Standard & Poor's has downgraded Ontario from AA- to A+
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That not equalization PoopsieFloss. That is dollar devaluation to discount exports which are marketed in US dollars.
Ontario Government's Credit-Rating Downgraded Again - How does it affect you?
Author: MPP Julia Munro | Date: Jul. 16 2015
Author: MPP Julia Munro | Date: Jul. 16 2015
On Monday of last week, the New York based financial credit-rating agency, Standard & Poor’s (S&P), downgraded Ontario’s long-term rating from AA- to A+. All the major credit-rating agencies – Moody’s, Fitch, DBRS, and S&P – have downgraded Ontario since the 2008 recession. This is the second full downgrade by S&P.
The credit-rating is like a snapshot of the borrower’s (government of Ontario) ability to meet specific financial obligations – payments on the debt, for example. Just as all of us who have borrowed money know, a credit-rating is based on the terms of repayment and our proven ability to meet those terms. As individuals, we need to demonstrate our willingness to meet these terms of managing our debt. If you don't have a good credit rating, fewer institutions will lend money to you. Also, these institutions will charge a higher rate of interest to reflect the higher risk of lending to you.
The announcement of a downgrade in Ontario's rating is a current measure of reduced confidence. In other words: is Ontario a good place to invest taking into account its nearly $300,000,000,000 debt load and $8,500,000,000 budget deficit? And, is the Ontario government able to make good on its promises to balance the budget while simultaneously spending billions on major infrastructure projects? The agencies are continuing to lose fiscal faith in Ontario’s government. Because of this instability, businesses will not invest in Ontario to create jobs.
This matters to you and me because we fund the government. If it mishandles our money, we pay more. If it wrecks its credit-rating, we pay more in borrowing costs. If businesses do not invest, Ontario tax revenues will continue to dwindle and personal taxes will continue to go up to cover that deficit.
The government currently pays $11.4 billion each year to borrow approximately $300 billion – this borrowing cost is the third largest spending commitment in Ontario’s budget after healthcare and education. If Ontario’s credit-rating goes down, Ontario’s borrowing costs go up – just like with our personal credit-rating. For example, if the province’s interest rate goes up 0.5% on its debt, Ontario would have to pay billions more in interest to its lenders. This means our taxes will go up, of course, but worse: that tax increase will be to cover our interest charges, with nothing to show for it.
Actually, right now, we are paying more in taxes each year to cover the interest charges our government commits us to. In fact, we’re now paying more taxes for less healthcare and fewer education programs as a consequence of the growing interest on the growing debt.
Last week, Standard & Poor’s said to expect more of the same. Credit-rating agencies act like a warning system forecasting failed deficit elimination, further tax increases and empty campaign promises.
Ominously, it’s the first time in Canada’s history that provincial government debt is larger than federal government debt. Unlike Ontario, Quebec will be in surplus next year.
Nothing can disguise debt better than spending announcements – and the government is addicted to throwing our money back at us to convince us the future is bright. It’s very difficult for me to be enthusiastic about any spending announcement since fiscal restraint has been so absent for so long.
This credit downgrade is more rock-solid proof that the Wynne government is failing Ontarians where it matters most – financially. Years of reckless overspending bear consequences for us all.
The Premier is running out of options to feed her fix. She’s lost.
The credit-rating is like a snapshot of the borrower’s (government of Ontario) ability to meet specific financial obligations – payments on the debt, for example. Just as all of us who have borrowed money know, a credit-rating is based on the terms of repayment and our proven ability to meet those terms. As individuals, we need to demonstrate our willingness to meet these terms of managing our debt. If you don't have a good credit rating, fewer institutions will lend money to you. Also, these institutions will charge a higher rate of interest to reflect the higher risk of lending to you.
The announcement of a downgrade in Ontario's rating is a current measure of reduced confidence. In other words: is Ontario a good place to invest taking into account its nearly $300,000,000,000 debt load and $8,500,000,000 budget deficit? And, is the Ontario government able to make good on its promises to balance the budget while simultaneously spending billions on major infrastructure projects? The agencies are continuing to lose fiscal faith in Ontario’s government. Because of this instability, businesses will not invest in Ontario to create jobs.
This matters to you and me because we fund the government. If it mishandles our money, we pay more. If it wrecks its credit-rating, we pay more in borrowing costs. If businesses do not invest, Ontario tax revenues will continue to dwindle and personal taxes will continue to go up to cover that deficit.
The government currently pays $11.4 billion each year to borrow approximately $300 billion – this borrowing cost is the third largest spending commitment in Ontario’s budget after healthcare and education. If Ontario’s credit-rating goes down, Ontario’s borrowing costs go up – just like with our personal credit-rating. For example, if the province’s interest rate goes up 0.5% on its debt, Ontario would have to pay billions more in interest to its lenders. This means our taxes will go up, of course, but worse: that tax increase will be to cover our interest charges, with nothing to show for it.
Actually, right now, we are paying more in taxes each year to cover the interest charges our government commits us to. In fact, we’re now paying more taxes for less healthcare and fewer education programs as a consequence of the growing interest on the growing debt.
Last week, Standard & Poor’s said to expect more of the same. Credit-rating agencies act like a warning system forecasting failed deficit elimination, further tax increases and empty campaign promises.
Ominously, it’s the first time in Canada’s history that provincial government debt is larger than federal government debt. Unlike Ontario, Quebec will be in surplus next year.
Nothing can disguise debt better than spending announcements – and the government is addicted to throwing our money back at us to convince us the future is bright. It’s very difficult for me to be enthusiastic about any spending announcement since fiscal restraint has been so absent for so long.
This credit downgrade is more rock-solid proof that the Wynne government is failing Ontarians where it matters most – financially. Years of reckless overspending bear consequences for us all.
The Premier is running out of options to feed her fix. She’s lost.
