Doug Ford’s biggest problem… Ontario’s spending crisis

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Doug Ford has a problem.  But it’s not what you might think.  It’s the Ontario budget.

Of course he has to win the election first.  And many pundits think his big problem in doing so is one Douglas Bruce Ford Jr.  But they’ve been wrong about populists before.  I myself was convinced Donald Trump could not win the Republican nomination let alone (ptoo ptoo – spitting out crow feathers here) the presidency.  And many people saying Ford is a risky bet or long shot for premier were also pretty sure he couldn’t win the Ontario PC leadership.

My view is that people are so tired of Kathleen Wynne’s Liberals that he has a safer path to power than it might seem.  He could bungle it with outrageous statements, have a chorus line of skeletons come rattling out of his closet or otherwise lose.  But he could easily win, including by not being Wynne and uttering harmless generalities that dramatically understate the problems he would face as premier.

I recently worried in the National Post that Ford “seems to have no more idea what government should stop doing than” his Ontario Tory rivals who mostly had none.  So he already cheered me up by urging competition in sales of alcohol and marijuana in Ontario.  Government should regulate not deliver, whether it’s booze or banking.  (And not overregulate, I might add.)  OK, he didn’t actually say the LCBO should be scrapped.  But an instinct to separate regulation from provision is a glimmer of hope.

He’s going to need a lot more.  Like many self-proclaimed conservative politicians, he says the right abstract things, like Tuesday’s “I don’t believe in government being in our lives and dictating how we should live.”  But then he promised not one public servant would lose their job, and there would be no reduction in health care spending, which accounts for over 42% of program spending in Ontario ($52.2 billion out of $123.5 billion in 2016).  Which suggests he doesn’t understand Ontario’s spending problem.

It’s massive.  Spending has gone from $68 billion in Mike Harris’s final year to $134 billion 15 years later.  At least on book.  One of the weirdest things about Ontario provincial budgets is they show deficits small and shrinking but debt rising fast, a scam that would land a private sector accountant in jail that depends on moving a bunch of capital spending “off book” to hide the true size of the deficit.  (For instance, for 2016-17 they showed a $1.5 billion deficit and a $7.4 billion increase in debt.)

Balancing the actual rather than paper budget was thus going to require much bigger spending cuts and/or revenue increases than it appeared even before finance minister Charles Sousa recently pledged to plunge back into deficit.  “We are making a choice,” he claimed.  “We are committing to more support for social and developmental services, more supports for mental health and healthcare programs, more supports for students.”  But as the National Post editorialized, “The problem is that this government refuses to make choices.”  Will Doug Ford?

He’d better, because the problem is dynamic not static.  It must not be assumed that the budget is temporarily out of balance due to some external shock or sheer carelessness, so the only real problem is closing the gap between current revenue and current spending.

Revenue has been growing massively, from around $68 billion in 2002 to $133 billion in 2016.  So if you could get it to keep growing by, say, $4 billion a year, you’d… go bankrupt, even if interest rates don’t rise.  And while a better tax system, fewer stifling regulations and sensible privatization might enable you to get it up to $6 billion, we have learned, or should have, from Ontario, Alberta, Canada, every other province, Britain, the United States, France and so forth that, as Milton Friedman once put it, governments will spend whatever they take in plus whatever they can get away with.

It’s baked in, leading to a crushing tax burden with pernicious impacts on everything from entrepreneurship to demographics, because the big social programs necessarily reward precisely the behaviour they wish to discourage.  So the more we spend on them the more we need to spend, and no amount of revenue will satisfy their appetite.  Or, to be blunt, ours.

The problem is not insoluble.  We’ve seen voters, in Alberta under Ralph Klein and Mike Harris in Ontario, respond to calls to fix the mess with strong measures.  We’ve generally not seen the strong measures; even Klein, after a few years of restraint, sent spending through the roof.  But if Doug Ford doesn’t want to clean up the mess it’s unclear why he’s running.  And if he does, he has to understand how bad it is.

Tough-minded management, honesty and some fiddling at the margins won’t fix things.  Which is why his problem isn’t getting elected.  It’s governing a province whose finances are structurally out of control.

Photo Credit: CBC News

More from John Robson.    Follow John on Twitter at @thejohnrobson

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