COMMENTARY: Ontario’s deficit leaves Doug Ford’s PCs at a disadvantage
So here’s something fun to think about, as the dust settles after this weekend’s botched Ontario Progressive Conservative leadership convention. As Doug Ford settles in as the party’s newly appointed (barely, but still) leader, thanks to an announcement late last week by the provincial Liberal government, Ford and the Ontario PCs are already behind.
Not in the polls. Those have been consistent in showing the PCs with a strong lead over the Liberals — remarkably consistent, in fact, given the disastrous not-quite-two-months the party has endured. The PCs, and the province as a whole, are literally starting behind in terms of money. And money matters.
Late last week, Finance Minister Charles Sousa announced that the Liberals would be running a deficit in the budget they will bring forward later this month. It’s a small deficit, the Liberals tell us, less than one per cent of the province’s annual GDP. But, uh, Ontario has a big GDP — now over $800 billion. So less than a per cent of $800 billion is, hmm, let’s see, divide that over that, carry the zero, round up to the nearest — ah ha! It’s as much as $8 billion. That’s a lot of money – especially compared to the size of the budget, instead of the whole economy. The budget for 2017 called for spending of $141 billion. The next budget will be bigger, of course, but $8 billion out of $140-ish billion is a difference of roughly five per cent. That’s a big gap to cover with spending cuts or tax hikes.
This matters, a lot, because Doug Ford has already pledged to blow a big hole in his own party’s fiscal plan. Former leader Patrick Brown, who seems to have been so thoroughly gobbled up by some kind of space-time anomaly that he has vanished, had billions and billions of dollars built into the PC platform that were going to come from carbon taxes and the province’s existing cap-and-trade system.
Economist Mike Moffat crunched the numbers for Maclean’s last month. It’s tricky stuff, since some of the costs would be felt immediately, and some over the course of a four-year mandate. But there’s billions of bucks on the line, totalling to what Moffat calculated was an average annual shortfall of nearly $3 billion (felt more strongly in the first year).
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That’s not helpful for the PCs, especially because they’re also pledging to make some targeted investments — more spending. So they’re cutting off revenue while ramping up spending. One need not be an economist of Moffat’s stature to see the problem this poses. And this is especially true with the Liberals promising to ramp up deficit spending before the PCs even get a chance to pass their first budget — a future Doug Ford-led government would be starting already deep in the red.
None of this, beyond the current deficit, is pre-ordained, of course. Doug Ford is the leader now, and he can make the calls. There is lots he can do. He can phase out the cap-and-trade system while phasing in the new spending — that’s one way to smooth things over. He can take an axe to spending in other areas, or try and find new sources of revenue (it’s tricky for a populist to raise taxes, but hey, anything’s possible). Or he can simply accept that he’s going to have to run deficits, perhaps across the entirety of his mandate, and he could claim — utterly plausibly — that he has no choice. He’s starting deep in a hole.
But these are all decisions that need to be made really, really soon. By law, Ontario needs to have its next election in less than three months. We’ve got 11 weeks, maximum, before we’re going to the polls. The party needs to have a campaign platform in place at least five weeks before that. Time is tight — and Kathleen Wynne basically can pull the plug any time after her government’s budget this month.
These are big questions for the new PC leader, and he’s got very little time to answer them. Is he going to swing an axe, in a big way, on spending? Ontarians might be ready for it, and he certainly has the cut-the-waste rhetoric down pat. Yet voters might blanche at the grim reality of what that would actually look like. Can even Doug Ford really sell long-term austerity — real austerity — to the voters? If not, is he ready to actually impose some tax increases on individuals or businesses? Can he live with the idea of a province he leads borrowing money year after year just to make ends meet? What does Doug Ford need to do to live with Doug Ford?
He’s probably asking himself these questions right now. We’ll find out what his answers are. And soon.
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