It seems every day there's a new report about California's financial woes.
Governor Jerry Brown is proposing a multi-billion dollar tax increase to deal with that state's debt problem and in recent weeks three cities have filed for bankruptcy protection. While California's economy grabs the world headlines, the grim reality for us in Canada is that Ontario's financial situation is just as, if not more, dire.
As chronicled in a recent report by citizens' group Fair Pensions for All, California trumps Ontario with lower debt-to-GDP ratio — the ratio used to measure a country's ability to repay debt. California's debt-to-GDP is 19 per cent whereas Ontario's is a whopping 35 per cent. California also boasts a much lower per capita debt: each Ontario resident owes $18,651 while Golden State residents owe just over $10,000.
This isn't the first time Ontario has been compared to the world's most struggling First World economies.
In a report released earlier this year, former TD Bank chief economist Don Drummond made 362 recommendations to the Ontario government to balance the books by 2017-18. Drummond cautioned against dawdling, noting that while Ontario's debt situation is nowhere near that of Greece, it could eventually compare, if steep spending cuts and reforms aren't made by Premier Dalton McGuinty's government.
"You can't really pick up a newspaper without reading about Greece and Spain and Italy . . . although keep in mind that Ontario's debt-to-GDP ratio is 35 per cent and Greece's was 35 per cent in 1984," Drummond said according to the Toronto Star.
The respected economist pointed out that government debt burdens can rise quickly if they are not "headed off early with appropriate action." Drummond cited Spain's net debt, which doubled to 56 per cent of GDP between 2007 and 2011; Portugal's, which doubled to 103 per cent since 2003; and Britain's, which went from 35 per cent — the same as Ontario — to 73 per cent since 2004.
When talking debt problems and financial troubles, Ontario already 'deserves' to be in the same conversation as California.
Unfortunately, it could soon be in the same conversation as Europe.
Ontario's financial situation by the numbers:
Ontario: 13 million
California: 38 million
Greece: 11 million
• Annual government spending
Ontario: $121 billion
California: $422 billion
Greece: $139 billion
• Government debt
Ontario: $242 billion
California: $388 billion
Greece: $478 billion
• Debt-GDP ratio
Ontario: 35 per cent
California: 19.3 per cent
Greece: 160 per cent
• Unemployment rate
Ontario: 7.7 per cent
California: 10.8 per cent
Greece: 16.5 per cent