Analysis:
“We Owe, We Owe … It’s Off to Work We Go”
By Peter Shurman
Hope, it’s said, is never a strategy. So, Finance Minister Charles Sousa, without appearing to change course, is playing the long game…looking towards Election 2018.
Budgets are, after all, political documents. The Wynne government, typically late with budgets, tabled its 2016 plan, "Jobs for Today and Tomorrow" with more than a month to spare. Sousa said there’s much to do and needs an early start. The “spin” begins now, a year away from the government’s self-imposed balanced budget deadline and two years before the next election.
Somewhat inauspiciously, we’ve crossed the $300-billion debt line. Most of us don’t comprehend $300-billion, but the Wynne government insists it’s manageable.
Economists tend to agree. Crucial is "Debt-to-GDP ratio"… debt as a percentage of our annual output of goods and services. It’s just under the 40% magic number I used to thunder about when squaring off with Mr. Sousa in the Legislature. Only Quebec and Newfoundland have higher ratios. But that percentage is notional. Check this out...USA: 105%; Japan: 245%; Italy: 133%; France: 97%. So 40% isn’t ‘good’ but it’s in range. Sousa promises improvement in 2017 on his path to a stated 27% objective.
Cyclical debt is good … borrow and leverage by investing in assets that gain in value – like your mortgage loan. But Ontario has borrowed money to finance program spending, creating a structural deficit, one from which escape is more difficult - like depending on your Visa card for food shopping. hoping you might strike it rich.
In this financial plan though, we see a tendency to move towards true investment for specific returns. An enlarged “re-announcement” of $160 billion over 12 years for infrastructure; $11 billion for school improvements; $12 billion for hospital construction: all needed.
As for my referencing the 2018 election, the Liberals are acutely aware of the need to capture support at either end of the age spectrum and in rural areas. Could they attract youthful support better than with free post-secondary tuition for kids from lower income families? Senior Ontarians will appreciate increased home care, palliative care, and hospital funding but providing the expensive shingles vaccination at no cost is a real winner. Recipients of Ontario Disability and Ontario Works (welfare) benefits get an increase, as does funding for public housing. And rurally, where Liberals don’t match their urban voter success, the Minister is upping special infrastructure funding for smaller municipalities. It’s called covering your bases.
The downside is that we pay huge interest, now nearing $12 billion annually and there’s no capital repayment, so it stays around. Think about the massive enhancements to health, education, and social services $12 billion could buy every year!
Sousa’s 2015/16 budget was based on real GDP growth of 2.7%. He appears to have been on the high side but still delivered a reduced deficit. Now he’s aiming for a more realistic 2.2%. In his Fall Economic Statement, the Minister promised a $7.5-billion deficit instead of the forecast $8.5-billion but now says it’ll be $5.7-billion and next year $4.3-billion that he insists will be the final forecast deficit he’ll deliver.
People don’t worry as much as politicians do over words like debt and deficit. They usually stare blankly and say “we have politicians…let them fix it, but don’t raise my taxes or cut my services”. This budget comes pretty close to those marching orders but here’s what it will mean for everyday Ontarians.
Taxes will hold fairly steady other than minor “sin tax” hikes on cigarettes and wine. As for the charges governments impose without calling them “taxes”, the government had already announced a new “cap-and-trade” carbon market costing average families about $13 per month more with some balance to that through elimination of the “Drive Clean” program; dropping the Debt Reduction Charge on utility bills; and funding assistance for home energy conservation retrofits.
Ontario will become part of the ‘Western Climate Initiative’ with Quebec and California, ostensibly to improve our environment. Liberal thinkers say it’s about what we breathe but some scientists claim the cost/benefit for Ontario ratepayers is minimal. Since we know the added costs on natural gas and fuel ($13 per month), Premier Wynne likely has a good idea of total net effect if, as she’s suggested, this new $1.9 billion revenue stream really goes to halt the rise of or even reduce electricity costs. Ontarians should monitor government accounting…when they begin selling credits next year, we need to see the ‘flow-through’ as opposed to finding it magically getting into general revenues in aid of the promised zero balance budget.
You can’t pay bills with budget titles like “build Ontario up” or “secure our future” but you can educate more young people, and so this year’s “jobs” title is more relevant. The question is when we can really expect to turn Ontario around and, meanwhile, how to govern it so we all get the biggest bang for our bucks.
Stay tuned. Budgets are indeed political documents but management and luck remain the key factors.
Peter Shurman was the Ontario Progressive Conservative Finance Critic from 2011 to 2013.
