Inability to Balance Ontario Budget a Warning Sign for Rest of Canada Today is Labour Day and labour leaders across Ontario will be marching, demanding more services and more jobs. What they won’t be demanding is a balanced Ontario budget. Popular NDP Leader Andrea Horwath won’t be able to balance the Ontario budget, either, according to Bruce Stewart. Ontario NDP leader Andrea Horwath will be marching, of course. So will Federal NDP leader Tom Mulcair. So what, you might ask? Well, hold on. The march is for something that, frankly, can’t be delivered. More. More money, more benefits, even just more jobs. In Ontario, that simply cannot be delivered. Ad it’s a problem that will spread to all corners of Canada very soon now. Go back in time to 2008 and the Global Financial Crisis. Our financial system creaked and groaned. Business credit dried up. Companies started falling. High energy prices (remember oil at $147/barrel in July of 2008?) slammed the brakes on a lot of economic activity. That’s also the year the Government of Ontario lost control of public finances. Ever since then, it’s been deficits in the ten billion dollar range. At first, deficits weren’t a big problem. After all, instant-suburbs were still popping up out of the ground like fast growing weeds. The national bird was the building crane, as condo tower after condo tower went up in Toronto. Real estate was in a boom, with endless reports of bidding wars taking sale prices for fixer-uppers to thirty, forty, even fifty per cent above the asking price. Much like the banking business of writing endless derivatives on derivatives that was a big part of creating the 2008 crisis (you build a house of cards, you have to expect it to fall), all this property trading looks like prosperity, but isn’t. It’s a house of cards, too. But that was the Ontario economy after 2008: too much moving the pieces around, not enough producing things people actually need and want. Even multiple rounds of business tax reductions didn’t restart the growth engine. Ontario has great strengths, relative to the other provinces in Canada. It has a more diversified economy than anyone else. No one sector is large enough to dominate. Massive numbers of start ups disappear as background noise in Ontario. Mining booms don’t make waves. Meanwhile, on a per capita basis, Ontario’s government is the smallest, and leanest, in the country. No province spends less per head on providing services. No province employs fewer, per head of population, in its public sector. Yet, for all that, Ontario can’t get restarted, and so the deficits continue to pile up, year after year, no matter what anyone does. With it, the province’s credit rating is slip sliding away. It’s on the road to bankruptcy, brought down by its pre-existing obligations (pensions, program promises) and a private sector economy that can’t bail it out. Resources? Globally, all resource markets are slowing down. Prices are falling, except for oil (and that’s up due to declining supplies of light crudes and worries about violence and civil war spreading in the Middle East). Australia’s national election this weekend is turning on this very question: its incumbent Labor government bet the country on resource exports to China, and now that China’s slowing so is Australia. (Much like Alberta, Australia has little to fall back on once resources go down the tubes.) Ontario needs to cut spending and get Ontario finances under , but it already spends less than everyone else, so what do you cut? Ontario needs business to pick up the pace, but it’s already cut taxes and regulations, and got nowhere. What Ontario really needs is for the global economy to pick it up, but the globe is as trapped in the post-crisis “go nowhere” as Ontario is. That’s the future for all of us. High energy costs impede growth (even as they’re needed to make shale and oil sands plays worth undertaking). All the trade deals in the world mean little if no one’s buying much of anything. None of Ontario’s politicians know what to do. None in the other provinces or up in Ottawa will, either. March this Labour Day for “more” if you want. “Less” is what’s in everyone’s future.
Posted on: Mon, 02 Sep 2013 17:27:01 +0000
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