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Economy will decide Wynne, no-Wynne

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With a projected $255-billion net debt and nearly $12-billion deficit as twin albatrosses around the neck of Ontario's minority government, the next phase of manoeuvring has begun in Ontario's game of thrones.

To date, Premier Kathleen Wynne has been adept at trudging a middle path between her main political rivals with a consultative governing style punctuated by occasional bouts of calculated sternness. Much like Margaret Thatcher, she appears to be extraordinarily patient, provided she gets her own way in the end.

She had managed to strike a deal with Ontario's teachers and outflank the NDP by expressing support and sympathy for some aspects of their platform -- such as lower auto insurance rates. In the process, she has begun trying to attract support away from the NDP while isolating the Conservatives.

Success for Wynne requires she maintain her core vote rooted in the urban knowledge economy while gaining support from the two other rails of Ontario political support -- rural small town Ontarians and the resource frontier North.

Her announcement there will be no special revenue deal for Toronto should it agree to a new downtown casino is designed to show Ontarians outside of Toronto she can say no to Toronto. This is politically advantageous as it secures her rural and northern flanks while not reducing her core Toronto vote given controversial Mayor Rob Ford is a casino proponent.

Moreover, saying yes to a deal that gives Toronto 50 per cent of casino fees given that other municipalities get far less opens the door to re-negotiation of those fees and the erosion of provincial revenues at a time when the province needs to reduce the deficit.

As for Wynne's Toronto voters, she is wooing them with the need to end Toronto's traffic gridlock with investment in urban transit infrastructure. She has not been specific, however, on what that means other than remarking that transit in Toronto will need tens of billions of dollars invested during the next 20 years. Of course, with a massive debt and deficit, there are no billions of dollars available, which means that there may have to be new "dedicated" revenue sources.

Dedicated revenue sources are a clever way of saying new taxes to fund urban transit. Metrolinx, the provincial transit agency, has already run some trial balloons such as regional sales taxes, gas taxes and high occupancy toll lanes.

Of course, dedicated revenue sources have been tried before in Ontario -- for example, the Ontario health premium income tax levied in 2004 or the even earlier employer health tax. Given that despite these dedicated taxes Ontario's health system is still chronically short of resources, the premier will need a dedicated effort to convince a skeptical public that it will be different with transit.

Of course, when all else fails, blaming external forces is a useful election tool. In this regard, the provincially funded Mowat Institute provided an exemplary report on Ontario's fiscal gap within the Canadian federation. The report noted the gap between what Ontarians contribute to the federal government and what is returned in the form of transfers and spending is approximately $11 billion -- a gap that is conveniently about the size of the current provincial deficit.

The fiscal gap refrain is a common theme in Canadian discourse. Indeed, an Ekos poll in 2005 found that just over half of Canadians believed that their province contributed more to Confederation than it got out. In 2006, Ontario also began this line of discourse with premier Dalton McGuinty asserting there was a $23-billion fiscal gap. These types of statements serve a dual purpose. They make the case for more federal funding and divert blame federally if more funds are not forthcoming.

To date, Ontario's new premier has been skilful in maintaining a minority government and demonstrated an aptitude for governing in the face of a rather troublesome set of political legacies. Of course, all of this manoeuvering will be for naught if the economy slows.

The weak March employment figures show both the Ontario economy and the vital American economy not doing well. It will take more than words and clever positioning to move Ontario forward in light of those numbers. If the economy worsens, the province could be in a no-Wynne situation by the autumn.


Livio Di Matteo is professor of economics at Lakehead University.

Republished from the Winnipeg Free Press print edition April 19, 2013 A11

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