Report underlines feckless profligacy of provincial government

Say goodbye to the good old Ontario. Bid adieu to the province that was once the roaring engine of the Canadian economy, that turned the public spending taps on full blast for decades at a time to buy new goodies for lucky residents, and that never seemed to spy a new government program it didn't want, especially when the deal was buy now pay later.

Well, that province, Canada's erstwhile capital of wealth, comfort and optimism, is just about gone. The engine is stuttering. The bills are coming due even though the spending tap still spews out money. But the government's wallet is empty except for a crumpled IOU note with $214.5 billion scrawled on it -- the amount of debt it carries.

This is the sombre reality Ontarians will see if they look into the mirror held up to their faces by economist Don Drummond, who heads the Commission on the Reform of Ontario's Public Services. We are poorer than we thought, slower and more world-weary. Our economy, and certainly our public finances, are sick. It is an ugly sight and it will get worse before it improves -- unless we swallow the medicine Drummond prescribes.

Have no doubt -- Ontario will change, one way or another. Drummond's report last week, the product of nearly a year of exhaustive investigation, explains why. Ontario is not in a fiscal crisis -- yet. But if it does nothing, if it refuses to take the bitter but necessary medicine of reform Drummond recommends, Ontario is on track for a full-blown fiscal crisis, not so very different from those now engulfing much of Europe today.

Many people will reject this diagnosis. Civil servants, doctors and teachers who fear pay freezes, post-secondary school students frightened of higher tuition fees as well as parents who don't want to lose all-day kindergarten will all shout, "No."

But "no" is a lousy argument against the convincing case made by Drummond, a respected financial expert who once helped the federal government with its budgets. The problem is twofold: Ontario's economy turned upside down while most of us slept. The 2008-09 recession ravaged a manufacturing sector that was already in decline. A stronger Canadian dollar curtailed Ontario exports while encouraging us to import more. Once the leader among Canadian provinces in growth, Ontario now lags behind the rest of the nation.

Meanwhile, Dalton McGuinty's Liberals have been ramping up spending far more quickly than its revenues were growing. And since economic growth will be sluggish for the foreseeable future, Ontario can't expect to buy itself out of its troubles -- unless it's ready to accept massive tax hikes.

Drummond's report is explicitly gentle with the McGuinty government. Implicitly, it represents a severe indictment of reckless, feckless Liberal extravagance. In 2005-06 the government spent $83.5 billion on programs. By last year, program spending had ballooned by $40.5 billion to reach $124 billion. Without decisive action, Ontario's net public debt will rise to $414 billion in 2017-18, which is the equivalent of 51 per cent of GDP.

The more we owe, the more we have to pay each year to service debt. Last year that cost us more than $10 billion. If we fail to control spending, our debt repayment costs will be crippling five or six years down the road and leave us paying high taxes but getting less for our contributions.

Noting that "the news is full of stories of countries around the world that have failed the fiscal test and slid into the ditch, to the enormous detriment of their citizens," Drummond concludes "Ontario must be different."

He's right. Ontario can't repeat the mistakes of other jurisdictions. It must change. And its people must unite and embrace that change -- now.

Republished from the Winnipeg Free Press print edition February 22, 2012 A11