Believe It or Not: Quebec’s Debt Is Actually Caused by Public Spending

By: Pierre-Guy Veer - @le_moutongris - Jun 13, 2016, 3:12 pm
Make no mistake, Quebec is in debt because of public spending. (Wikimedia)

When the time comes to defend the actions of “big government” in Quebec, one can always count on The Institute of Socio-economic Research (IRIS).

Their latest research is no exception, as it shows that public debt in Quebec is not growing as a result of public spending. One might wonder what the researchers were smoking.

After showing what “really” caused the debt, they claimed Quebec would have had a CAN$48-billion surplus if all of the government’s assets had been properly considered. This conclusion makes no sense because it believes in a perfect liquidity of said assets – roads, bridges, buildings – which is impossible.

How many sane buyers are lining up to buy the crumbling Champlain Bridge? A Highway 20 full of potholes? Considering IRIS’ ideological leaning one would be surprised if they advocated selling “public” good.

So if debt is not caused by spending, then what? Unsurprisingly, IRIS concludes that it’s caused by a lack of revenues. From lower federal transfers to lower corporate taxes to privatization, the institute lacks no imagination in forgiving the blatant irresponsibility of successive governments.

Let’s imagine an individual person were the same way. He earns $20,000 a year and spends $32,000, creating a $12,000 deficit. Year after year, he keeps borrowing to pay for his lavish lifestyle. While he is able to get a 10-percent raise and decrease his spending by the same amount, this person still has a $7,000 deficit.

All right, I admit that comparing private and public finances is farfetched. There’s a reason for that: governments have virtually no sources of autonomous revenues. They must therefore steal — or, rather, obtain — it through taxes that negatively influence people’s lives.

Remember the fuss about the Burger King-Tim Hortons merger? It arose form the former wanting to escape punitive corporate taxes (or maybe it was just that Nicolas Marceau completely missed his revenue targets).

Therefore, IRIS’ simulations claiming that the government would have not accumulated any debt since 1984 and would have eliminated all the taxes levied since with a partial selling of assets is completely unrealistic.

Not only does it treat humans like robots that aren’t moved by incentives, but it uses the altruistic pretense of having a right to others’ money, which is unacceptable in a free society. To how much of my salary are you “entitled?”

IRIS’ study is just another excuse to justify high taxes and the big government status quo. If their goal was really about finding a solution to public debt, they should have looked in the real world, where they would have seen that the government must decrease spending.

Considering how much governments must borrow to finance spending, they must carefully look at interest rates. And since those have been null for too long, they’re going to increase lest we want to repeat the mistakes of Weimar, Zimbabwe and Venezuela.

Pierre-Guy Veer Pierre-Guy Veer

Pierre-Guy Veer is a freelancing journalist originally from Quebec City, Canada. He writes both in French and in English. Follow @le_moutongris.