Ontario Credit Downgrade Possible, Moody's Warns
December 16, 2011 - 12:52am
Ontario Credit Downgrade Possible, Moody's Warns
http://www.cbc.ca/news/business/story/2011/12/15/ontario-moodys-credit-w...
"The international bond rating agency Moody's Investors Services warned that it could downgrade the Province of Ontario's debt rating. Moody's said it's concerned the provincial government won't be able to meet its targets for reducing the deficit given the sluggish economy.
A downgrade would affect the government's $190 billlion debt and likely increase future borrowing costs. Finance Minister Dwight Duncan said the government will meet its financial targets. The province got the message from Moody's he added."
Long time coming, really. We can argue about outfits like Moody's and Standard and Poors handing out Triple A credit ratings to anyone who asked for one before 2008, and them being a cog in the cause of all that is wrong in the world today, but there are serious structural problems in the Ontario economy.
Ontario infrastructure is based on when the province had a lot of people in manufacturing making good money. Even if the economy recovers-- and that acutally is an if-- the recovery will be made up of jobs that are only two thirds to a half of what used to be paid.
That's a serious gutting of the tax base.
And, what it worse, it will start (as we are seeing) a terminal vortex event, where government will lower corporate taxes, reducing government income. People will start living more and more in the black market, as we've seen. (hack, cough, these Akwesasne smokes are a bit harsh, but the price!) Government will cut public sector jobs and salaries, further shrinking the economy.
It will be exactly like Greece. Only colder.
More alarming is the possibility that Ontario's government - spooked by the debt crisis in Europe - might overreact by slashing spending....
What is new is that credit rating agencies are weighing in. Moody's already assigns Ontario a second-tier rating (of the provinces, only Alberta scores higher). Thursday's announcement means Moody's might, in the future, downgrade Ontario to third-tier status, which would put it on a par with five other provinces, including Quebec....
What should Ontario's government do? First, it should avoid panic. Bob Rae's New Democratic Party government panicked back in the mid-1990s, the last time that Ontario's debt and deficit fell victim to a slumping economy. The NDP made cutbacks from which the province is still recovering.
Second, it shouldn't scapegoat public sector employees. To his credit, Premier Dalton McGuinty has avoided doing that. But the pressure on government to get tough with its workers, both from the Conservative opposition and parts of the public, is intense.
To that end, McGuinty might take a look at a new study on wage differences in the public and private sector done by the Canadian Union of Public Employees.
Toronto Star
Is it a coincidence that banana republics aren't worried about rising public debt owed to private sources, either?
Debt is only an issue when NDP governments are in power as a rule. Ontario is basically conservative still after 50 years of political conservatism and only half-heartedly dabbling in Liberal government today. Ontario voters, the approximately one-half of us still voting religiously every four years for whatever reasons, don't care about Keynesian theory on spending in bad times until turning the corner economically. They've been told by lapdog newz media for decades that all debt is bad, and this is the off-key FPTP tune that CCF governments have had to dance to through to the NDP in Ontario today. Tories blew up the debt by nearly $1 billion every year for the 42 consecutive years they were in power during some of the best economies North America has ever had, and debt wasn't an issue for them, either. It depends on which provincial party the newsies are discussing that determines whether debt is an issue or not. This time, though, real recovery will be a long time coming as the ideology has basically run its course around the western world. There will be no recovery and in part because there has been no real Keynesian spending in the economy by governments. Most of it has been expansion of corporate welfare programs while deep-seated corruption gnaws away at the upper end of things.
The truth is that state capitalism in N. America is a rotting corpse, and these Liberals are spending us into banana republic status without any real plan for the future. Our Ontario Liberals used to be neoliberals but abandoned the ideology more or less after they observed how it was failing under the Harris government. And today they've botched the other approach, which is Keynesianism according to the McGuinty Government of Ontario. It's a a case of too little Keynesian spending applied far too late. The cows left the barn some time ago.
Whether or not it is an individual, a family, a business, or a government, you have to pay your bills.
Quebec is in quite a mess financially with their debt, and as Tommy says is is overdue in Ontario. Same ole, same ole. The rich get richer, and the poorer get poorer. We ain't seen nothing yet, and there is no silver lining here.
Walkom forgets to say that Liberal governments have the worst record overall for not only fiscal management but for scaling back on social spending at both federal and provincial levels since the neoliberal roaring nineties. The feds were so concerned about banana republic style national debt which they and the Tories were responsible for from 1975 to 1998 that they panicked like hell and peeled back tens of billions from social transfers. Yes, Liberals have panicked in government before while obssessing over public debt. In those days the Liberals were "good fiscal managers" when destroying the economy in favour of boosting debt service payments to their friends on Bay St. and rich Canadians and foreign sources. The Liberals know who their real constituents are just like the Tories do.
Whether or not it is an individual, a family, a business, or a government, you have to pay your bills.
Quebec is in quite a mess financially with their debt, and as Tommy says is is overdue in Ontario. Same ole, same ole. The rich get richer, and the poorer get poorer. We ain't seen nothing yet, and there is no silver lining here.
That's right. The thing with maintaining banana republic levels of debt is that it can and should be paid down in good economic times. The problem for neoliberal ideologues in federal and provincial governments is that they haven't been able to string two good decades in a row without crippling recessions in each of them. They have actually used public debt as a means to impregnating our economies with an ideology that hamstrings socialism while pushing the failed ideology even further and deeper into oblivion. And that is their utlimate goal, to bide their time with a phony majority of voters until such time as the whole country can be dregulated and privatized and corporatized to the max. The two old line parties believe their only role in government should be those of administrators for servicing banana rep. debt payments, and those of tax collectors for the corporatocracy.
Fascists tend to want to destroy the economy while attacking trade unionism as a first order of business. We don't want to imagine what comes after. But things are generally unfolding according to the grand central plan I'm afraid.