Reality means running a deficit – Opinion/editorial – Reality means running a deficit
October 23, 2008

Given the latest global financial crisis, it should come as no surprise that Ontario is now facing a budgetary deficit for the current fiscal year. Premier Dalton McGuinty has prudently resisted calls to slash vital programs out of a misguided fear of red ink in tough times.

The province’s fiscal update yesterday put the deficit at $500 million. Saving $108 million, primarily through slowing down planned programs, helped keep the deficit in check. Far better to run a small deficit than make big cuts to core health and social programs that people rely on, or infrastructure spending that stimulates the economy.

In light of continued economic uncertainties, McGuinty’s cautious approach makes sense. If Ontario’s fiscal situation weakens next year, as many predict, he will have tougher choices to make.

“Ontarians are understandably anxious and concerned for their future,” Finance Minster Dwight Duncan said in delivering the fiscal update. That’s a statement of reality. For the sake of looking busy, or bold, it may have been easier to do what New Democrats and Progressive Conservatives suggest: spend our way out of the crisis or slash spending to avoid a deficit. Both alternatives are oversimplified in present circumstances.

The $108 million savings are largely symbolic in a $96 billion budget: trimming discretionary government expenses, deferring non-essential school capital projects and new ventures, and delaying the start date for 9,000 new nurses and 50 family health teams. But the government is tightening its belt where it can, while safeguarding core programs and maintaining investments that stimulate the economy.

But yesterday’s update also laid the groundwork for more bad news to come in next spring’s budget. Unless world markets undergo a miraculous recovery, the 2009-2010 deficit could be considerably above the $500 million budgeted for this fiscal year. That will be a much bigger test for the government.

Cities, hospitals, universities and schools were all put on notice yesterday that they shouldn’t plan for the budget increases they had expected next year. They are already crying poor, so it will be a bitter pill to swallow. Still it was heartening that the $135 million plan to provide dental services to low-income Ontarians, and other anti-poverty measures, weren’t among the programs targeted for savings.

As Prime Minister Stephen Harper takes stock of the economic headwinds facing the nation, he would do well to borrow a page from Ontario’s economic statement by shedding any ideological hang-ups about budget deficits.

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