Rarely has an economist been the object of such breathless anticipation.
Dalton McGuinty’s Liberals deny that they see Don Drummond’s review of government spending as a panacea for Ontario’s troubled finances. But as the legislature convened this week for the first time since the Oct. 6 provincial election, their actions belied them.
With Tuesday’s Speech from the Throne, and especially Wednesday’s fall economic update, the Liberals signalled that they’ll rag the puck until the new year. The brief pre-Christmas sitting is about implementing a few campaign promises and trying to get a feel for the dynamics of the province’s first minority legislature in a quarter century. The really big policy questions – how to carve a path from a $16-billion deficit back to balance, without decimating public services – will have to wait until Mr. Drummond’s report is delivered in January.
What remains to be seen, and cannot be taken for granted despite Mr. Drummond’s impressive credentials, is whether he’s capable of delivering the sorts of answers the Liberals are seeking.
No doubt, he will be unflinching in his diagnosis of all that ails the balance sheet. Based on conversations with sources familiar with the province’s books, and with Mr. Drummond’s examinations of them, his report will suggest that the long-term projections in last spring’s budget (anything from about 2013 on) were basically fiction.
But that’s hardly the most important part of Mr. Drummond’s work; the provincial Auditor-General has already hinted at much the same thing, and it’s no great secret that global economic turbulence has cast further doubt on forecasts. What really matters is the prescription, and that’s where the expectations might be getting out of control.
Of late, the Liberals have essentially argued that by modernizing delivery mechanisms, they’ll be able to find billions of dollars in savings without adversely affecting (and in some cases even improving) public services. That means finding places where too many people are doing the same job; where agencies and responsibilities overlap; where practices haven’t yet caught up to the available technologies; where private-sector partnerships could reap benefits.
Nobody familiar with the inner workings of the public service could seriously dispute that there’s room for more efficiency. Simply by finding ways not to replace retiring public employees over the next few years, the government could put a significant dent in its structural deficit. But even identifying all the opportunities, much less capitalizing on them, would be a tremendous undertaking.
Mr. Drummond is known mostly for his expertise in macroeconomics. And so far, his pronouncements about the province’s finances – notably a call for overall spending increases to be flat-lined at 1 per cent annually – have hardly delved into the nitty-gritty.
While that may change with the report’s release, the best-case scenario is that he’ll provide a series of examples of where there’s room for reform – largely in the big-spending areas of health care and education – not the line-by-line itemization of every department’s potential savings that Finance Minister Dwight Duncan seems to be counting on.
That task will ultimately fall to the people running those departments. But there was considerable pushback when Mr. Drummond briefed cabinet recently, reflecting the fact that (with the arguable exception of Mr. Duncan) there are few fiscal hawks among Mr. McGuinty’s ministers. Senior bureaucrats, meanwhile, are a decidedly mixed bag, with many resistant to changes that could shrink their turf.
Realistically, Mr. McGuinty’s best hope is Mr. Drummond will light a fire under all concerned. And if his specific proposals are enough to lend some meat to an austerity budget next spring, it should buy the Liberals some time to build on his broader ones.
The scary prospect is what will happen if his report lands with a thud. If so, the improbable notion that government can spend less and deliver more will likely prove a very short-lived one.