Montreal, Sunday, June 1st, 2014 – In a Viewpoint published today, the Montreal Economic Institute calculated what would have happened if the growth of public spending, instead of totalling 66.9%, had been limited to 39.6%, the same rate of growth as the economy during the past ten years.
“According to this scenario, spending would still have risen faster than inflation. Yet the Quebec government would have a $15-billion surplus at its disposal thanks to controlled spending, instead of a deficit of $2.5 billion—or more probably $3.1 billion—for the fiscal year that just ended,” explains Youri Chassin, the author of the publication.
By using these surpluses to reduce the debt, after ten years, it would have been $82.4 billion lower than it is today, which represents a difference of more than $10,000 per Quebecer. Servicing the debt would have cost nearly $4 billion less per year.
“All of this shows that it would not have been necessary to reduce spending in absolute terms; just doing a better job of controlling the rate of spending growth would have radically changed Quebec’s public finances.” The Finance Minister, Carlos Leitao, will table his 2014-2015 budget on June 4. “This lesson from the past should inspire him going forward,” argues Youri Chassin.
“Quebec’s finances are in worse shape than we could have expected based on the last budget, and the problem will only get worse if nothing is done. This publication demonstrates that simply controlling the growth of spending would have been enough to give us healthy public finances,” concludes Michel Kelly-Gagnon, President and CEO of the MEI.
The Viewpoint entitled “The $15-Billion Quebec Surplus That Might Have Been” was prepared by Youri Chassin, Economist and Research Director at the Montreal Economic Institute. This publication is available on our website.
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The Montreal Economic Institute is an independent, non-partisan, not-for-profit research and educational organization. Through its studies and its conferences, the MEI stimulates debate on public policies in Quebec and across Canada by proposing wealth-creating reforms based on market mechanisms.
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