THUNDER BAY – The Drummond Report nails it when it comes to explaining Ontario’s current plight: “How did we get to this point? For most of the past decade, Ontario’s economic growth has lagged that of the rest of Canada, as changing economic conditions hit Ontario harder than other provinces. A strong dollar made Ontario’s exports more expensive for foreigners to buy while making imports cheaper; as a result, foreign trade, once a net contributor to GDP growth, is now a net drag. In the recent recession, Ontario lost 5.0 per cent of its GDP from peak to trough, while the rest of the country lost only 3.7 per cent. The human cost of this lacklustre performance is apparent in jobs and incomes: Ontario’s unemployment rate has been above the national rate for over five years now; average personal income in Ontario, more than 20 per cent higher than the average in the rest of Canada in the second half of the 1980s, was 0.5 per cent lower than this average in the third quarter of 2011”.
The report states, “Ontario faces more severe economic and fiscal challenges than most Ontarians realize. We can no longer assume a resumption of Ontario’s traditional strong economic growth and the continued prosperity on which the province has built its public services. Nor can we count on steady, dependable revenue growth to finance government programs. Unless policy-makers act swiftly and boldly to prevent such an outcome, Ontario faces a series of deficits that would undermine the province’s economic and social future”.
The executive summary continues, “Our message will strike many as profoundly gloomy. It is one that Ontarians have not heard, certainly not in the recent election campaign, but one this Commission believes it must deliver. If Ontarians and their government are going to come to grips with the fiscal challenges that lie ahead, they must understand the depth of the problem and its causes. Ontario must act soon to put its finances on a sustainable path and must be prepared for tough action — not just for a few years, but at least until 2018. We believe Ontarians can make — and implement — the kind of thoughtful decisions needed to resolve the province’s fiscal dilemma while protecting, to the greatest degree possible, the public programs on which Ontarians rely, many of which are a source of justifiable pride”.
The strong words in this report appear to be ones that could be setting Ontario on a course for the next election. The sunshine and roses scenarios that some still seem willing to accept in Queen’s Park, and in Northwestern Ontario are now likely more a pipe dream than they are affordable, both financially and politically.
Ontario has to start taking stock of what works, and what doesn’t work and start preparing for some serious cuts in government spending.
The cuts that the McGuinty Liberals have decried for their entire time in office made by the previous Mike Harris government are likely to pale beside what the Drummond Report is saying that Ontario must do in order not to hit the wall politically.
With the minority government in Queen’s Park, politics is likely to play a greater role in decision making than making hard choices.
The report adds, “High-debt governments are always vulnerable to the whims and demands of the financial markets from which they have borrowed; governments in this position can be forced to take draconian measures to keep their lenders happy (Greece and Italy are recent vivid examples). Low-debt governments have much more flexibility to set their own priorities — ones that meet the needs of their citizens and the good of their jurisdictions as a whole”.
In Ontario there appears a continual swinging of the political pendulum over the past twenty years. There was massive spending under the Rae Government which led to the “Common Sense Revolution” of Mike Harris taking over to attempt to achieve balance. Those cuts were not popular, and the McGuinty Goverment headed down a trail of spending more than we could afford.
Ontario’s current crisis may not be as serious as that of Greece, but it is going to likely lead to a government which will be forced into major spending cuts as outlined in the Drummond Report.
Voters are likely going to be asked to make those hard choices, and based on the reaction from the McGuinty Government, it is quite possible an election could come as a result of the coming budget. A spring election might not be what politicians say the voters want, but it could well be what Ontario needs.
Likely to implement the needed spending cuts from the Drummond Report, a majority government will be needed.
James Murray
Chief Content Officer