Finally, a sense of what lockdown is costing Ontario

The numbers are colossal, unprecedented

At last, someone has put a number on what the COVID-19 pandemic will cost the Ontario government, and it’s stunning. The province’s Financial Accountability Office said Monday Ontario’s deficit this year will hit $41 billion. That is double what Finance Minister Rod Phillips estimated in March and four times what the deficit would have been without the pandemic. That’s not the end of the bad news. Next year’s deficit will be about $25 billion, if all goes well.

Those deficits will be of great consequence to provincial taxpayers and the government’s ability to deliver services, but the direct effect on government is only part of the economic toll. The report also projects an unemployment rate of 10.5 per cent this year, nearly double what it was pre-pandemic. The report predicts that the provincial economy will shrink by nine per cent, the largest decline in nearly 40 years. Corporate profits are expected to drop by almost 27 per cent. The reality is even worse because while some businesses are fine, restaurants, hotels and retail have been clobbered.

Monday’s economic and fiscal numbers finally provide the overdue counterweight to the province’s much earlier projection of potential pandemic deaths. That Ontario model predicted that 100,000 people could die if nothing were done, but that between 3,000 and 15,000 would die with strong health measures, including closing down much of the economy. As of Monday, 1,669 Ontarians had died, the vast majority in homes for the elderly.

Throttling the provincial economy can be seen as a great success in terms of public health, with the significant exception of the death toll among the elderly. The economic and fiscal cost has been colossal and unprecedented.

It’s disappointing that the provincial government did not think it necessary to keep the public apprised of the escalating cost of its COVID-19 approach. An additional $20-billion impact on the public finances might have been worth a mention. Monday, Phillips played down the budget watchdog’s report, calling it

“a scenario.” Certainly, the numbers in it would have been no surprise to the minister, but the more the public knows about the real cost of fighting the pandemic, the more difficult it is to justify Ontario’s go-super-slow approach.

It’s important to note that Financial Accountability Officer Peter Weltman’s $41-billion deficit projection is predicated on the idea that the Ontario economy is substantially reopened during the second half of the year. Going slower, either because of government caution or setbacks in the viral fight, would boost the deficit to $45.3 billion this year and $37.6 billion next year.

Some dismiss deficits as a kind of accounting technicality of concern primarily to conservatives. If only it were true. The deficits Ontario is racking up now will have long-term consequences.

The Doug Ford government came into office with a reasonably plausible plan to eliminate the deficit over five years with a combination of efficiencies and spending restraint sufficient to let tax revenues catch up to government spending. That’s dead now. Weltman’s report says government revenue will drop $21.7 billion this year, a 14-per-cent decline. Even the following year, revenue still will not have returned to 2019 levels.

So what does a debt-addicted province do? There are only three choices. Taxes could go up to close the gap between the services Ontarians get and what they pay for them. That would be extremely unpopular. Services could be cut to help bring revenue and spending into line. The Ford government’s tepid flirtation with service cuts shows that many Ontarians simply won’t stand for them. That leaves only more debt, but the previous Liberal government added debt liberally, it has gone up under the PCs, and now the pandemic has pushed total debt into the danger zone.

That’s bad news for those who argue that we need substantially higher health-care spending or a public takeover of the long-term care centre sector. Where will the money come from?

There is no perfect path forward. Going too quickly raises the fear of future lockdowns, which would do more economic damage. Going too slowly prolongs job losses and government revenue declines.

Getting the balance right depends on a fact-based risk management analysis. That’s why it’s essential to start testing a representative sample of the broader population, to gather meaningful information about the prevalence of COVID-19. As well, the workplaces that have been open throughout, like grocery stores and manufacturing, must offer some useful risk data.

Instead, Ford and key cabinet ministers offered generic pep talks at their daily briefing Monday. Come on. Give people the facts. Ontarians’ physical and economic health is at stake.

Randall Denley is an Ottawa

political commentator and former Ontario PC candidate. Contact him at randalldenley1@gmail.com