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                                         The Politics Of Deficit Cutting: 

                         Why The Liberals May Not Balance The Budget On Time

 

By Susanna Kelley 

This week Ontario Finance Minister Charles De Sousa delivered the Liberal government's economic statement, revealing revenues are down by half a billion dollars. That means the Minister of Finance is going to have a harder time wrestling the current $12.5 billion deficit to zero by 2017-18.   

Mr. Sousa is refusing to rule out tax increases in the future.

The Liberals haven't helped themselves by cutting a special deal with teachers to make labour peace before the last election - at a cost, according to Ontario's auditor general Bonnie Lysyk, of $468 million. The fact that the deal was kept secret for so long, despite journalists' persistent questions at the time, makes them appear they had something to hide. Bad optics for a government mulling over tax increases.

But speaking strictly from a political perspective - i.e., not whether this is good public policy - the Liberals may be able to put off balancing the budget by 2017-18 and not pay any serious political price for it.

While tax hikes still make politicians nervous, they are not the anathema that they were even five years ago.

That's because there's been a number of warm-up acts of late.

The Ontario public batted not an eyelash when Kathleen Wynne accepted the idea of implementing a tax hike on income over $500,000 as the price of continued NDP support for her minority government in 2012.

Nor was there much anger in a later budget when the Liberals raised taxes for those who are making between $150,000 and $220,000 a year.

In the U.S., Barack Obama won the presidential election in 2012 pledging to bring in tax increases on the wealthiest Americans.

So Mr. Sousa's refusal to rule out tax hikes in the future isn't exactly coming out of the blue. These steps by politicians have tested the waters, and indeed even those who have promised tax hikes have, in high profile cases,  then been re-elected.

Ah, but Mr. Sousa has promised to bring in a zero budget by 2017-18, you say, meaning he really only has three years to do so.

The fact that that is faster than former PC Premier Mike Harris cut an even larger deficit is a pretty nerve-wracking thought for many Liberals - Mr. Harris cut an $11.2 billion deficit to zero in five years, and the Liberals howled that these nearly tor apart the social fabric of the province itself in the late 1990s.

Barring a major turnaround in Ontario's economy and the resultant hike in government revenues, such a task would mean even deeper slashing than Mr. Harris pulled off.

Can Mr. Sousa do it? 

Of course, anything's possible with enough determination, as Mr. Harris showed.  

The bigger question is whether Mr. Sousa has the political will to actually do so, and whether the voters care if he does not.

Forget about the debate over whether having a balanced budget is good policy for a minute. Sometimes it is, sometimes it isn't, depending on the economic times (note that even the Stephen Harper's minority government brought in a deficit of more than $50 billion in 2009 to try to stave off global economic collapse  - and the loss of government - under pressure by the Liberals and NDP.

The Ontario Tories were quiet as church mice about that, even refraining at that time from their usual outcry that Dalton McGuinty was spending like a drunken sailor.  During that tense period, many politicians on the right were channeling Richard Nixon, who at one time famously said, "We are all Keynesians now."

And it's true that Keynesian economics says governments should spend in bad times to keep the economy going - which the McGuinty Liberals did - and pay back those debts in better times - which the Liberals have not. 

And since those dark days, as Ontario limped into a slow recovery, the government has faced criticism from not only Ontario Tories, but, somewhat ingenuously, the Harper Conservatives about the size of the province's deficit.

But speaking strictly about the politics of deficits, the vast majority of Ontarians have shown they don't much care how much we're spending over what we're taking in.  And the size of the provincial debt, which is now projected to be $310.5 billion as of March 31, 2015 - a hike of almost $15 billion from the year before - appears to be even less of a concern as far as the electorate is concerned. (By the way of aside, here's a trick: The quickest way to find the debt is to look in the very last pages of the budget or economic statement. This time it's buried on the sixth last page of the economic statement: page 157.)

Poll after poll, for decade after decade, have shown the deficit is almost always nowhere near the top of the issues concerning Ontarians. Jobs, health care and education are most often in the top three.

But when it comes to the deficit, the voters in Ontario mostly shrug and issue a collective "Meh."

The debt doesn't even appear on the radar.

Not that there isn't pressure on governments to balance the budget from other players.

Many a finance minister have been given the heebie-jeebies by bond traders who often warn there could be a downturn in the province's credit rating if spending isn't kept "under control."

And in the current case, reporters are on the lookout - and rightly so - for any signs the Liberals might break their promise to tame the deficit by 2017-18.

But when it comes to pragmatic, retail politics, the Liberals, and everyone else, know there will be little anger from the public if they don't balance the budget by then.

And Premier Wynne just doesn't have the same ideological commitment to such a thing as Mike Harris did. She believes in government funded social services and is trying to bring in a new, whopping one in before the next election - a public pension plan.

Far more dangerous for the Liberals, politically, are protests on the front lawn of Queen's Park over layoffs or cuts to public servant salaries, education and other services.

That's not the way Ms. Wynne secured a majority government.

The next election is a long way off, and anything can happen in that time. We'll have to wait and see if the Liberals reach their promised zero deficit on time.

But if they were really serious about that, the first two or three budgets would be the ones to do the most cutting.

The first was last summer, the Economic Statement was this week. And there was nary a peep.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

About Susanna Kelley

Susanna Kelley is Editor-in-Chief and Queen’s Park Bureau Chief for Ontario News Watch. A veteran political and investigative reporter, documentary-maker, host and media commentator, Susanna oversees and has final editorial control over all news production at Ontario News Watch. Susanna has reported for the CBC, the Canadian Press and served as Queen’s Park Bureau Chief for TVOntario for 13 years. She has also hosted a number of documentaries for CBC’s The Current, CBC Radio News and TVOntario’s Studio 2. Passionately dedicated to excellence in political journalism, and having covered both Parliament Hill and Queen’s Park, Susanna believes quality political reporting is essential to a healthy democracy. You can find Susanna here: @susannakelley
Posted date : November 20, 2014

View all of Susanna Kelley's columns
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