By MPP Toby Barrett
While Premier McGuinty was busy celebrating the passing of the 2012 budget and his “tax-the-rich” scheme, two world-renowned credit rating agencies were poised to wallop the Premier with some bad news.
Last Wednesday, Standard and Poor’s downgraded Ontario’s economic outlook from stable to negative, and just a day later the other shoe dropped as Moody’s Investors Services downgraded the province’s credit rating to Aa2.
My colleagues and I have been calling on Mr. McGuinty to get his finances in order for some time, demanding definitive immediate fiscal action to prevent Ontario from finding itself in the same crumbling financial situation of many European countries. We warned the government urgent action was required and yet we saw no plan to take us off the path to a $30.2 billion deficit and a $411.4 billion debt. This is why we stood fast in our response to the 2012 Budget. We believe our province can only lead again when our economy is strong and our budget is balanced.
Finance Minister Duncan has consistently blamed the situation on international economic turmoil — that would only make sense if all provinces were in roughly the same fiscal and economic shape, but they’re not. In fact, Ontario’s deficit is larger than all other provinces combined, even though it represents just over a third of Canada’s economy.
Economic indicators that place McGuinty’s economic management as among worst-in-class include losing 43,600 full-time jobs since the October 2011 election while the rest of the country has added full-time jobs. Ontario’s unemployment rate has now been above the national average for five years, and Ontario ranks 15th out of 16 comparable North American jurisdictions in GDP per capita. Further, Ontario’s debt-to-GDP ratio has been the worst in the country four years running.
We have seen governments, of all political stripes, eliminate deficits over the years and it is usually accomplished within two to four years – not six!
In response to a Wall Street Journal warning in 1995, that the Canadian government was on the verge of bankruptcy, the Liberal government led by former Prime Minister Chretien and Finance Minister Martin set in motion fundamental reforms that reduced government spending and ultimately changed the federal government’s involvement in the Canadian economy.
After the 1995 election, newly-elected Premier Harris inherited a $49 billion debt. Harris rolled up his sleeves and after one month in office released a three-year austerity plan – the Balanced Budget Plan — to address the fiscal realities. By 1999/2000 – one year ahead of schedule – the books were balanced and for the first time in over a decade, Ontario was running a surplus.
At the end of the day, the consequences of this credit downgrading are very real and very troubling for our province. This will drive up interest rates and increase the cost of servicing the $280 billion debt. Every one per cent increase in interest rates will cost our province an additional $500 million. That’s $500 million that could have paid for 12,000 first year elementary teachers, 8,700 first-year nurses, or 250,000 MRI exams.
How many warnings does Premier McGuinty need? He’s like a deer stuck in the headlights. We know Ontario can get back on track and if Mr. McGuinty does not have the political will to do so, he should step aside.