One unforeseen consequence of the COVID epidemic has been an outbreak of a different kind.
It appears governments across the country have taken the temporary outlays needed to fight the virus as license for ongoing spending sprees after the crisis is over.
Both the federal government and Premier David Eby’s provincial administration are projecting deficits far into the future, as are several other provinces.
At the local government level, municipalities in B.C. are not allowed to run deficits, so instead we’re seeing a glut of huge property tax increases.
Victoria’s draft budget (yet to be approved) calls for an 8.4 per cent tax increase this year. Saanich is also poised to set a tax increase of more than eight per cent.
91原创 is considering a 7.6 per cent hike, Kamloops is pondering a hike of nearly 11 per cent, and Surrey possibly more.
One result of these gushing cash flows is that public sector spending, meaning municipal, provincial and federal combined, has reached 34 per cent of Canada’s overall economy.
And that has several damaging effects, both now and into the future.
In the short term, a surge in public sector spending helps push up the overall inflation rate. We pay for that in two ways.
Goods and services cost more. And the Bank of Canada, in the single-minded way that central banks have, has hiked the interest rate, from just 0.25 per cent at the beginning of the COVID outbreak, to five per cent today.
Higher interest rates, of course, mean higher charges for loans and mortgages. The interest rates on a one-year fixed term mortgage average in the region of 6.2 per cent.
That makes owning a home even more difficult, indeed impossible for many.
And hefty municipal property tax hikes only make things worse. The average single family home in Victoria, price around $1,250,000, now pays more than $5,000 in property tax.
In effect, while all three levels of government say they are committed to increasing the supply of affordable homes, their own actions have the exact opposite effect.
There is also a longer term concern to take into account. If politicians come to believe, as many evidently have done, that the public has grown resigned to hefty spending, the instinct for self-discipline is removed.
Eventually, by the time voters have had enough and call a halt, layers of government have been added that cannot easily be removed.
We’ve been through at least three of these cycles. In the early 1980s, years of deficit spending at both the federal and provincial level led to a period of belt tightening. But not before interest rates climbed to the 20 per cent range, and some homeowners simply walked away from their property, leaving the banks to repossess it.
Again in the late 1990s, after more deficit spending country-wide, reality set in and sweeping reductions were made in government services.
Following the 2008 recession, Stephen Harper’s Conservative government embarked on six years of deficit financing leading, again, to significant retrenchments.
Our health-care system has never recovered from these recurrent cost-cutting sessions.
There is an old saying that if something cannot go on forever, it won’t. But that seems a lesson our politicians, at all levels of government, will not learn.
Yet the lesson will be learned, and we will all be the ones learning it.
In 2023, the average salary in B.C. rose by around 4.4 per cent, while the projected increase for this year is around 4.2 per cent.
The average wage earner simply doesn’t have the means to absorb ongoing property tax increases in the eight per cent range and higher.
We need a return to responsible financing, and we need it now.
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