Ontario’s ugly, Ford-made fiscal crisis

July 5, 2018 — In Doug Fordlandia it was going to be free ice cream every day and no one will ever have to pay for it.

Unfortunately, the election is over and reality’s here. And it’s going to be an ugly reality.

Doug Ford made big spending promises and never showed voters any plan to pay for it. He repeatedly said no one would lose a job. That there would be more nurses and teachers if he was elected. And that his spending plan only required targeting efficiencies of three or four per cent. Nope. Nope. Nope.

In fact we can now see Ontario is moving inexorably toward a Ford-made fiscal crisis.

The ugly reality is that cuts will need to three or four times deeper than the efficiency targets he promised voters if Ford is to keep his campaign promises.

Consider the problem. Ontario has annual revenues of $152 billion and annual expenses of $158 billion — a $6 billion deficit. But the Auditor-General says it’s $164 billion in expenses and a $12 billion deficit. Oh.

Now, if you review Ford’s campaign platform, it adds another $1.6 billion in expenditures, increasing annual expenditures to about $166 billion. And his promised revenue cuts of $8.05 billion bring new annual revenues down to $144 billion.

Never mind a $12 billion deficit, if Ford keeps his promises, balancing a budget with revenues of $144 billion requires cutting $22 billion from the $166 billion of expenses.

For someone who says he is very concerned about the deficit, increasing it is a very strange way to go about balancing it. But maybe his real priorities are elsewhere.

So what about that three or four per cent efficiencies claim? Well, it was just not true. It was never true. Surely they knew that. They know math.

A $22 billion reduction from a $166 billion budget is a 13.2 per cent cut to all spending — a lot more than the three or four per cent efficiencies Ford talked about.

It gets worse. The province pays $13 billion in debt interest each year — but it won’t be Wall Street that takes a haircut. So the $22 billion reduction needs to be cut not from the $166 billion in total spending, but from the $153 billion in program spending — the funds for departments and transfer partners. That’s a 14.4 per cent cut to all program spending.

Here’s a couple problems for Ford. First, he’ll be tempted to defy the Auditor-General and continue the Liberals’ accounting methods. That would come at a political price. Second, the largest revenue cut — over $2 billion annually — is for a tax cut that gives a maximum benefit to the highest income earners and nothing at all to an income under $45,000. He’ll try to just power over this fact. Horwath and her team need to keep everyone focused on it.

The stragtegy for Ford will probably be to create confusion. Already the right-wing chorus is saying the books are “a mess,” which actually isn’t true. The Liberals were awful, spending money on themselves, that’s true. And they had fights with the Auditor-General on accounting, yes, true. But it’s all accounted for. The Auditor-General knows how much money is coming in, and how much each Ministry is spending and transferring. There are no unknowns.

What will be interesting is how the Ford PCs try to use their “mess” narrative and their consulting auditors to confuse people about the revenue effects of their tax cuts. Right now, I don’t see any other big play for the Ford team to make in an attempt dodge blame for turning a Liberal deficit into a full, Ford-made fiscal crisis that badly hurts the services we rely on.

Tom

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