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politics

Queen’s Park Watch: New Budget Woes, Coming Soon To a Provincial Program Near You

The ongoing world economic crisis means it sucks to be Ontario's finance minister. What can he do to keep the province from stalling out?

Poor Dwight Duncan. Only a couple of weeks into his reassignment as Ontario finance minister, and already the wheels are starting to come off.

Remember last month when the Big Three political parties were fighting for the premier’s golden nameplate in an election that they would all eventually lose? When the campaign started, things were looking up for the provincial economy; maybe we weren’t quite ready to run the marathon but we were yanking out the IVs and getting wheeled to the hospital door.

Confident that Ontario’s literal and figurative fortunes were poised for the ascent to mediocrity, Grits, Tories, and NDP all waxed eloquent about increased spending on healthcare and education, rampant job creation, and for god’s sake no tax increases on working families.

Of course the promised largesse was based on the economy performing as predicted, or maybe a little better. But in September, RBC downgraded their projections of Ontario’s GDP growth for 2012 from 3.1% to 2.4%, with TD prognosticators suggesting 2.3%. Nevertheless, none of the parties changed their assumptions, which were uniformly optimistic at 2.7 to 2.8% annual growth for the next couple of years.

Still, not a disastrous gap. Trim a little fat off the budget, start cutting our own hair, and honey, we can keep the Volvo.

But what a difference a month can make. For a variety of reasons, including the Greek aversion to paying taxes and Italy’s incompetent libertine of a prime minister, European economies are starting to swirl in the bowl, and are making a fair bid at dragging the rest of the world down with them.

The Euro-crisis isn’t the only factor at play here, it’s just the most currently dangerous flare-up of the debt wildfires that are slow-roasting the global economy. But whomever you blame, the local picture isn’t getting any prettier, with 54,000 full-time jobs lost in Ontario last month. Duncan now says that economists are predicting economic growth of only 2.1% for Ontario next year, and even lower growth in fiscal 2013. With corresponding decreases in tax revenues expected, the Ontario government will have to make hard choices about how to allocate their dwindling stash of loonies.

Opportunities for meaningful cuts in the budget are limited. Healthcare accounts for over 40 per cent of Ontario government spending, and no politician will risk headlines about babies and seniors stacked like cordwood in hospital hallways waiting for the last working MRI machine. Education, which accounts for another 26 per cent or so of the the budget, is a barely less explosive topic.

Elimination of the budget deficit, notionally scheduled for fiscal 2018, will be pushed back, increasing government borrowing costs and interest payments.

With Duncan firmly fixed between a rock and a hard place, spending on your favorite government programs and institutions is going to be under the microscope.

That work has already begun. In March, when things still looked relatively rosy, Don Drummond, economist and comrade-in-alliteration to Dwight Duncan, was appointed to head a commission tasked with reviewing the Ontario public service and determining where costs could be cut with minimal impact on services.

However, as Rob Ford has learned, efficiencies aren’t always easy to find, especially when the discovery process is opposed by well-funded and combative labour unions (the Ontario Public Service Employees Union has already called for the Liberals to “Decommission the Drummond Commission”). And if we can’t lose some inefficiencies, we’ll be saying goodbye to something else, maybe a few clicks’ worth of subway track or an all-day kindergarten.

Right now, the finance minister may just be envying his colleagues across the aisle, who can watch the unfolding fiscal squeeze secure in the knowledge that they aren’t expected to do anything about it except complain. Because even it it’s not Dwight Duncan’s fault, this is what he signed up for.

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