Lacking consensus on a fiscal plan, Ontario Liberals cling to mantra of growth

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Charles Sousa did not announce new spending cuts. He did not announce significant new tax increases, either. And yet when he delivered his fall economic statement on Thursday, Ontario's Finance Minister continued to insist that his government remains on track to eliminate by 2017-18 a budget deficit projected to be $11.7-billion this year.

The hope of doing so revolves around a mantra repeated in recent weeks by Kathleen Wynne's Liberals: With smartly targeted spending, particularly on infrastructure, the province can grow its way out of deficit.

The embrace of this premise has been billed as a "pivot" from a focus on austerity to one on investment. But in reality, it appears to be a stall – and more than that, a tacit admission by a Premier who prizes consensus that her government has not yet settled on a real plan to get its books in order.

Even many government insiders concede that new jobs-oriented commitments, from building new roads and public-transit lines to launching youth-employment programs, are unlikely to have a major economic impact in the next few years. But the prospect that economic growth will nevertheless outstrip grim projections and boost revenues offers an excuse to avoid tough decisions.

As of now, Liberals are struggling even to reach an agreement on just how much of a priority eliminating the deficit should really be, let alone how to go about it.

According to multiple sources, the advice from Ms. Wynne's campaign team is that the size of the deficit and the speed with which it is eliminated is not a major concern among voters. Ironically, much of that team – including top strategist David Herle – worked for former prime minister Paul Martin when he was slaying the federal deficit as finance minister. But Mr. Herle's polling is said to indicate the issue does not resonate the way that it did in the 1990s.

Naturally, provincial finance officials and other senior bureaucrats have a different perspective. Having cautioned during Dalton McGuinty's flirtation with austerity during his final year as premier that short-term wage restraint and even some impressive moves to flatten health-spending increases were inadequate to address major structural challenges caused by industrial decline and an aging population, they have all the more reason to worry now.

Many members of Ms. Wynne's caucus and cabinet, who view finance as a department of Chicken Littles, are inclined to side with the campaign team. Ms. Wynne appears to be caught in the middle. While she is perceived to come from the left side of her party, she is worried about downgrades to the province's credit rating and general disapproval from the financial sector.

As a result, the economic statement effectively tries to have it both ways. It maintains existing targets for reducing the deficit yet indicates the government is prepared to miss them to avoid asking too much of Ontarians.

As for how much will be asked of Ontarians, and whether it will be in the form of spending cuts or taxes, bets are similarly hedged. Sources say that the Liberals flirted with signalling a personal tax increase, but could not bring themselves to do so – settling for a commitment buried in the update to "review" a property-tax change economist Don Drummond proposed nearly two years ago. Similarly, the government will continue to consider cost-cutting reforms Mr. Drummond proposed in his government-commissioned report.

Just how long will they rag the puck? Perhaps only be until after the provincial election widely expected next spring. Or maybe, if they remain in power past then, the Liberals will prove as optimistic as they claim they are.

Adam Radwanski is The Globe's columnist covering Ontario politics.