Joe Oliver channels Jim Flaherty in telling Ontario to quit whining and solve its own budget problems
Kelly McParland
July 3, 2014
When the late Jim Flaherty was finance minister, he got a certain joy from taking pot shots at Ontario’s economy, which he felt was badly managed under a series of Liberal governments.
In a 2012 speech he said the province had “no one to blame but themselves” for their troubles, and complained that “Ontario’s spending mismanagement is a problem for the entire country.”
He had plenty of justification for his taunts. Under his direction, the federal budget was well on the way to being balanced, while Ontario couldn’t seem to get a handle on its much-smaller shortfall, for all the bold talk from Queen’s Park. At the time of Flaherty’s address, Ontario expected a deficit of more than $12 billion, but was promising to bring it down. Two years later, it is still expecting a deficit of more than $12 billion and is still promising to bring it down.
It was reported that the Prime Minister’s Office eventually intervened and suggested Mr. Flaherty put a sock in it. His successor, Joe Oliver, lacks Mr. Flaherty’s brashness, but also seems to have been freed of the sock. In an article in the Financial Post Thursday, Mr. Oliver suggests, in the politest of terms, that the new government of Kathleen Wynne has no one but itself to blame for the mess it’s made of its economy, and should stop bleating at Ottawa to come to its rescue.
In response to complaints from Ms. Wynne and her Finance Minister, Charles Sousa, that Ontario has somehow been shortchanged – a charge they’ve used to divert attention from their ongoing borrowing binge – Mr. Oliver dismissed their charge as “both false and sad…. False because it is contradicted by the facts and sad because Ontario used to take pride in being a contributor to Confederation and now is squabbling for a greater piece of the pie.”
Money for Ontario under the three main federal transfer programs have all increased dramatically since the Harper government took office in 2006; a 76% hike overall, to a record $19.2 billion, he said. Of that, $2 billion is under the equalization program, which is designed to help less prosperous provinces, which Ontario didn’t used to be.
“As the engine of the Canadian economy, Ontario had never collected Equalization money until 2009,” Oliver notes sharply. “The year before, Premier Dalton McGuinty argued it was time to kill the program, which Ontario was paying into. Now that it is a ‘have-not’ province receiving equalization funds, the Ontario government has changed its tune and wants more.”
The finance minister’s rebuke appeared the same day Moody’s debt rating agency cut the outlook on Ontario’s debt to negative, a reflection of its inability to get a handle on its finances. The move was long forecast, particularly after Mr. Sousa unveiled a big-spending budget in May in an effort to stave off an election. The election took place anyway, producing a surprising majority for the Liberals, indicating Ontarians are unaccountably sanguine about the state of the economy even as professional watchdogs like Moody’s grow increasingly alarmed.
The heart of the problem is the Liberal pledge to reduce the deficit to zero by 2017-18. Even with interest rates near historic lows, this year’s $12.5 billion deficit is 25% higher than forecast , and Ms. Wynne was unable to explain how it could be eliminated in three years other than to suggest the economy would grow thanks to government “investment.” Ontario already spends almost 10% of its revenue financing the debt. And that will only grow if Moody’s follows up its warning with a downgrade, making borrowing pricier. Signalling how little it thinks of Liberal promises, the agency didn’t even wait for Mr. Sousa to re-introduce his budget to deliver its verdict.
Ontarians voted for a fairy tale in June, and already the tale is unraveling. After pouring millions into efforts to get Wynne re-elected, Ontario teachers are already building a strike campaign in anticipation of a walkout in the fall. Mr. Sousa can’t possibly cut costs without reducing public service jobs, which represent the majority of provincial spending. If he doesn’t cut costs, a downgrade is inevitable. If he does cut jobs he’s following exactly the line proposed by the Conservatives during the campaign, when they were denounced by the Liberals as heartless beasts.
Oh well. You make your bed. Mr. Sousa and Ms. Wynne will no doubt continue to insist their troubles are all caused by those other heartless Tories, the ones in Ottawa, despite the $20 billion they’ve been getting. It’s going to wear pretty thin, though, over the next four years.
National Post
Wynne’s Ontario can no longer afford to ignore fiscal reality
JEFFREY SIMPSON
The Globe and Mail
Published Saturday, Jul. 05 2014
Well, that didn’t take long. Moody’s Investors Service has changed its outlook for Ontario’s fiscal situation to “negative” and warned of a forthcoming downgrade of debt. Standard & Poor’s is likely to follow very shortly.
Can you blame the ratings agencies? They studied the Ontario budget presented by the governing Liberals. They witnessed the party’s majority election triumph. They heard pledges, repeated in Thursday’s Speech from the Throne, to push ahead with that budget and its $12.5-billion deficit. And they witnessed Premier Kathleen Wynne’s refusal thus far to take a hard decision about anything.
That the ratings agencies would do what Moody’s has now begun was evident before the election. In this space May 31, it was written that “ratings agencies already smell a rat. Get ready for a downgrading of Ontario’s standing if the Liberals win and actually try to implement this budget.” The only question was when, not if, reality would smack the Liberals in the face.
Now, having systematically fled from reality before and during the election, and having been rewarded handsomely for this evasion, Ms. Wynne and her government face the difficult task of beginning to tell the truth. This volte-face is always hard for a government that lives and dies by what pollsters tell politicians that voters want to hear, rather than by what they need to hear.
Squaring the circle of Ontario’s deteriorating fiscal situation with the expansionist Liberal budget will require spending restraint of a kind for which the party did not prepare the electorate, because the spending restraint will have to be tighter than anything the Liberals imagined. Moreover, the tax increase on people earning more than $150,000 a year, while progressive in a manner of speaking, will raise only a small amount of money, far below what the deficit requires.
Already, rumblings have begun at Queen’s Park about further tax increases. But on what, and how? If taxes are indeed boosted beyond the additional levy on those earning more than $150,000, what would that do for stronger economic growth, on which the Liberals have pinned an inordinate amount of hope?
Perhaps – but this is mere speculation – the Liberals will do a Quebec and appoint a commission to investigate the province’s tax code to see if it can find the right balance of promoting fairness and efficiency. After all, the previous Liberal government asked economist Don Drummond and his colleague to examine only the spending side of the ledger. His mandate explicitly ruled out examining revenues, a restriction he ruefully lamented. Governments in doubt, as Ms. Wynne’s evidently is, often seek delay and help through commissions. Why not, therefore Drummond II?
Of course, Ms. Wynne will whinge about how unfairly Ontario is being treated by federal transfer policies, a complaint recently given modest support by the Parliamentary Budget Office. But even if treatment were improved, Ontario would still face obstacles of its own making, and, more important, of shifts in the world and North American economies, and of an aging population, that will render governing choices much harder than anything the Premier spoke about before and during the campaign.
The most likely scenario, now that reality is smacking Ms. Wynne in the face, is that she will do a Jean Chrétien. Here was a prime minister who waltzed into office with a big smile in 1993 saying trust me and everything will be okay. He dawdled through 1994 and then, with finance minister Paul Martin helping hugely, got serious about attacking the federal fiscal situation with a tough budget in 1995 – for which the party was rewarded by public opinion.
It helped the Chrétien-Martin duo to find courage when outside observers – including ratings agencies – started sending disquieting signals about the country’s inattention to its fiscal challenge. The knock-knock coming from the ratings agencies for Ontario might therefore help concentrate previously scattered minds.
The Chrétien-Martin effort was easier in one sense than what confronts Ontario. Ottawa could cut transfers to the provinces as part of its assault on the deficit, an option obviously not available to a provincial government.
The only glimmer of hope is that a majority government and external messages of disquiet will encourage the Ontario Liberals to govern with a seriousness of purpose almost completely lacking in their election campaign.
Thucydides said:Schadenfreude, No one cares because (like sewers and most other infrastructure) it isn't visible or "sexy", but the sooner steps are taken to address the issue, the easier it will be to fix.
Why we should cheer Canada’s new debt surge
SUBSCRIBERS ONLY
David Parkinson
The Globe and Mail
Published Friday, Jul. 04 2014
Canada’s credit situation has assumed a split personality – the debt loads of consumers and businesses are headed in opposite directions. But as households slow their debt accumulation while businesses ramp up their borrowing, this is a divergence that might suit Canada’s current economic needs just fine.
According to the latest credit data from the Bank of Canada, total household debt in Canada was up 4.2 per cent in May from a year earlier – the fourth straight month at that level. Indeed, the annual pace of household debt growth has been hovering around 4 per cent, the bottom of its long-term historical range, for a year now.
Year-over-year growth in mortgage credit, at 5.1 per cent, is near its lowest levels since 2001. Growth in consumer credit – credit cards, personal lines of credit and consumer loans – rebounded slightly in May to 2.2 per cent, but is still tracking near the bottom of its 20-year range. Pretty much any way you slice it, household debt growth has stabilized, at about as slow a pace as we’re likely to get.
That’s certainly encouraging in terms of the nagging risks to Canada’s financial stability that excess household debt poses – an issue over which regulators and policy makers of various stripes in Ottawa have long fretted. While no one is ready to declare the threat over, it is certainly fading. Moody’s Analytics economist David Rosenblum noted this week that household assets are now growing at 8 per cent year over year – nearly double the pace of debts. That trend surely is putting Canadian household balance sheets on more stable footing in the event of a rapid surge in interest rates – something that, it should be said, looks extremely unlikely anyway.
But a slowdown in consumer credit growth to historic lows does pose a downside to the economy – it implies slower growth in consumption, and is thus a serious headwind for economic expansion in the current cycle. Fortuitous, then, that Corporate Canada looks to be stepping in to fill this economic void – and then some.
The Bank of Canada data show that business credit was up 8.3 per cent in May from a year earlier, its fastest growth since the pre-recession days of early 2008. And the pace of corporate borrowing has been accelerating rapidly: Over the past three months, the annualized growth rate was 10.6 per cent, more than double the pace of the same period a year ago and the fastest three-month trend in seven years. While consumer credit has added a modest $11-billion over the past 12 months, business credit has expanded by $121.6-billion.
It’s a little unclear what companies are planning to do with their expanded credit – though one obvious use would be to finance that long-awaited expansion in capital investment, something the Bank of Canada has often cited as a crucial missing ingredient in Canada’s economic recovery. The historical data suggests that this magnitude of business-credit growth is often associated with acceleration of business capital formation, but not always.
It could be that corporate Canada is taking advantage of historically low interest rates and their improved balance sheets to build up a war chest for investment opportunities down the road, but will still wait for more definitive signs of sustained strength in demand before investing more heavily in expansion. Nevertheless, the recent trend in borrowing shows they are gathering a lot of economic fuel; where there’s smoke, there will inevitably be fire, sooner or later.
Putting these two opposite trends together, we’re seeing more light at the end of two key tunnels for Canada’s economy. And for them to be developing at the same time, to nicely offset each other, could prove a very handy bit of timing.
How can it be legal for prostitutes to sell sex, as Canadian law says it is, but illegal for customers to buy it?
E.R. Campbell said:Why, then, bring forward a fatally flawed bill?
Because:
1. One part (a small but important part) of the CPC base wants them to try; and
2. Both MacKay (an old Progressive Conservative) and Harper (a pragmatic Conservative) want to legalize prostitution in Canada but neither wants to actually say so. Beverley McLachlin and her colleagues will be invited to do the deed for them
~ and accept the blame from that small segment of Canadians that actually cares.
Edit: typo
E.R. Campbell said:Here, reproduced under the Fair Dealing provisions of the Copyright Act from the Globe and Mail is an interesting bit of speculation or prognostication, if you will:
http://www.theglobeandmail.com/news/politics/globe-politics-insider/why-stephen-harper-may-call-an-election-earlier-than-planned/article10337226/
I agree with Ibbitson's rationale for changing from fall to spring. Campaigns are, at a lawful minimum (and recent traditional maximum), 36 days in length, so an election on, say, 12 May 15 would require the campaign to begin on (or before) 6 Apr 15.
When it comes to Mike Duffy, there's always more
SCOTT REID
Last Updated: July 25, 2014
From Peru to Prince Edward Island, Mike Duffy has spent the past two weeks lacquering his name with fresh new coats of disgrace. Fifteen counts of breach of trust. Fifteen counts of fraud. One charge of bribery. And, most spectacularly, one allegation of paternity.
To the mental portrait of Duffy clutching Nigel Wright’s $92,000 cheque like a pink round Sméagol we can now add a whole new catalogue of distinguished images — attending funeral services with expense claims in pocket, quaffing taxpayer-funded per diems while travelling on Conservative party business, stamping RETURN TO SENDER on envelopes hand-addressed in Spanish. We can even imagine, if the latest reports are to be believed, a much younger man, bewitching a convicted drug mule into ignoring curfew at her halfway house with his best imitation of Richard Gere.
The Senator and his lawyer deny all and insist that they welcome the impartiality of a criminal trial. That’s codswallop. The truth is that Duffy is done. Finished completely and savagely. There can be no vindication from a tarnishing this extensive. No matter the trial’s verdict, his reputation is now utterly and hopelessly demolished.
Stephen Harper should take heed of this ugly truth. Because it means that Duffy, desperate and fierce, only appears to be in the business of clearing his name. In reality, his business now is revenge — and the prime minister is his certain target.
Which raises the question: how much of a threat does Duffy actually pose?
For Conservatives, it will be tempting to believe that their former colleague’s ability to inflict further damage is limited. Many observers assume that whatever political price might be extracted for Duffy’s sins, it has been paid already. Helpfully, a headline-dominating trial will likely occur only after next year’s election campaign. These are sensible considerations. But they pale in contrast to the two reasons that Conservatives should continue to fear Duffy.
First, Harper is more vulnerable now than he has been at any point since 2006. With job creation and economic growth weakening, Harper’s most basic claim to re-election is fading noticeably. This renders him even less able to deflect incoming fire and sustain damaging innuendo from Duffy. After nine years of grudging respect, but precious little affection for Harper, Canadians’ appetite for change is already running dangerously high. Additional reminders of how the status quo in the PMO is failing voters is the last thing Harper needs.
In this context, the resurrection of Duffy as a reportable news item hurts in ways both direct and indirect. First, it most obviously places the government on defense, consuming the energy and attention of senior staff and advisors. For those who have never worked in a PMO, it is difficult to adequately comprehend the degree to which a threatening political development can exhaust all other functions and focus within the office. Duffy also serves to fill the news hole – pushing out less glamorous government initiatives and creating a steady diet of negative impressions. Governments subject to such periods tend to comfort themselves by arguing that real people grow bored and ignore such reports. There’s some truth to that. But persistently negative news can seep in like rainwater rotting away the timbers that hold a government erect and steady.
Second, Duffy’s return places the spotlight firmly on Stephen Harper’s greatest handicap: his political character. The flinty-eyed, ends-justifies-the-means manner affected by this government has, over time, morphed from proof of leadership into evidence of licentiousness. Defenders will point out that such faults haven’t hurt Harper yet at the ballot box, but can Conservatives afford to take voters’ ongoing indifference for granted?
More reports about the lengths taken by PMO to wash away Duffy’s abuses will surely harden the already sizable majority of Canadian voters who disapprove of the prime minister’s performance. Even without new revelations, there is plenty to cause worry lines on Conservative foreheads. For example, we know already that Stephen Harper was consulted at some point during this drama, leaving his then-chief of staff to report that from the perspective of the prime minister they were “good to go”. Salt will surely be poured by Duffy into this unhealed scar across the government’s story.
More damning yet is what remains undisclosed. Take Mike Duffy’s hints of wild new exposures for what they’re worth but a mystery still exists at the centre of this entire debacle. Why did PMO go to such extraordinary lengths to help Duffy? Why was the Conservative Party willing to pay his tab when they thought it was a mere $30,000? Why did a person as seemingly intelligent and conscientious as Nigel Wright reach into his own pocket when he realized that tab was actually $92,000? There must be an answer to these questions. There must be a motivation that has not yet been shared. It seems likely to assume it will emerge at trial. Just as it seems unlikely to assume that it will flatter the government.
Harper’s greatest hope now lies in the timing. If the trial occurs after the next election perhaps the return to crisis can be avoided. But the prime minister doesn’t control that particular variable. It is the purview of the courts to set the schedule. Worse, Duffy will decide if he’s willing to wait until then to start making news once more. If the pride of Cavendish is bent on revenge above all else, he knows that his moment needs to arrive before October 19, 2015, not after. For all these reasons, it’s a good bet that we won’t need to wait much longer for Mike Duffy’s particular brand of more.
Scott Reid is a principal at Feschuk.Reid and a CTV News political analyst. He was Director of Communications for former prime minister Paul Martin.