Eugene Lang

Opinion: An austerity agenda hidden in an ‘NDP budget’

May 4, 2013

This piece was originally published in the Ottawa Citizen on Friday May 3, 2013. 

The Ontario government tries to satisfy everyone.

How does a minority government mired in a big deficit and in the grips of weak economic growth craft a budget that satisfies the NDP opposition and keeps the financial markets content?

Bob Rae, premier of Ontario for five years in the early 1990s, faced economic and fiscal challenges like this throughout his time in office but failed to triangulate such disparate interests. Paul Martin — undisputed master of the fiscal and economic universe for nine years as finance minister under Jean Chrétien — headed a minority government that negotiated a budget in 2005 with the NDP that managed to secure the support of Jack Layton, but was frowned upon by Bay Street.

By contrast, the inaugural budget of Premier Kathleen Wynne and novice Finance Minister Charles Sousa has likely succeeded where these and previous attempts at placating left and right have failed. The NDP will undoubtedly support the budget because it meets most of their demands. And Bay Street should be quite satisfied with a fiscal plan that is consistent with their agenda.

Most of the commentary has characterized this budget as a major victory for the NDP, upon whose support the Wynne government relies to survive, Tim Hudak’s Conservatives having committed to vote against it regardless of its contents. It has even been suggested this is more NDP Leader Andrea Horwath’s budget than anyone else’s.

To be sure, Horwath’s main demands were met, notably closing some corporate tax loopholes, putting in place a youth unemployment strategy, establishing new supports for small business, additional funds for northern Ontario infrastructure and committing to a legislated 15-per-cent cut to auto insurance premiums.

That said, the most important element of the budget runs rather contrary to NDP orthodoxy. This part is buried toward the end of the lengthy tome under the heading “Ontario’s Recovery Plan.” It is in here that we find the stuff the financial markets will like. And it is here that we locate the method to execute a comment Sousa made in a speech on April 22: “The most important and fundamental thing that we can do, together, to secure our future prosperity is eliminate the deficit.”

Put simply, the austerity drive — eliminating Ontario’s $10-billion deficit by 2017-’18 — is the cornerstone of the Wynne government’s agenda, even if the government hasn’t emphasized this.

Importantly, this deficit elimination objective will be achieved by holding program spending increases to less than one per cent per year on average over the next five years. Which might not sound terribly ambitious unless you consider that this is under the rate of inflation, meaning it equals a significant real cut in government spending.

Consider further that health care spending — which has been rising seven per cent per year on average for 30 years — eats up 42 per cent of Ontario’s program costs.

Then add to that the fact that we are on the cusp of the “grey society” — a period of unprecedented aging demographics which will put huge upward pressure on health care budgets — and one starts to realize the magnitude of the fiscal challenge Wynne and Sousa have set out for themselves. The budget document acknowledges this, stating that holding program spending rises to less than one per cent for years to come “will require some difficult choices.” Indeed it will.

Most of these choices have not been grappled with in Budget 2013, and lie in the future for the Wynne government. And despite dire warnings of its imminent demise, this government will almost certainly have a future of at least a few more months, if not another year and another budget.

The Wynne government’s effort at fiscal and economic planning has demonstrated skill on the part of the budget’s architects. They have crafted a document that both left and right can find their values reflected in, which is no small feat. That, in a sense, seems to be the essence of Liberalism today. By injecting into the budget some NDP inspired initiatives — and then emphasizing these publicly — the government is almost certain to survive. And by committing to a fairly tough austerity agenda — even in the context of weak economic growth and relatively high unemployment in Ontario, which might argue for rather less austerity — the government maintains its fiscal prudence credentials. The budget is an impressive piece of political strategy.

In the final analysis, however, what we really have here is a scene setter for a second Wynne-Sousa kick at the fiscal and economic can in a year.

Budget 2014 is where the rubber really hits the road — where the premier and finance minister will have to make some fundamental choices about the basic direction of and role for the Ontario government in the economy and in the lives of citizens.


Related Content

Opinion: Why the US and Europe must stand together

President Obama’s trip to Europe is an opportunity to build on the vision he outlined in his West Point speech last week, and to set out a plan to renew the transatlantic relationship. This backbone of an alliance of liberal democracies across the globe, and the foundation of the post-war order, faces fresh challenges today. Over the past few years, though, this alliance has suffered from neglect which is troubling, as the inexorable triumph of liberal democracy is not inevitable – it requires constant work and vigilance.

Global Progress: Making Progressive Politics Work

“Making Progressive Politics Work: A Handbook of Ideas” is a collection of essays from the organizations and thinkers that are a part of Global Progress, an international exchange of ideas that will fuel the creation and implementation of progressive policies around the world. The handbook, organized and published by the U.K.-based Policy Network. Divided into two sections – Future Wealth Creation, and Jobs, Wages and Skills of the Future – the publication is required reading for Canadian progressives.

Analysis: Who is Matteo Renzi?

At just 39 years of age, Matteo Renzi became Italy’s youngest-ever prime minister in late February. The dramatic events that led to this meteoric rise are nothing new for Renzi. Over the course of his relatively short political career, the former lawyer and regional counselor earned the nickname “il Rottomatore”—meaning “the bulldozer” or “the demolition man”—thanks to his reputation for taking on the establishment and pushing through political reforms.

Opinion: It’s not unemployment, it’s underemployment

As short as 20 years ago, our combined attainment of education, work experience, and connections would place many young Canadians on a secure career track that would allow us to pay back our loans, save for a house, and contribute to the overall productivity of this great country. Today, that’s more or less not the case, and an increasing number of young Canadians are caught in a veritable limbo state of underemployment.

Summer Reading: 10 infographics you should see

We love infographics at Canada 2020 – and there’s no better time to browse and read them then over the long summer office hours.
Here’s 10 online features from The Guardian, The Economic Policy Institute, The White House and more than you should catch up on. Topics include tracking and comparing national carbon outputs, measuring exactly how inequality is rising in North America and answering what makes Canadians sick.

Leave a Reply

Your email address will not be published. Required fields are marked *

You may use these HTML tags and attributes: <a href="" title=""> <abbr title=""> <acronym title=""> <b> <blockquote cite=""> <cite> <code> <del datetime=""> <em> <i> <q cite=""> <strike> <strong>

Site by Carbure