Can British Columbia handle more debt The recent Auditor General's report, Monitoring the Government's Finances, commanded attention because it noted that BC's net liabilities relative to the economy are the second lowest in the country. One is tempted to respond with a "so what " After all, New Democrat governments spent the 1990s arguing precisely that point (without granting credit to W.A.C. Bennett and his son for putting B.C. in that enviable position).

However, the A.G.'s report can and should be examined from at least two angles. The first concerns the report numbers that didn't make the headlines. The one chart that jumps out at a reader concerns Gross Domestic Product per capita. Simply put, take the economy and divide it by the number of people and BC's "per person economy" equals $31,400. That's less than Saskatchewan ($32,700), only 83% of Ontario's ($36,800), and only two-thirds that of Alberta's average "wealth per person" ($47,700).

And here is where the second angle - the numbers not included in the Auditor's report - becomes relevant. For B.C. to pay for Ontario and Alberta-level public sector salaries (or above in some cases) with a weaker economy, our overall tax levels are kept yet higher than Alberta and in most cases also above Ontario. That continues our disadvantage in attracting investment and jobs, to be compounded by 2005 when Alberta and Ontario business tax reductions will fully kick in.

Given those realities, this brings up a counterpoint to the interpretation some gleaned from the Auditor General's report, as well as the arguments about debt-to-GDP ratios. Theoretically, any jurisdiction can "afford" to pile on more debt as long as the economy grows quicker than does the debt, or to use the slightly different measurement used by the Auditor General, if the economy grows quicker than net liabilities. The problem with such measurements is that they miss the real-world point that every dollar in increased debt interest is a buck not available for debt reduction, program spending or tax relief or some combination of the three.
For example, (and I write this before the provincial budget updates these numbers), BC's debt interest payments (on the total debt) equaled $2.6 billion in the budget year now ending. That's equal to about 53% of the $4.9 billion the province expects to collect in personal income tax.

Put another way, for every personal income tax dollar you send to Victoria, 53 cents out of that dollar theoretically pays for just interest on the total provincial debt. Granted, Crown corporations are responsible for part of that total debt (though, as in the case of BC Ferries, Crown corporation debt is sometimes swallowed by taxpayers anyway), and there are other tax revenues that accrue to the provincial treasury besides income tax. Thus, income tax is only one part of a government's cash flow.

But it is one stark way to look at how much money is already spent on debt interest. Simply expressed, taxpayers in British Columbia could pay 53% less provincial personal income tax if there was no provincial debt - without touching a penny in program spending. Look at your provincial income tax portion this tax season and ponder that for a moment. Like program spending Think where $2.6 billion could go.

As it is, taxpayers still pay plenty of tax in B.C.. Meanwhile, deficits - long chronic with the exception of two resource "boom" years - have not "stimulated" our economy. And now B.C. is in the unenviable position of having to balance the books, rein in spending, and try and be competitive on tax rates all at once. Not real great choices. As for more debt, it is true that governments can overspend for a very long time before the fiscal wolf shows up at the door, so B.C.'s debt is "sustainable" by that measure. But the better question for British Columbians is this: how many more of your tax dollars do you really want spent on debt interest every year