Dalton McGuinty resigned his legislative seat today, and appraisals of the former Ontario premier’s legacy have begun. Attention has naturally fallen on the power-plants saga and the mass deletion of emails by staff in the Premier’s Office that followed (the latter, apparently, being a ham-fisted attempt to cleanse the historical record of the former).
But the real story of the former McGuinty era lies in the financials, and it’s not happy reading. A cursory look at Ontario’s fiscal position suggests the Liberals have left a burden that, in the future, will limit the province’s ability to help those in the greatest need.
It’s a curious outcome for a leader whose political brand boiled down decency, duty and responsibility—the boy scout who grew up to be Premier Dad. And yes, a lot of subjective values feed into the essential “legacy” question, namely, whether a leader left the place in better shape than he found it. But at least one tangible measure of leadership—money—won’t flatter McGuinty. Here’s why:
Even by the standards of bond-happy Canadian provinces, Ontario has dug itself a scary-deep hole. Between 2003-04, McGuinty’s first year in office, and 2011-12, the province’s net debt rose more than 70 per cent and now stands at nearly a quarter of a trillion dollars. That’s about $18,000 for every man, woman and child—which is second only to Quebec’s per-capita debt and not by much. According to Statistics Canada projections, Ontario’s net debt will hit 40 per cent of provincial GDP some time next year.
Ontario’s bills wouldn’t be so daunting, were it anywhere close to being able to pay them down. Instead, the province faces a $12-billion shortfall in 2013 even after extensive cost-cutting. That is, by coincidence, roughly what taxpayers will shell out in interest on provincial debt in the next fiscal year—a cost that will go up because the province keeps adding to its liabilities.
The price will rise even more sharply if bond-rating agencies further downgrade Ontario’s debt.
What this means to average people: Ontario can no longer help. It can’t help the needy with augmented programs. It can’t help the sick by paying for new drugs. It can’t give its employees a cost-of-living raise. At about $8,400 per person, program spending is already lowest among provinces (though the method of calculation here can vary; some place Quebec at the bottom) and has been for the last three years. The perennial “have” province is now a have-not, and may soon need the help of its western counterparts to maintain existing levels of service.
HE ACTED TOO LATE
This seems an opportune moment to pause and consider the words of Don Drummond, the former bank economist McGuinty commissioned to draw a roadmap out of this fiscal tar pit.
Debt is costly, since interest must be paid on the province’s outstanding bonds and other obligations. Unusually low interest rates in recent years have allowed Ontario to borrow cheaply, but as interest rates rise to more normal levels, so will the cost of servicing the growing debt, and that will divert dollars away from public programs.
If McGuinty had heeded this sort of advice just a few years earlier (there were plenty of smart people offering it) he could have saved at least some of the pain Ontarians now face. Alas, he waited until 2011 to reach out to Drummond, and even then shied from the economist’s tougher recommendations.
How we got here is no mystery. Program spending under McGuinty climbed by an average of 7.6 per cent annually before the financial meltdown of ’08-09. During that period, Liberals got in the habit of saying they were backfilling a program deficit wrought by the program-slashing government of Mike Harris—costs downloaded to municipalities and a strained health-care system.
It was only partly true: billions also went out in the form of wage increases and benefits to teachers and other unionized public-sector employees. Then, after the U.S. economy deflated, and Ontario’s swooned, the province had to go cap in hand to the unions to get the money back.
Needless to say, it didn’t work and the province eventually traded its cap for a legislative hammer.
BANG FOR THE BUCK? OR A WHIMPER?
Here’s where we get to the subjective part: will Ontarians see evidence of all that spending when they look around their communities?
They’ll see full-day kindergarten, which costs $1.5 billion per year and may or may not yield the dividends promised. But they’ll also see flaking bridges, pocked streets and crumbling expressways.
They’ll see a Greenbelt protecting the lands around Toronto from sprawl. But they’ll also see a courthouses so crowded accused criminals walk free because they cannot be tried in time.
They’ll see pension liabilities; the burden of an aging population; or boondoggles like eHealth, the air ambulance system and, yes, those dastardly power plants.
We can debate all day about how a government should spend its money, but if it hasn’t got any, the whole discussion is moot. And if Dalton McGuinty isn’t exclusively responsible for landing us here, he bears at least part of the blame.