Selling the Family Silver
As reported on the front page of yesterdayâ€™s Globe and Mail, the McGuinty governmentâ€™s “deficit reduction” strategy involves not only cutting taxes, but also divesting revenue-generating assets.
Todayâ€™s Globe comment page features three sassy letters on the contemplated privatization. But the editorial strikes a seemingly pragmatic tone, arguing that the Ontario government should sell â€œif the price is right.â€
However, the numbers in yesterdayâ€™s front-page story suggest that the price is not right. The Globe reported that the Liquor Control Board of Ontario (LCBO) could be sold for $10 billion.
So, reducing Ontarioâ€™sÂ current borrowingÂ by $10 billion would reduce future interestÂ charges by $0.5 billion per yearÂ (at most). By comparison, The Globe reported that the LCBOâ€™s profit was $1.4 billion last year.
Why should the government give up $3 of annual revenue to save $1 of annual interest costs?