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By the current account, the highest debt-to-GDP state in the US is NY, which is around 23%, with most states around 18%. By comparison, Canadian provinces tend to have much higher ratio, with Ontario at around 37% and Quebec over 40%. What accounts for this? Are the Canadian provinces responsible for distributing social benefits that would be under the federal jurisdiction in the US which skews up their %? Or are they just spending more irresponsibly than the US?

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  • $\begingroup$ Higher debt is not the same thing as "spending more irresponsibly." It's possible to run a budget surplus and spend irresponsibly; just as it's possible to run a budget deficit and invest wisely. $\endgroup$
    – 410 gone
    Commented May 31, 2017 at 11:09
  • $\begingroup$ As in "There are three kinds of lies: lies, damned lies, and statistics.". Please, go learn the basic statistic and statistic bias on matching. Also learn that correlation doesn't denote causation. That's why I downvote the question. $\endgroup$
    – mootmoot
    Commented May 31, 2017 at 16:35
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    $\begingroup$ @mootmoot, I chose to upvote the question; it's a good one. Your gripe is petty and arrogant. This community should support questions, not berate those who ask questions. $\endgroup$
    – c4sadler
    Commented May 31, 2017 at 17:35
  • $\begingroup$ Can you provide the source of your data? We should not discard as an explanation some measurement issue (for example, different definitions). $\endgroup$
    – luchonacho
    Commented Jun 1, 2017 at 9:38
  • $\begingroup$ @c4sadler : Invalid correlation and attempt to derive an "answer" is "Garbage in garbage out". It is similar to a false debate that spark more false interpretation, bad input and bad answer. $\endgroup$
    – mootmoot
    Commented Jun 1, 2017 at 11:30

1 Answer 1

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The Canadian provinces implement most of the welfare state programmes. The role of the Canadian Federal Government is to set out guidelines, and undertake fiscal transfers to allow provinces to stay near national standards. Since they have much larger budgets, they necessarily end up absorbing more of the economic cycle as being an automatic stabliser (i.e. they issue more debt).

There are no balanced budget laws for Canadian Provinces. American states generally have balanced budget rules, so debt levels are necessarily low. The states that do not have balanced budget laws are pretty much forced to follow the borrowing norms set by states with balanced budget rules.

Finally, the funding mechanism is different. Canadian city governments do not issue much debt, and there is very little project-based bond issuance. In other words, debt that shows up at the Provincial level ends up being financed otherwise in the United States (and does not show up in State level debt).

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  • $\begingroup$ How does this address the question? The issue is higher debt per GDP in Canada than US. You are instead saying that the funding is different, so Canada's cities issue less debt. How is this consistent with the numbers provided? How is the budget rule relevant? Do all US states have them? What if taxation rates are different? (Debt depends importantly on tax revenues) And why who implement welfare state programmes matter? I seriously fail to see how this answer is relevant. It needs considerable editing and further information, and ideally, backed with references. $\endgroup$
    – luchonacho
    Commented Jun 1, 2017 at 9:44
  • $\begingroup$ It's an argument from authority, I worked as a provincial bond analyst. I'll add a couple of explanatory remarks, but what I gave is the set of reasons that matter. $\endgroup$ Commented Jun 1, 2017 at 10:38
  • $\begingroup$ Finding a reference in the public domain would be tough. Ratings agencies would be the only people do to analysis like this, and their research is not free. $\endgroup$ Commented Jun 1, 2017 at 10:47
  • $\begingroup$ @BrianRomanchuk : A scientist can tell you that using a specific value e.g. nutrients , to say apple is better than orange, is not science. So call "authority argument" is merely apple and orange comparison , for the sick of political gains only. $\endgroup$
    – mootmoot
    Commented Jun 1, 2017 at 11:45
  • $\begingroup$ It's common knowledge among the people who actually care about provincial debt. Finding references for common knowledge is not going to be easy, especially when all the relevant research is private. If states have to balance their budgets and provinces do not, how could states get high debt levels? $\endgroup$ Commented Jun 1, 2017 at 12:38

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