The premier of the Sick Man of Canada, Ontario, arrives in the nation’s capital Thursday for a major speech. If it’s like the speech Premier Dalton McGuinty delivered recently in Toronto, people should turn in their tickets before it’s too late.
That speech was a snoozer at a time when Ontario needs a wake-up call. Ontario, once the golden goose of Canada, is laying an economic egg. Its public services cannot be financed at existing levels of taxation. So Ontario borrows a lot of money, and will keep right on borrowing unless serious remedial measures are taken. Either the government gets both smaller and smarter, or taxes must go up – or both.
The rest of Canada should take note: Ontario is fiscally crippled and will be for some time. This crippling represents the biggest change within Confederation since the discovery of oil in Alberta.
The dynamics of the country are changed. Ontario now receives equalization payments and will for the foreseeable future. Not large payments, but payments nonetheless. Symbolically, that says it all.
Of course, the McGuinty government puts the best gloss possible on the situation. The two opposition parties, regrettably, are into puerile populism of the left and right, with the NDP talking about heating oil rebates for seniors and other irrelevancies, and the Conservatives blathering on about eliminating toothless regional health authorities as a way to save money.
But the Conference Board of Canada, beholden to no one, has laid it on the line. Its recent report on Ontario’s economic and fiscal prospects, combined with economist Don Drummond’s report next week (anyone who knows him will anticipate the straight goods), will be a one-two punch against all the illusions, posturing and politicking that have characterized much of what passes for political debate in Ontario.
The Conference Board’s report starts from a devastating premise: Ontario’s real economic growth will be 1.9 per cent, almost a full point below the government’s projections. As a result, the McGuinty government’s plan to wipe out the $16-billion deficit by 2017-2018 is already junk bond stuff.
The government had predicted it could bring health-care spending increases down to 3 per cent and keep them there (something never before done), limit education and social services to a 2-per-cent increases, and restrict everything else to almost zero.
Not any more. Slower growth will mean fewer revenues, which will require cutting everything except health, education and social services by 5 per cent. That would mean cutting, inter alia: roads, public transit, legal aid, culture, agriculture, environment, corporate subsidies and grants, research and development – in short, everything else the government does.
If the government stuck to its original plan, it could balance the books, all right – but in a decade. If, as is likely, it were impossible to hold health care increases to 3 per cent – if health care rose at 4.7 per cent – then the budget would not be balanced in 2011-2012 or any time thereafter. And if health care tracked up to 5.6 per cent yearly increases, then to balance the budget by 2017-2018 the provincial sales tax would have to hit 15 per cent.
These are projections, albeit it highly intelligent ones. Maybe growth will soar well beyond expectations. Maybe Ontario’s public institutions will suddenly become vastly more productive. Maybe public-sector unions will accept five to 10 years of restraint. Maybe a surge of innovation will wash over Ontario; after all, it has large universities, a well-educated population and some world-class companies. Maybe the three parties in a minority government will stop posturing and come together in a serious effort to restore Ontario’s fiscal situation. Maybe pigs will sprout wings.
But after years of the McGuinty government adding new programs everywhere – including the latest one to lop 30 per cent off university tuition fees for many full-time students – while the economy kept slumping, ye olde proverbial chickens have come home to roost. Indeed, they arrived some time ago, but the politicians weren’t looking, or pretended not to see.
And so the Sick Man of Canada, and its premier, now has a choice: Speak the truth about what is really happening and prepare people for what must be done; or give a Toronto speech, evasive, bland and political.