Government spending sprees without the tax revenue to support them created deficits year after year and left British Columbia with a legacy of debt. Times have changed. The consensus in support of balanced budgets, debt elimination and spending discipline is growing.
 
That's probably why the government's commitment to balanced budgets, and surpluses since 2004, might lead observers to think the debt is shrinking. Anyone looking a bit more closely, however, would notice the debt is growing. That's because the government is borrowing to finance its spending sprees. The Balanced Budget and Ministerial Accountability Act was only one-half of the prescription for fiscal responsibility. B.C. needs a debt elimination act to rein in politicians hell-bent on that elusive third term in office.
 
Deficit spending through the 1980's and 1990's helped push British Columbia's debt up to $37.7 billion by 2003. The debt fell to $33 billion in 2006, but it expected to increase to $42.5 billion by 2010. B.C. taxpayers currently fund interest payments of $6 million per day to service the debt, money that might have a better use, such as reducing hospital wait times.
 
Taxpayer pressure on government has given us lower taxes, but politicians still want appear to be "doing something" for every imaginable ill on the planet. This is how to get re-elected, after all. What better way to do that than to shift the tax burden for all this benevolence to future generations. This is exactly what borrowing to finance spending does. True, the B.C. government is borrowing primarily to fund new infrastructure, but borrowing instead of funding from current tax revenue merely shifts the payment for that infrastructure to future generations who have no say in what governments of today are up to.
 
Governments can balance budgets and eliminate debt at the same time, but it takes political will. Alberta did this by passing the Balanced Budget and Debt Retirement Act in 1995. By law, 75% of any budget surplus went to debt reduction. By 2004, the debt was essentially gone and budgets remained in surplus. Why is fiscal responsibility so important? Alberta’s interest payments once consumed 12% of its tax revenues. Today, 100% of Alberta’s provincial tax revenues are available for roads, bridges, policing, schools, and hospitals.
 
Debt-free Alberta still builds infrastructure by using cash flow or a capital fund it has built up over time from budget surpluses. If the Alberta government wants to build a big piece of infrastructure, it budgets for it, allocates the funds from general operating revenues or the capital fund, then pays for it the same year. This pay-as-you-go system is the recipe for more responsible government spending in B.C. It would keep government spending within the means of current taxpayers.
 
Some might argue that using debt to pay for infrastructure is OK because future generations will benefit from it. Families take on debt to buy a house, for example, so why shouldn't government take on debt to build a bridge? Families use their own money, so tend to spend carefully. Governments are using someone else's, and as we know all too well, people don't spend other peoples' money as carefully as their own. Should future taxpayers have to finance the massive cost overruns of Gordon Campbell's convention centre or Glen Clark's fast ferries? Balanced budget and debt elimination laws together keep spending within the means of taxpayers, don't shift the tax burden to future generations and make government more accountable.
 

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Let's Talk Taxes is a weekly commentary provided to media outlets by the Canadian Taxpayers Federation. The CTF is a non-profit, non-partisan, educational and advocacy organization funded by free-will contributions. Permission is granted to reprint or broadcast this material with appropriate attribution. Canadian Taxpayers Federation: P.O. Box 20539 Howe Street RPO Vancouver, B.C. V6Z 2N8 phone: (604) 608-6770 / cell: (604) 999-3319 / fax: (604) 608-6773 BC Director Maureen Bader: E-mail: bcdirector@taxpayer.com