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For British Columbians, news that a leading credit rating agency was sounding the alarm on the province's debt and economic outlook must have come as a shock.

For months now, all Premier Christy Clark has talked about is how the province was the economic envy of the country and Canada's No. 1 jobs creator. New mines were opening. The natural gas industry was on the precipice of exploding. Forestry was coming back. And all of this, she was quick to add, was no accident.

It was her Liberal government that deserved much of the credit for B.C.'s improving economic fortunes.

So what happened?

It seems the Premier's optimistic forecasts ran smack dab into the harsh economic reality of our times. The world is still a very fragile place in which to do business, and it looks like it will be that way for some time. It has had an impact on export demand and commodity prices, which cuts to the heart of a resource-dependent economy such as B.C.'s.

Even Alberta is not immune. Premier Alison Redford has blamed declining oil and gas revenues for a growing deficit. Without access to new markets for its oil, Alberta's economy could easily stall, if it hasn't started to already.

Last year's projections in B.C. for natural gas revenues have become irrelevant. Royalties have shrivelled to peanuts in the current economic environment. In the meantime, the housing market has slowed to a crawl. Not only are fewer homes being built, but the sale of existing homes can now safely be described as worse than sluggish.

In a real estate-centric market such as Greater Vancouver, this has a trickle-down effect. The government is seeing significantly less tax money from property transfers and goods and services associated with the real estate market – the sale of furniture and appliances, for example.

The news gets worse when you consider that British Columbians have the highest personal debt levels in the country, thanks in part to the massive mortgages they carry. A drop in house prices of 20 to 30 per cent, which could happen, could spell doom for many people who would no longer have the asset value to pay off their debts.

Not surprisingly, the B.C. government is playing down Wednesday's announcement by Moody's Investors Service that its Triple A credit rating is in jeopardy. The fact is, B.C. is one of only two provinces in the country that has the highest rating that is given out; the other is Alberta. Being knocked down a notch would increase the province's borrowing costs, but it would not be the world's end.

It would, however, unquestionably hurt the pride of government Liberals who have made a point (incessantly so) of boasting about what wonderful stewards of the economy they are – this, despite making a mockery of the province's balanced-budget law. (It has forwarded four successive deficit budgets.) Given that B.C. is officially in the run-up to an election, the Moody's warning takes on a political hue.

The rating agency will be particularly interested in B.C.'s next budget, expected to be tabled in February. Ms. Clark and her finance minister, Mike de Jong, have insisted it will be balanced. But there are some hard questions that accompany that promise.

The first is: Will anyone trust their numbers? Since Gordon Campbell tabled a budget in 2009 that turned out to be $1-billion short of reality, the Liberals have lost the credibility they once had in this area. Secondly, how can the government even be talking about balancing the budget given the worsening economic picture that Moody's and others have been painting?

Finally, is balancing the budget at all costs the right strategy in any event?

Many, including noted economist Jock Finlayson of the Business Council of B.C., believe we focus too much on operating deficits and not enough on accumulated debt, which is the primary concern of institutions such as Moody's.

"My view is we need a debt management framework that specifies an upper limit on debt as a percentage of GDP," Mr. Finlayson says. "That would allow the government over time to manage around that rather than worrying excessively about the operating deficit, which is a relatively small percentage of overall debt."

If nothing else, Moody's has forewarned political parties in B.C. that they may want to hold off making any rash, expensive election promises they cannot keep. If that were to happen, it might be a first.