BREATHING IS a comparatively simple process for most people. Use it as a means of calculating interest.
For every breath you take, day and night, count Eleven Dollars.
That makes about $960,000 every twenty-four hours. Or $350,000,000 a year.
Which is the amount of interest paid annually on Canada's government debts—Dominion, Provincial and Municipal.
The total of these debts is conservatively estimated as being Seven Billion Dollars. For ten million people!
In the United States, Federal, State and local debts total some Forty-five Billions of dollars.
With twelve times Canada's population, the U.S. has but six and a half times our debt.
President Roosevelt has been told by a jury of economists that Uncle Sam could carry a debt as high as fiftyfive billions. After that, danger.
Canada crossed into the danger zone long ago.
SO FAR as the Dominion is concerned, the King 'Government believes that it can meet its obligations as they fall due. By its refunding operations it is reducing the interest load, and the Minister of Finance hopes to balance his budget in two years by new taxation, increased revenue from bettered business, and economy.
But the Government proposes to do nothing about the yearly railway deficits except hope for improved traffic. It is assuming a larger share of relief costs. And, undoubtedly, it will lx: forced to lend more to the Western provinces.
Mr. Dunning's worries are not by any means over. ,As for the Provincial debts, without repeated transfusions from the Dominion Treasury, the Western Provinces would have defaulted before this. In the East, administrations arc finding it difficult to make ends meet.
,In the case of the municipalities, there have been defaults all through the country.
AND SO, as the realization has come that three into X\. two won't go and you can't force it, there is a demand from many quarters for a writing down of our debts, for repudiation, for forced conversion of our Ixinds to a lower interest basis.
Premier Hepburn of Ontario would have all governmental interest lowered. To those who have lent money to his province he says, in effect: Fifty per cent of Ontario’s income goes in interest and fifty per cent on relief. In spite of higher taxation, in spite of retrenchment, we cannot balance our budget. Which course shall we follow? Go bust, in which case your capital goes; or give you a smaller return and make your capital secure?
A great many people consider that to loe a reasonable argument.
But Mr. Hepburn admits that forced conversion cannot be tackled piecemeal; that Dominion, Provinces and Municipalities must act jointly.
,So the problem is a national one, affecting not only your present welfare, but that of many generations to come.
WE THINK that perhaps too much emphasis has been placed upon the saving that could be made in interest by forced conversion. For instance, if all Dominion bonds not already converted were converted to the lowest rate at present obtainable, the saving each year would be only half the amount of the C. N. R. deficit. And apparently that deficit is not considered to be worth worrying over, because nothing is done about it.
We think that not enough emphasis is being placed upon what would be saved by a re-establishment of confidence within Canadians themselves and within those who deal with us and finance us.
It is said that Britain repudiated her war debts and that she and Australia converted their loans without impairing the confidence of the world. Or that every nation which went off the gold standard or lessened the gold content of its dollar, as we have done, repudiated its contracts and benefitted as a result.
But we cannot count on these being the right answers to the particular problem we have created for ourselves.
When Britain set about the business of putting her finances in order she held the confidence of her own people and of the world at large because it was known that politics was not involved; that she was taking drastic action in accordance with the May report— a coldly independent survey of her position.
MACLEAN'S believes that such a course is the best one for Canada to pursue. Let the Dominion Government appoint the finest financial commission it
can obtain anywhere. It might even get Sir George May himself. Let that commission investigate fully the entire financial position of the country. Let it do its work privately and without publicity until such time as its report is concluded. Then give that report and its conclusions the widest possible publicity.
If such a commission reported that forced conversion, or repudiation, or receivership was necessary, well and good. The Government would be exempt from political criticism. Our creditors would know that we were honorable debtors seeking readjustment because of inescapable circumstances and a desire to re-establish ourselves on a sounder foundation.
Were such measures to be recommended, it goes without saying that with that recommendation would go suggestions for definite economies in our administrative set-up, and for a solution to the railway problem.
On the other hand, should compulsory conversion, repudiation or cancellation of contracts not be deemed necessary, there would be a plan for financial re-establishment over a definite period of time.
It may be argued that a commission is not necessary; that it is the duty of a Government to govern and to sponsor itself such measures as may be necessary to meet emergencies.
The answer to that is that no government in Canada has yet tackled the debt situation as it ought to loe tackled and the likelihood is that no government will, such is the pressure of "political expediency.
No citizen would object to bearing still heavier taxation were he assured that his sacrifices would result definitely in an improvement of his country s position and, therefore, of his own. But so far it has been all burden and no progress.
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