recognized as one of the key determinants of good health.
If we did that in Nova Scotia, we might not need to generate so much government debt. It’s not that the debt will drive us into bankruptcy. It’s that we’re incurring it by spending too much money on systems that do not ensure the well being of Nova Scotians.
Perhaps it might have a calming effect BruceD, if you read the American economist, Dean Baker’s perspective on debt and deficit panic in the US. http://www.huffingtonpost.com/dean-baker/t…
The American economy is large enough to carry a 98% debt-to-GDP ratio, but once again, I’d argue the US government should be spending more to further the well being of its citizens rather than continuing to borrow billions to finance those costly and futile wars in Iraq and Afghanistan.
Bruce Wark: That is exactly what it means, to pay off the debt an average of $15 thousand plus must be paid on average per person in this province. Spain, Ireland Greece and Portugal are all facing bankruptcy (Greece from the debt left behind by the Olmypics). Comparing our debt to others does nothing to diminish it and is an old political trick to pull the wool over the public’s eyes. Would it make you feel any better if your neighbour was dying of cancer and you were only dying from MS or some other health problem? I doubt it. The fact is no matter how deep other provinces are in debt this 14 billion plus is our problem and we will never solve it. It will continue to grow while taxes raise in an attempt to break even and services continue to slide along with regular increases in both user fees and where user fees ar charged. In order to get a company to look at this province we have to dole out hundreds of millions in grants or tax concessions. You can refer us to GNP and GDP and any other government figures you want. The one figure that is dragging us down and scaring business and people out of this province is $14,000,000,000. New Zealand woke up a few years ago and found themselves bankrupt. I don’t know if they actually declared backruptcy or devalued their dollar to the point that the loans people were holding were of no value and they burned them and they started over again and in the article they mention that Canada is is worse shape than New Zealand was. I can lend you a copy of the program if you wish. Also the country and economy was a lot better off after the fact because they killed a lot of their hand out welfare programs after they cleared the debt. Interesting watching.
Good article Bruce. The road to financial freedom is a long road, but you need to know where you’re at before you take care of it.
I’d like to point out that countries like Ireland and Greece (I’m less cognizant of Spain’s and Portugal’s problems) both were in situations where they were either banking on an industry that was destined to either disappear or fizzle (the tech industry in Ireland) or in Greece’s case, they were actually recycling debt with Goldman Sachs by issuing bonds and then buying them back from them (kinda like paying off a credit card with a credit card), both situations are very extreme cases of countries that are in dire straits and need to declare bankruptcy, because there’s no way out. Luckily, both of them are a part of the EU, so they may receive help in that respect. I’d even take it so far that the EU may eventually take over the countries, leading to the EU becoming a political force that will rival the US, instead of being just an economic unit.
In any case, we may never be able to remove the debt entirely, but it’s controllable. We’re not in the situations that those countries are in. Our economy has stumbled, but it’s still healthy.
Somebody sent me this if you open the site and scroll down to pages 42-43 under community services you’ll find a list of numbered companies that do very well in grants. Also it seems we give money to every university in Canada as well as the Manitoba finance minister. Also on the public teat is shambala school. Also look at the travel costs for community services and the number of employees. I wonder if any private organization has this many employees. They want to get their own spending under control before they come after more money from us.
http://www.gov.ns.ca/finance/site-finance/…
That’s a fairly form response for someone who doesn’t understand the situation, BruceD. By your analysis, The Shambhala (the text indicates that it’s the pre-school program by the way) School is less deserving of funds than someone more, like Golf Nova Scotia who received 85 K in grants? Or the IDOW festival getting 5 K?
In the end, it really doesn’t matter. We could cut all spending, but then we’d see Mulroney-era levels of social support. I’d rather bite the bullet than have the province declare that they’re bankrupt.
Dr Fever I have a big problem with a long list of the outfits at the tax trough. The Farmer’s Market is a private for profit business yet it got a million from the city and I see them in here for 333,000. Golf courses should be out as should any ski resorts that appear. It seems that we have to allow any and all of these outfits to “wet Their Beaks” in the tax coffers. The idea that Oh they can’t support this or that in their community so we will finance it has got to stop. We’ve lost the aspect of, “we can’t afford that’ or We’ll have to do without that. Take a look at the list. Page after page has bills from hotels like the recent one from Oak Island. Hold their meetings in the government offices we pay rent on enough land they shouldn’t have to go out for their meetings. Also I was surprised to see the millions going to local native groups. They are a federal concern and get very generous amounts of money from Ottawa providing the local band council is honest. The band in torero is very well run. Shambala is a private school why are they getting tax dollars? It seems that the tax coffers are now used to give everybody everything. 75 million to the mulit billion dollar Irving family, 600 million to a multi billion dollar Korean company, They toss it around like they are dealing with a bottomless money pit. half a billion to local universities while tuitions keep climbing. Maybe that’s the problem I have we don’t see any gains for the billions we spend, The debt goes up, crime goes up, tuition goes up, taxes go up, the groups getting money from government goes up. The Fraser institute said we work until mid July before we get to keep any money. 6 and a half months that the government takes every cent we make. It can’t go on it’s that simple. They HAVE to start cutting big time in their handout programs. I knew people who couldn’t afford TV’s when I was young nobody in government bought them one people AND government lived with in their means and paid for what they NEEDED first and what they WANTED after wards if the money was there.
I find it interesting you cite the Fraser Institute, where the motto is: “If it isn’t Conservative policy, we don’t like it”. These are the same guys who think that NAFTA and the erosion of the Canadian-owned manufacturing sector was a good thing for this country. Anyways, that’s just my political opinion about a very shortsighted and over-relied upon source of biased right-wing thinking. I’d also mention, in a roundabout way, The Fraser Institute is at the public trough too.
This is all taken into consideration that their findings of you working for the government for 6 months of the year, provides you a significant number of benefits, benefits you actualize on a daily basis, like health care, or public roads, or public transit.
To your point of “living within our means”, your insistence that we cut everything off of the government payroll would indeed help out quite a bit. But only in the very short term. There are good, honest, hardworking people that rely upon those grants to aid in the creation of jobs, or creating small business opportunities, or stop funding charities, or anything that those grants are given for. Just because they drag the system down. Do you not see the shortsightedness of that? What would your suggestion be to those that want to start a business, but can’t because the banks have an aversion to small business loans during an economic climate like this? Charities would shrivel up and die. Good-bye to sport programs, higher education, and everything else that makes our society a society.
Take a look at Iceland for a lesson in what happens during a state bankruptcy. There’s nothing left there. In Political Science terms, it’s called a Failed State. While the effects of a Provincial bankruptcy may not actually be as severe as what happened in Iceland, the effects on the credit rating of the Province (by default, most government debt issued in bonds, which is how governments lend each other money, by the way is rated at AAA, which is usually the best rating, meaning more interest, because it’s a safer investment) would seriously hinder the Province for the foreseeable future in terms of issuing debt and getting programs under way. This failure would need to be passed on to the Federal government, who would not be able to take the burden of a failed Province, which in turn may harm the Federal government’s finances irreparably.
Debt figures do not push people away, nor do they draw them. It’s a financial figure that we only need to be aware of strictly because we can be. Deficit figures are what we should be more concerned about, and getting back on track as soon as possible.
Dr. Fever
In reality, as I’ve said earlier, this round of hikes won’t even level off the past. Here are the losses that must be made up.
This problem was made up of:
Personal Income Tax (PIT) revenue down by $10.2 million or 0.6 per cent from estimate due to a
decline in Nova Scotia’s yield of national personal taxable: Corporate Income Tax (CIT) revenue is down by $63.4 million or 15.3 per cent from estimate: Offshore petroleum royalties were $62.0 million or 12.1 per cent below estimate
There were a few minor increases but they were minor when compared to the losses you can see them at http://www.gov.ns.ca/finance/site-finance/…
If you look hard at what is going on in the province you will see that our “economy” is a house of cards that will come apart at the slightest wind. Look at the lists of companies getting grants annually to keep them afloat. Look at the grants handed out weekly to mulit-billion dollar companies. Look at Halifax. Take away the government jobs and the city is dead. Weekly you can watch long trains full of gypsum leaving Nova Scotia. Why aren’t we making the gyproc and shipping that? Moir’s is gone, Volvo is gone, we can’t seem to retain shipping lines calling here to off load, The shipyards, once a large employer is all but dead.
We can’t continue to export our jobs and simply be a consumer society based on government jobs it’s a diminishing return scene where we are heading to become a third world economy.
As a country we ship raw materials and buy back finished goods for the most part: that’s not how it should work and it’s not a healthy economy. The provincial debt is real, it’s there and it adversely affects our economy daily. The taxes needed to service it and our bloated public service (at every level) drives salaries out of any kind of competitive range.
High costs of living and the wages needed to sustain it are the death knell of business.
The best recent example of this is City Hall and the insane spending spree they are on. Despite the fact that the Liberals, with enforced amalgamation made it more difficult, you will see people leaving HRM for the county to escape the estimated $1,000 a year water bills that were forecast last week not to mention the property taxes that rise annually. The taxes, no matter who takes them in all come from one source, our pockets and until Ottawa, Hollis St and City Hall accept this fact and act accordingly we will get nowhere.
As for the Fraser institute, math is math, if the amount of maony the government takes through one of it’s 45 plus ways means we work until the middle of July to pay taxes that’s a fact it doesn’t matter who is doing the math
If, as has been forecast, our population base does get smaller and greyer, then we will begin to see cracks in the debt system. We will have fewer and fewer paying to service the debt at the same time as the health care costs going up to look after us old coots.
Sadly we do not have a Politician, Federally or Provincially, who inspires enough confidence in me to stop the debt worries. We continue to fork over tax $$ to call centres and short term band-aid companies so that politicios look good at the photo op. Social Services has become a sacred cow where tax payers are not permitted to criticise 3rd and 4th generation welfare recipients, teen mothers, drug abusers, school drop outs, criminals etc.
At some point our provincial credit card will be maxxed out.
We are and we always will be governed by really incompetent people who for their own wealth and enhancement do not mind passing the bills on to us. Why do we have 50 some MLA’s why do we have double the amount of needed public servants, why do we have so called industrial expansion fund that only expands the number of persons on the payroll. Why do we have an idiotic premier running around with multi million dollar cheques in his mouth, looking for some one to take them? Because we are stupid, plain and simple, and stupid is what stupid does Amen.