We’ve seen this script before. Higher spending. Tax increases. Persistent deficits. Growing debt. Warnings from credit rating agencies. A government unwilling to make the tough choices to turn things around.
The other day former Ontario Premier Bob Rae, fumed at a column by economist Jack Mintz who noted the similarities between the current Kathleen Wynne government and Rae’s reign as premier of Ontario, specifically the “high deficits, debt and taxes.”
A new report on provincial debts and deficits by Moody's, the international credit rating agency, is another piercing reminder of Ontario's serious fiscal challenges.
It has been more than two years since an independent commission submitted its report to the Ontario government on the provinces poor public finances and high government debt.
Ontario Finance Minister Charles Sousa called his updated financial plan a new direction but in truth it had a nostalgic feel. With his government facing considerable fiscal challenges including an $11.7 billion deficit and growing debt, Ontarians desperately needed a new direction. What they actually got was more of the same: increased spending and a government reluctant to deal with core problems.
Even Greece, the poster child for rampant debt, carried an Ontario-style debt load as recently as 1984
Don Drummond (2012) Commission on the Reform of Ontarios Public Services
I do not want Ontario to become like California Finance Minister Dwight Duncan once proclaimed. And it's not hard to understand why, California is a fiscal nightmare. It has the lowest bond rating in the United States and its own Treasurer, Bill Lockyer, referred to the state budget as "a fiscal train wreck." Yet, despite all that is said about California's finances in the media and financial markets, there is a Canada province that is in much worse shape. Welcome to Ontario.
Kathleen Wynne celebrated this week after winning the Ontario Liberal leadership and the premiers job. But now comes the hard part, finding a way to return Ontarios finances to a stable, sustainable path.
Part of the challenge facing Ms. Wynne is Ontarians indifference to the provinces deficits and debt. If the citizens of the province arent concerned about the over-spending, the deficits, and the accumulated debt that emerges from such spending, then we shouldnt be surprized to see politicians ducking hard decisions.
On Tuesday, Ontario Finance Minister Dwight Duncan had one of those rare opportunities of which politicians can only dream. With his province heading toward a fiscal crisis caused by mounting debt and out-of-control spending, an opposition sympathetic to dealing with the problem, a public that clearly wants his government to address the debt, and news outlets that understand the need for significant fiscal restraint, everything lined up for Duncan.