National Post (National Edition)
Budget can’t balance itself
Opposition in Ontario should face reality
Ontario NDP leader Andrea Horwath and other progressive thinkers have seized on this week’s report from financial accountability officer Peter Weltman as evidence that, as she put it, “Doug Ford juiced up the deficit number to create a manufactured crisis and justify coming cuts to the services people need.”
If only she were even remotely correct.
Finance Minister Vic Fedeli says the province’s deficit for this year will be $14.5 billion. That includes a $1-billion contingency that probably won’t be spent. Without that, Fedeli’s deficit is $13.5 billion. Weltman doesn’t include that contingency and projects a bit more tax revenue than Fedeli does. His deficit number is $12.3 billion.
Neither of those figures constitutes good news. Fedeli is saying we’re in quicksand up to our necks. Weltman says maybe the quicksand is only shoulder deep. Either way, the dilemma is not appreciably different.
The budget crisis was manufactured, but it was manufactured by the former Liberal government, which left the province with a substantial deficit and a public expectation that services can be continually improved without having to pay more for them. Now, Ford has the unenviable task of trying to restore fiscal sanity.
Weltman’s report is also being used to show that Ford is actually driving the province deeper into the hole, because it projects deficits that will increase in the future. Had those critics even read the headline of Weltman’s media release, they would understand that those deficits would occur “without government action.”
Of course, we know that there will be government action to tackle the deficit. Ford is not going to sit there and watch it go up.
The main point of Weltman’s report, which certainly wasn’t disguised, is that eliminating the deficit over four years by spending reductions alone, as Ford has promised to do, will be extremely difficult. Weltman doesn’t use it, but the word “impossible” wouldn’t be inappropriate.
Weltman is the first to quantify what an all-cuts budget-balancing exercise would look like, and it isn’t pretty. To balance the budget in four years, Ford’s government would have to hold program spending to an average of 1.2 per cent a year, a number not seen since the notso-fondly remembered Mike Harris era.
Accomplishing that kind of spending control is even tougher than it sounds because that 1.2 per cent would still need to accommodate inflation, population expansion and increasing service demand. Health care, government’s largest expenditure, faces annual four-per-cent increases from those pressures alone.
Weltman says balancing the books with spending restraint and cuts only would mean an actual reduction in spending of eight per cent per person, a figure we haven’t heard from the government. Even that might understate the challenge. Weltman doesn’t account for any revenue or expense decisions the government might make in the future, but Ford has promised further income-tax and gasoline-tax cuts that would reduce revenue by an additional $2.9 billion a year.
One can reasonably infer from Weltman’s report that he, as a neutral expert on public finances, would not recommend balancing the budget so quickly with no tool but spending cuts.
He says, “Ontarians would benefit from an informed debate on the province’s budget objectives and the tradeoffs necessary to achieve them.”
This is precisely what is required, and what we are least likely to get. Ford is a spending-cuts guy, although he has been a little cagey on just how many years balancing the budget might take. The opposition parties will reflexively oppose any cut, no matter how small or logical. It’s a disappointingly juvenile approach to a real problem.
There is a sensible position in the middle. Postpone additional tax cuts. We don’t have the money to pay for what we have now. Gradually bring power bills back in line with real costs, eliminating $2.4 billion from the deficit. Consider modest medicare user fees or a higher health tax. Money won’t fix our health care system, but starving it for dollars will make it worse. No one wants that. Those moves would still leave billions in spending reductions to be found, and six years is a reasonable timeline for finding them.
That kind of approach would mean bending or breaking some of Ford’s election promises. In a way, it’s commendable that he doesn’t want to do that, but he needs to reflect on how much thought went into those promises, and how people will be affected by them.
The first step is for all parties to agree that deficits and debt are a problem and stop acting like cuts aren’t needed. That ball is in the opposition parties’ court.