Re Mathieu @ 9:59 pm:
Circuit’s point is very à propos, illustrated by the student protests in Quebec. It was about who carries the cost of education – society as a whole or students (or recent graduates). It’s clearly fairer that society as a whole carry the debt since educated young people are a benefit to society. Conservatives do not see it that way of course.
The point about Philippe Couillard is spot on. Perhaps even worse is the revolving door between the health ministry and the pharmaceutical drug industry, shown in the Quebec documentary of a few years ago partially on that topic.
My point about leakage is a general one. Since Quebec is not a closed circuit financial outflows are a loss to Quebec, are not controlled by the government and can be problematic if they are substantial and not adequately offset. Since I don’t think we know their magnitude further discussion on that is probably pointless.
I take your point about raising the top marginal tax rate to cover interest expenditures but there must be some limit to this. It may well be a political limit – lots of money and other support for politicians who predict catastrophe, but it’d still be real.
My concern is for the longer term. Currently interest rates are very low. The retail rate today for Quebec government 10 year bonds is about 2.8%, according to TDWaterhouse. However the average rate paid on Quebec gross debt is about 5% (9.5 billion/183 billion) due to debt incurred in an earlier period. You could argue this is the time to load up on long term debt. However you are then supposing economic growth will be strong enough to enable easy payment in the future – a risky assumption. Also interest rates have nowhere to go but up now although it may be some time before that happens. Not long ago interest rates for provinces were quite a bit higher, about 3 % higher 10 years ago, 2% 5 years ago. Granted economic growth would probably be higher as well. So while there is no imminent catastrophe, my point is that as the share of debt versus gdp rises the risks rise for a non-issuer of the currency and can become constraining if circumstances turn bad. And in Europe they did turn very bad indeed for some countries.
