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Why Silence on B.C.'s Groaning Debt?

Nobody seems to want to mention the fast growing $38 billion elephant in our living room. Each of us owes $9,003, sharply up under the Liberals.

By Will McMartin 9 Aug 2004 | TheTyee.ca
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The burden of provincial-government debt on every man, woman and child in British Columbia has grown by $682 in the three short years since Gordon Campbell and the B.C. Liberals took office.

Each individual British Columbian -- and there are more than 4.1 million of us -- now is on the hook for $9,003 borrowed by Victoria and various Crown corporations and agencies.

This is up 8.2 per cent from the $8,321 owed in 2001 when Campbell's Liberals defeated the former New Democratic Party government.

These figures, and many more, were made public at the end of June when the public accounts for fiscal year 2003-04 were released in Victoria.

But the debt figures received little or no notice from the news media, the punditocracy or opposition politicians.

Used to be a big NDP sin

The paucity of comment is in stark contrast to the 1990s when the NDP was in government.

Then, nearly every rise in the province's debt sparked vitriolic diatribes by newspaper editorialists, open-line radio hosts, the business community, as well as the former legislative opposition, the B.C. Liberals.

This go-round nary a peep on the debt has emanated from the legislative press gallery. Newspaper editorial-writers have turned elsewhere to vent their spleens. Phone boards at talk-radio stations have been silent on the issue. Captains of industry are mute.

The NDP, in opposition, also seems unwilling to press the Campbell government on British Columbia's soaring debt.

Instead, recent NDP news releases have focussed on the B.C. Liberals' transportation policies, and specifically the RAV-line. Organized labour similarly has taken a pass.

Klein's Alberta a sharp contrast

Not until mid-July, when Ralph Klein's government declared itself debt-free, did B.C.'s level of indebtedness garner a cursory mention -- along with every other Canadian province and territory -- by way of an unfavourable comparison to nirvana-like Alberta.

The fiscal picture darkens when the debt of profitable Crown corporations is excluded. (This is called 'self-supported debt,' because commercial Crowns such as B.C. Hydro and B.C. Rail are responsible for their own debt-repayments and interest-charges, not B.C. taxpayers.)

The financial obligations for which B.C. taxpayers are solely liable -- the 'taxpayer-supported' debt -- has grown by a whopping $965 per capita since 2001, and now stands at $7,137. This represents an increase of 15.6 per cent, a growth-rate nearly twice as fast as that of the total debt.

The documents reveal that British Columbia's total debt was in excess of $37.3 billion on March 31, 2004, the date that marks the end of the most-recent fiscal period. By comparison, when the B.C. Liberals took office in 2001, the total provincial debt stood at $33.6 billion.

'Politicization of debt'

How to explain the current lack of concern for British Columbia's growing debt obligations? Sad to say, it's all politics. Call it 'the politicization of the debt,' if you will.

Like most left-of-centre governments, the NDP administrations of 1991-2001 were vulnerable to charges of fiscal incompetence. Consequently, the growth of B.C.'s public debt was seen by critics as tangible proof of NDP mismanagement. Political opponents found it useful to use each reported debt-increase as a stick to beat the beleaguered government.

At the same time the New Democrats seemed to acknowledge their critics' complaints, repeatedly vowing to reduce and eventually eliminate annual deficits. The NDP even went so far as to initiate an annual 'Debt Management' report to disclose the extent of B.C.'s indebtedness and the government's purported success in reducing its growth.

Still, many observers thought the NDP commitment to low public debt and balanced budgets was half-hearted. Their public image seemed fixed, and not even a record-breaking surplus, paying for a half-billion dollar reduction in B.C.'s debt on the eve of the 2001 general election, could prevent a defeat of historic proportions.

Today's opposition New Democrats may think it would be unseemly to criticize expansion of the public debt while at the same time castigating the Liberals for hospital and school closures, contract-breaking and imposed settlements on public sector unions, cutbacks to social assistance, and more.

Where's the business community?

The 2003-04 public accounts show that in 2001, taxpayer-supported debt was 19 per cent of B.C.'s gross domestic product; at March 31 of this year, it had climbed to 20.8 per cent. Thus today it seems inconsistent for the business community, once fierce in its denunciations of NDP fiscal performance, to appear blithely unconcerned by the manifest deterioration of B.C.'s public finances.

The truth is that public discourse on British Columbia's public finances is largely, if not entirely, political. Right-wingers reflexively criticize left-of-centre administrations for their fiscal incompetence, while left-wingers focus their critiques of right-of-centre governments over penny-pinching social policies and a lack of compassion for the disadvantaged.

A review of the growth of British Columbia's growth in public debt reveals that it is largely non-ideological. That it not to say that governments of the left or right are better or worse at managing public finances, but that the provincial debt has steadily increased regardless of the party in power.

B.C. debt: A brief history

One of the central reasons British Columbia joined Confederation in 1871 was because Canada was willing to assume our entire colonial debt. In excess of one million dollars, it posed a challenging burden for the approximately 10,000 whites, 2,000 Chinese, and 28,000 Indians or more who comprised British Columbia's population.

(The debt was incurred mostly for construction of the Cariboo Wagon Road, which linked the goldfields at Barkerville to Yale. From Yale, steamboats ran down the Fraser River to New Westminster and across the Strait of Georgia to Victoria, and south to San Francisco.)

Debt-free ever so briefly following our admission to Canada, British Columbia quickly began borrowing monies to cover the yearly shortfalls between provincial revenues and expenditures. In 1874, three years after entering Confederation, the new province's net debt totalled more than $189,000. By 1888 it had surpassed $1 million, and in 1895, $5 million.

In 1903, the year that political parties first made their appearance in provincial politics, B.C.'s net debt exceeded $10 million. Thereafter governments of varying stripes contributed to British Columbia's mounting debt: the Conservatives, elected in 1903, left office in 1916 with the net debt close to $18 million; when their successors, the Liberals, were defeated in 1928, that figure had climbed to more than $85 million.

Returned to government in 1928, the Conservatives were overwhelmed by the Great Depression and defeated by

voters in 1933 with the province's net debt totalling $131 million. The newly-restored Liberal administration rode out the balance of the Depression before making way in 1941 for a Liberal-Conservative Coalition; at that time the province's net debt was $148 million.

After declining for a few brief years during the Second World War, B.C.'s debt exploded in the expansionary post-war period. By 1952, when the Liberal-Conservative Coalition was succeeded by a new Social Credit government, the province's net debt had sky-rocketed to $222 million.

W.A.C. Bennett's hucksterism

Seven years after taking office, premier W.A.C. Bennett held a well-publicized bond-burning ceremony on Lake Okanagan at Kelowna to celebrate B.C.'s freedom from debt. The festivities were a sham, however; Bennett merely had shifted Victoria's financial obligations to newly-created Crown corporations and other government agencies as 'contingent liabilities.'

Bennett sought two objectives with his 1959 huckersterism: first, to gain voter approval for Socred fiscal policies; and, second, to shield the fact that B.C. was borrowing enormous amounts of money to finance massive infrastructure development (highways, tunnels, bridges, schools and hospitals). In 1960, B.C.'s official net debt was recorded as 'zero', but contingent liabilities stood in excess of $555 million.

By the mid-1960s, B.C.'s contingent liabilities had surpassed the $1 billion mark, and in 1972, when W.A.C. Bennett's Socreds were defeated after two decades in government, British Columbia owed more than $2.7 billion. Led by Dave Barrett, B.C.'s first New Democratic Party government lasted a single term, and left office with the debt close to $4.5 billion.

Recent NDP nearly doubled debt

Returned to government under Bill Bennett, W.A.C.'s son, Social Credit politicians blasted the NDP for fiscal incompetence and promised strict economy. Yet B.C.'s debt roared past the $10 billion mark in 1982, and exceeded $17 billion when Bill Bennett's successor, Bill Vander Zalm, resigned his office in disgrace in 1991.

Under the NDP governments of the 1990s, led first by Mike Harcourt, later by Glen Clark and lastly by Ujjal Dosanjh, British Columbia's debt nearly doubled to more than $33 billion.

From 'zero' in 1871, British Columbia's debt today exceeds $37.3 billion. Since the arrival of party politics in B.C. a century ago, not a single government -- Conservative, Liberal, Social Credit, or NDP -- has left office with the provincial debt lower than when it first took power.

This historic fact does little to discourage B.C. politicians from vowing to be fiscally prudent, and even making vague promises to 'reduce the debt.' Recently, NDP leader Carole James attended a meeting with the Coalition of B.C. Businesses, and in response to a question concerning debt-reduction she replied: "Every year there will be a balanced budget."

Sure.

Headed for $40 billion

Meanwhile, free from criticism by the news media, business community or political opposition, Gordon Campbell and his Liberals repeatedly extol their alleged 'success' in managing B.C.'s finances. Despite reams of statistical evidence to the contrary, these assertions largely go unchallenged.

In May 2005, eight months from now, B.C. voters will go to the polls in a general election. Not long thereafter, regardless of which party wins the contest, B.C.'s debt will surpass the $40 billion mark.

Will McMartin is a political analyst and consultant who will be contributing columns to The Tyee.
   [Tyee]

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