Austerity – the chickens have come home to roost

By MPP Toby Barrett

…history teaches that recessions involving financial crises tend to be
more severe and have recoveries that take twice as long…
– Bank of Canada Governor Mark Carney

Last week’s Ontario Liberal Government report authored by economist Don Drummond has exposed a deficit spending crisis more severe than has been described to date. The report demands immediate action to start reversing the damage – and straight talk from political leaders.

According to Mr. McGuinty’s Drummond Commission, the current government’s overspending will not lead to a balanced budget in 2017–18 as Mr. McGuinty has predicted, but rather to a deficit in the order of $30.2 billion. That would translate into a net public debt of $411.4 billion, close to 51 per cent of the province’s GDP compared with 35 per cent today.

Why the discrepancy in outlooks? It’s, in part, because Mr. Drummond believes economic growth will be slower than the rosy forecast government has been communicating.

It’s time to say the things people need to know – not just what they want to hear. We’re running out of money, and running out of time. And, as we fight for a smaller, smarter government, we must also grow the private sector economy.

For instance, Ontario’s unemployment rate has been above the national rate for over five years now. In 1976, manufacturing accounted for 23.2 per cent of all Ontario jobs. Today manufacturing’s share of employment has slid rapidly — to 11.8 per cent. We cannot afford inaction while more of our hard working people are forced to sit on the sidelines.

And with over one million public sector employees in Ontario – 70 per cent unionized compared to 15 per cent in the private sector – labour costs account for about half of all Ontario government program spending. As such, control of spending growth cannot be attained, according to the report, without moderation in the growth of public-sector total compensation, whether through base wages or pension costs.

If Ontario has any chance to come close to its predicted balanced budget by 2017–18, Drummond notes, “the provincial government must take much tougher fiscal measures over a protracted period than anyone has yet discussed publicly.” That means, “deeper cuts to program spending on a real per capita basis, and over a much longer period of time, than the Harris government did in the 1990s.”

Given the eight years of McGuinty spending excess, meeting a balanced budget target means that program spending for every Ontario resident must drop 2.7 per cent over the next seven years, or 0.4 per cent annually – a decline in government spending that even Mr. Drummond admits is unprecedented.

The penalty for continuing down the debt-ridden, overspending road Mr. McGuinty put us on eight years ago is a continuation of the decline of economic indicators already at levels forcing Ontario families into difficult financial decisions.

The chickens have come home to roost! Government must take daring fiscal action, before current challenges transform into future crises. That said, we must ensure we are not simply meeting, “the demands of the present by pushing off expenses for future generations to pay.”

Dalton McGuinty has his Drummond report on his desk for over a month. It’s well past time for action.