Finance Minister Sousa's Math Can't Save Ontario
By Peter Shurman
My only “difficulty” with Finance Minister Charles Sousa, when I served as his Opposition Finance Critic for the Ontario Progressive Conservatives, was that he’s a nice guy and I like him. On media he appears equally likeable and trustworthy - and he is.
But, hope is never a strategy! Critics and citizens must hold Ministers to account. So, while we might conclude from Mr. Sousa’s Fall Economic Statement that he thinks we’re the luckiest people alive, he’s wrong.
The Minister is sticking to his “Building Ontario Up” theme - but that doesn’t happen by spinning 17 of 20 minutes of the Statement into self-congratulatory re-announcements or heralding Ontario’s change from manufacturing to service economy in spite of, not because of Liberal direction - then just three minutes 'fessing up to a continued uninspiring economic picture.
Projecting growth figures that don’t materialize, or expecting to break a structural deficit’s back by saying you can rein in spending increases to almost nil, isn’t good stewardship.
Mr. Sousa projects a $7.5-billion deficit versus the budgeted $8.5-billion shortfall, but the extra billion moves money from reserve funds, an annual event, and appears to pull Hydro One IPO proceeds into general revenues. Minister Sousa told reporters that wasn't the case. But Hydro One funds used to offset a budget deficit is pure deception.
The Minister is consistent. In budgets, economic updates and responses to questions, Sousa maintains Ontario is constantly improving; that the Liberal plan is working; that a balanced budget will be achieved by 2017/18. I believe he speaks his own truth. I just don’t share his optimism.
Charles Sousa is a good soldier but “General” Kathleen Wynne, and her adjutant, “Colonel” Deb Matthews, call the shots. Their version of moving towards budget balance has always involved reaching into our pockets for just a wee bit extra or making deficits look better in a shell game.
While a balanced budget may seem like the Holy Grail, it’s only a first objective. The debt generated by deficit financing is the real issue. Remember the old truism - “there’s only one taxpayer”.
For example, Minister Sousa’s budgets don’t address total taxpayer burden. He dismisses Ontario’s provincial debt topping all other provinces’ combined. He knows every man, woman, and child is technically on the hook for about $22,000 totaling $300-billion and rising. Neither his Fall Economic Statement nor his budgets discuss ballooning electricity rates (the highest in North America).
Ordinary people don’t think in lofty numbers. They just expect government to “fix it." But everyday people are starting to understand that it costs between 11 and 12 billion dollars annually just to pay the interest! They are realizing that if Ontario were debt-free, we’d have put that money into our health system, for example. Wait times wouldn’t exist. Needed infrastructure could easily be accommodated.
Instead, a new pension plan (ORPP) will take another 3.8% in combined employer/employee dollars out of the economy and a cap-and-trade plan to address carbon emissions will hit companies and (indirectly) individuals. The government won’t acknowledge that hydro rates, ORPP, carbon tax, land transfer taxes scare business away to the point where reducing carbon emissions will take care of itself!
In the face of new programs and pricey power, real GDP isn’t spiraling skywards. Minister Sousa says Ontario is holding program spending in check. But he based his budget on 2.7% real GDP growth while Scotiabank’s latest forecast is 2.1%, the same for his own Financial Accountability Office. That means lower revenues. Going forward, if government spending (or interest) rises and GDP fails to keep pace, we’re in serious trouble. Yet Minister Sousa counts on increasing revenues and rigid cost control levels his party has never approached.
RBC’s current research indicates significant increases in provincial debt over the next two years. The Ministry’s numbers agree. That takes us to the 2018 provincial election and past the stated deadline for balancing revenue and expenses.
With the $0.75 U.S. dollar likely heading lower, Ontario should be doing better. Other provinces are maintaining their historical share of U.S. exports while Ontario’s share is down almost 50%! China and Mexico are “eating our lunch”. And with household debt at record levels, consumer spending offers no salvation.
I am no longer a politician. I speak for myself without “talking points”. My commentary isn’t partisan; it’s simple logic and math. Our projected real GDP figures are poor. Mr. Sousa's own Ministry specifies 2.4, 2.2, and 2.2% for the next 3 years, respectively, while Scotiabank numbers peg it at 2.3% in each of the next two. Better than Canada, but insufficient to fund Wynne economics! And unemployment won’t return to “normal” levels (under 6%) until 2018.
Minister Sousa’s mellifluous speaking style and superlatives inspire confidence but the track he’s on doesn’t. To borrow from Kathleen Wynne, ”we need to have an adult conversation”. If she thinks her new friend in Ottawa will bail her out, the cupboard is bare.
In summary, Premier Wynne needs to say we’re adults; that we have a problem; that we must make some serious decisions about what’s affordable; and that we have to take concrete action now.
Peter Shurman was the Ontario Progressive Conservative Finance Critic from 2011 to 2013.