Montreal, March 23, 2015 – Quebec’s 2015 budget should represent a turning point in the province’s public finances by eliminating the deficit. But above all, it should be seen as the first stage in a long-term undertaking to put Quebec’s public finances in order, maintains the MEI.
We should recall that over the past 40 years, the budget has been balanced or in surplus only six times. Since the elimination of the deficit in 1998-1999, the province’s public debt has increased by $95 billion. This debt is now equivalent to $69,000 per taxpayer.
Registering potential surpluses will provide an opportunity to reduce the tax burden for Quebec taxpayers and to shrink the public debt. Indeed, these are the government’s two main promises related to public finances, which rest on the continuation of fiscal discipline in the coming years.
“It’s time to do things differently,” says Yanick Labrie, economist at the MEI. “If we want to avoid having the same debate on balancing the budget every five or ten years, we have to address the structural causes that lead us to have recurring deficits, and recognize that the state has a spending problem, not a revenue problem. The current government seems to be heading in the right direction; let’s hope it will stay the course.”
We can learn from the lessons of the past. As calculated in an MEI publication last June, if the Quebec government had controlled its spending growth by limiting it to the same rate as economic growth during the past ten years—which was still faster than the inflation rate—it would have a $15-billion surplus at its disposal today.
“Of course, for certain groups, it will never be the right time to return to a balanced budget. But we’ve already waited long enough. As economic analysis demonstrates, balanced budgets and surpluses entail benefits for current and future generations. This should therefore be the goal not only for the government in power, but also for all subsequent governments,” adds Jasmin Guénette, Vice President of the MEI.
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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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