Spare a little sympathy for Kathleen Wynne. Ontario's Liberal Premier may have won a majority government last spring. She may be guaranteed three more years of virtually unfettered power. She may be personally popular, facing an opposition in disarray. And yet for all that, she's still subject to Stephen Harper's Law of Political Gravity. When taxes go up, governments go down.
Look at the latest provincial budget, which landed on Thursday. It lives in the shadow of the Conservative federal government's fiscal plan, released two days earlier.
The Wynne government's DNA is all about activism, not cutbacks. It has a long list of big, important things it wants government to do, some of which – from building new public transit to reducing carbon emissions – badly need doing. Finance Minister Charles Sousa's budget is built around a 10-year, $130-billion public transit and transportation plan, which he described as "one of the largest infrastructure investments in Canada since the Last Spike was driven." Big Government is back! Or so the marketing materials say. The math? Well, it tells another story.
The Liberals are clearly terrified of being seen raising taxes to pay for transit, or anything else. With the exception of a minor, carefully hidden beer levy, which brewers and retailers will somehow not be allowed to pass on to customers – it's an immaculately conceived $100-million – there are no new taxes in the budget.
Once upon a time, the Liberals talked about paying for transit with road tolls. It's an idea favoured by most economists; we're willing to bet that if you polled the readership of the Canadian Journal of Economics, it would win in a landslide. But the idea was politically dead on arrival – user pay means users would have to, you know, pay – and it hasn't been mentioned in years.
How about a carbon tax? Another idea beloved of economists. It's even a policy that has worked elsewhere, with British Columbia raising taxes on gasoline and other fuels and, brilliantly, recycling every cent back into lower income taxes. But in Ontario, the carbon tax was treated as DOA: It contains the word "tax."
Instead, Ontario promises to reduce carbon emissions with a vague, details-to-come cap-and-trade plan. How much money will it raise? Unknown. Who will pay? Undecided. Cap-and-trade will impose costs on someone, somewhere, somehow. But the actual taxpayer will be harder to find than Waldo.
Ontario is finding money by partially privatizing Hydro One, accounting for it with a magic trick that appears to cost nothing, while conjuring up billions of dollars for transit. Privatization is a sound idea. But the accounting alchemy is driven by the demands of Stephen Harper's Political Gravity. Governments are afraid to be seen raising taxes, even for things voters want.
In the last election, Ms. Wynne won in part by running against Mr. Harper. And this fall, Mr. Harper will surely try to win in part by running against Ms. Wynne. (Justin Trudeau will try to win by running with her.)
In his budget, Mr. Harper made a small, electorally prudent bow to the government-must-act imperative, promising a few trinkets for transit – $1-billion a year, by the end of the decade, spread across an entire country. On a federal budget of nearly $300-billion, it's a rounding error. Ms. Wynne is far more constrained by the physics of the Harper universe than he is governed by hers.
Ontario is already a low-tax, low-revenue, low-spending province. Yes, really. Nobody wants to mention this, neither Liberals nor Conservatives. And in the absence of new revenue measures, keeping the deficit on a downward path from $8.5-billion this year to balance in two years, means the Liberals are committed to ratcheting down spending.
Program spending will rise just 1.4 per cent this year – considerably less than inflation and population growth. Next year, the budget promises program-spending growth of less than 0.1 per cent. The following year, it will fall by 0.5 per cent. This is the budget Liberals normally accuse Conservatives of hiding up their sleeve.
Consider health care. Liberals want to tell voters to expect more, bigger and better. "We've hired 5,600 more doctors and 24,000 nurses," said Mr. Sousa. But Ontario is squeezing its $50-billion health-care budget. Spending is supposed to rise just 1.9 per cent a year between 2014 and 2018. That's considerably less than inflation plus population growth, and likewise less than the once normal 6 per cent per year increases.
The province also says that any new public-sector contracts, in health or elsewhere, will be negotiated in the context of a "fiscal framework which does not include additional funding for wage increases." The province says, "We are going to lead Canada in our degree of controlling spending."
The Liberals' marketing is all about more, more, more. Look at all the transit we're building! But the math doesn't lie. Ontario's government aims to get smaller, and spend less. The laws of political physics are subject to change, but for now, they demand it.