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Canada middle of PIGS pack – Deficit tough talk should start at home

By Kevin Gaudet
web posted July 5, 2010

The G8 and G20 summits are now over. While we are closer to knowing the final costs, it's unclear if there will be any long-term benefits for Canadian taxpayers in exchange for the large amounts of tax dollars that were spent. That is unless Mr. Harper decides to send the same anti-deficit message to our provinces as was sent to debt-laden countries like Portugal, Italy, Greece and Spain (PIGS) during the summits.

As for the summit costs, the final figures aren't all in, but direct costs alone to host the three day G8 and G20 summits are projected to range from $1.2 to $1.4 billion. However, the total summit cost is substantially higher. There are indirect costs due to damaged property, prosecution costs of those arrested and of course the promises our politicians made to spend even more taxpayer money.

Money was committed by Canada -- $400 million -- to fund developing world efforts to reduce so-called man-made climate change. As well, Canada has committed another $1.1 billion over five years to improve maternal health in the developing world.

This puts taxpayers on the hook for around a $3 billion summit.

It is hard to relate to a number with nine zeros on the end, especially, it seems, for summit organizers. Consider this: taxpayers paid as much for the summit as it costs to fund the whole budget of the province of Prince Edward Island for a whole year or the same amount of money the United Nations spends on water and sanitation sectors in sub-Saharan Africa for more than 18 months.

The alleged crown jewel from the summit was the austerity clause. It's an agreement that governments cut their deficits in half over three years.

It shouldn't take a $1.4 billion meeting to get governments around the world to understand the same premise families all around the world know very well: you can't continue to spend more than you earn. Yet, if other countries do not get their spending under control they will likely come begging for more from Canada. Remember, Canada just committed up to $10 billion in loans for Greece.

Importantly, these deficit targets are not nearly aggressive enough for Canada. The federal government is already in its third year of deficits with at least four or five more years projected in the red. Prime Minister Harper projects Canada will beat the meager deficit target in two years -- based on promises made in the last two budgets. Ironically, the cost of this summit and the subsequent spending promises will only add more to Canada's $49.2 billion federal debt this year.

While Canada is often heralded as the poster-boy of fiscal austerity, it's only partially true if you look strictly at the federal government. When other levels of government are brought into the picture, the poster-boy starts to look more like an aging rocker than Justin Bieber.

Canada's per capita total public indebtedness ($32,506) in fact, is a lot better than Italy ($44,657) but is only a little better than Greece ($35,403). Worse still, according to the Economist Intelligence Unit, Canada ranks 21st worst of the 30 OECD countries, worse than two of the PIGS, Portugal ($18,959) and Spain ($23,962). The reason for this is that our provinces are running up huge deficits as well. With only one taxpayer, total public debt is what matters, not just that of the federal government.

Perhaps instead of only focusing on the federal debt Mr. Harper should consider the G20 commitment to apply to total public debt in Canada. This would require him to push the provinces hard to get their budgets back under control. After all, if it is important for Greece and Italy, it should be just as important for Ontario, Quebec and British Columbia. ESR

Kevin Gaudet is the federal director of the Canadian Taxpayers Federation. © 2010, Kevin Gaudet


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