No Ontario party has credible financial plans

Cuts, moderation, a hard sell against big spenders

Voter alert: All three major political parties are trying to sell us a vision of the future that is so disconnected from the province’s scary fiscal situation that it would be laughable if we weren’t the ones facing the consequences.

Detailed, authoritative analyses from Ontario’s two leading public spending experts, the auditor general and the financial accountability office, show that Ontario is on the brink of sinking into a quagmire of debt and overspending that will lead inevitably to higher taxes, higher debt-interest payments and lower service levels.

And yet you’d never know that from the careless abandon with which all the parties are promising billions of dollars in new spending. The Liberals and the NDP want to expand the scope of government with borrowed money, adding to an existing $5-billion deficit identified by the two experts agencies, a deficit the Liberals dismiss as an accounting disagreement and the other parties don’t want to talk about.

The Doug Ford Progressive Conservatives offer no salvation. They are also promising substantial new spending and tax cuts, although they will at least partly offset that with unspecified “efficiencies.”

The Liberals and NDP decry those cuts, said to be about $6 billion over four years. Thank goodness someone is talking about cutting something, but at best the PC program is likely to eliminate some expenditures and replace them with others of equal or greater cost.

As the financial accountability office details, the Liberal plan would produce $12-billion annual deficits, double what they are letting on. That issue has received some attention, but it’s only part of the problem.

Those big new deficits come at a time when government revenue growth is starting to weaken and expenditure pressures are going up.

Economists anticipate slower economic growth for Ontario in the next few years. Reduced spending by heavily indebted consumers is a key factor. The problem is compounded by a lower rate of increase in transfers from the federal government and running out of onetime things to sell, like that big chunk of Hydro One.

Slower growth means less new money for government. Last year, revenue grew 6.7 per cent. For the next several years, it is expected to go up only 2.7 per cent.

So less new money coming in, but lots of pressures for higher spending. Inflation, population increases and increased demand for health care will inevitably drive government expenditures higher each year, no matter who is in power.

Add to that impending labour contracts, an expensive repair backlog for schools and hospitals and a shortage of money to meet current health-care needs.

Running deficits only makes the problem worse. If the Liberal program were enacted, $70 billion would be added to the debt and interest payments would increase by $1.7 billion over the next three years, reaching $13.6 billion. That would chew up 8.4 per cent of total revenue.

The Liberal plan to get out of the deficit hole is not credible. It offers three years of mega-spending followed by five years of slowly cutting back. The accountability office says balancing the budget by 2025 at the expenditure levels the Liberals propose would mean $15 billion in permanent cuts. Can you see any party doing that?

Or how about this? A 10-per-cent increase in personal income tax rates, combined with a one-percentage-point increase in the HST could eliminate the planned Liberal deficit by 2025 if the tax increases were enacted right away.

A credible political party would promise neither tax cuts nor new programs. It would focus on difficult spending reduction choices, so that we could eliminate the deficit, start to pare back the debt and meet future health-care needs.

But then who’d vote for that when two parties are offering every new program you can imagine and the other one says the government needs less money than it has now?

Welcome to the fools’ paradise.