Deficits today mean future tax hikes or service cuts
None of Ontario’s three major parties stand for fiscal discipline, Don Drummond writes.
DON DRUMMOND Ontario voters wishing to elect a government that believes in fiscal discipline are being left without a party.
In 2017, the Liberal government announced the budget would be balanced in 2017-18, and they set a target of bringing the bloated debt burden back to where it stood prior to the 2008 financial crisis. It seemed Ontario’s fiscal woes were being put in the rear view mirror. An obstacle to economic growth was being tamed and the day could be seen when more of taxpayers’ dollars would be available for public services as less would be squandered paying interest on the debt.
What a difference a year can make. The Liberals decided to drive off the path of fiscal discipline with a 2018 budget that featured so much new spending that the deficit was projected to average almost $6 billion over the next five years. If proper accounting conventions had been used, as urged by the auditor general of Ontario, the average would have been more like $12 billion.
Instead of declining, the debt burden would resume its upward march, reaching well above anything recorded during the 1990s, when it was generally accepted Ontario was in fiscal crisis.
Voters disliking the willing return to deficits and huge debt burdens offered by the Liberals will naturally look for a party with an alternative fiscal perspective. They will not find that in the NDP. Its platform, corrected for the error made concerning the contingency re- serve, features deficits averaging $4.6 billion over the next five years and that does not include anything for the plan to re-purchase half of Ontario Hydro.
Furthermore, the NDP platform uses the same accounting conventions the auditor general criticized the Liberals over. If proper accounting is applied, the NPD’s deficits would be similar to the Liberal’s plan.
Proponents of fiscal discipline may find appealing the Conservative’s reference to balancing the budget by the end of the mandate, although on the party’s website that initial pledge has morphed into balancing over a “responsible period.” Yet it is not clear under what accounting conventions they envision doing this.
The major budget savings being offered is a $6 billion per annum spending cut to be found by tackling inefficiency. That would be enough of a challenge on its own, but the exercise becomes highly dubious under the rider that no civil service jobs would be affected.
Even if the savings were secured, they would not be enough to offset the cost of promises made: a middle-income tax cut that seems more lucrative for higher-income individuals; scrapping capand-trade for greenhouse gas emissions and hence foregoing the revenues from permits; a corporate income tax cut; a gasoline excise tax cut; a 12 per cent electricity price reduction on top of the Liberal’s plan; and the elimination of personal taxes for those earning around minimum wage.
Those alone exceed the proposed sav- ing or just balance the savings if all the environment spending associated with climate change were also scrapped. But other pledges have been offered, including new spending for mental health, long-term care, Toronto transit infrastructure and uploading to the province the municipal operating costs of transit.
Putting it mildly, new or old math, this doesn’t add up to deficit reduction, never mind elimination. We may never be able to check the Conservatives math because the earlier promise of a fully costed platform seems to have been replaced with a tally of initiatives and no explanation of how they fit with balancing the budget.
So none of Ontario’s three major parties stand for fiscal discipline. But the piper must be paid and hence the stage is merely being set for future tax increases or cuts in services. And in the meantime, a lot of money will be wasted on interest on the public debt.
If the NDP or the Conservatives form the next government, wait for that tired old refrain of how the books look worse from the insider perspective than the previous government let on. Voters will not fall for that. Everyone knows the fiscal situation is worrisome.
Everyone except the three major parties that is.