An NDP budget Andrea Horwath can be proud of

Posted on May 3, 2013 in Governance Debates – news/QueensPark – The real budget news? There is good news for the NDP. But, in other news, Ontario faces a grim economic outlook.
May 03 2013. By: Martin Regg Cohn

Premier Andrea Horwath and her popular finance minister, Michael Prue, defended their 2013-14 Ontario budget yesterday against criticism that its social justice measures are too costly.

Horwath boasted that her NDP government achieved its public goals of reduced auto insurance rates, higher welfare payments and new job-creation funding for youth — but balanced them against fiscal pressures to lower the deficit.

Not quite true. Prue is just the NDP’s finance critic. Horwath isn’t yet premier, merely party leader. And we didn’t quite elect an NDP government in 2011.

But here’s a political truth: New Democrats now wield the balance of power with the minority Liberal government. And to their credit, they are using their enviable leverage to extract impressive concessions from Premier Kathleen Wynne. As in any negotiation, however, the New Democrats are not about to perform high-fives in public.

That’s why Horwath hemmed and hawed and played hard to get Thursday, lest she be taken for granted in predictable post-budget posturing. We are merely going through the (budget) motions here.

The real news about Finance Minister Charles Sousa’s first budget? There is good news for the NDP. But, in other news, Ontario faces a grim economic outlook.

For all those reasons it’s hard to imagine the NDP defeating what is essentially an NDP budget that could easily have been written by Horwath herself, if not Jack Layton or Tommy Douglas. If she provokes a spring election, it would be on a pretext — for political, not fiscal reasons.

And the NDP leader would pay a price with the labour movement, which is proclaiming the budget’s progressive measures hard to resist. More likely, Horwath will keep us guessing for a few weeks more, forcing the Liberals to firm up the fine print.

But there is more fine print buried in the 314 pages of detailed budget papers, going well beyond the latest Liberal-NDP political machinations. And here, the news is decidedly mixed:

THE DEPRESSING NEWS is that we face continued economic paralysis in Ontario, as in the U.S. We were supposed to be in recovery mode by now, but the numbers tell a different tale: not just sluggish but lagging growth.

The budget forecasts an increase of only 1.5 per cent in economic activity for 2013. It was supposed to be 2.2 per cent for this year (as predicted in the previous budget). Instead, we now face our third consecutive decline in economic growth — from 3.2 per cent (2010) to 1.8 per cent (2011), 1.6 per cent (2012), and 1.5 per cent (now). That’s a lot of ones.

Unemployment remains stuck at 7.7 per cent and is predicted to remain high through next year. That’s why the economy remains Ontario’s biggest and most elusive challenge.

ONTARIO’S MASSIVE DEFICIT is the other bad news. Deficit reduction is the “single most important step” the government can take on the economy, Sousa asserts.

It will take another four years to wipe out the current $11.7 billion deficit — when the cumulative debt will top $300 billion. That’s why spending is being quietly cut by 4 per cent in most areas, with increases restricted to health, education, training and social services.

Virtual wage freezes extracted from most of the public sector have given Sousa some fiscal room. (The budget has also booked $1.1 billion in savings from teachers who can no longer bank their sick days for retirement payouts.) Will he use that short-term manoeuvring room to make any long-term headway?

THE TAKE-AWAYS FROM LABOUR aren’t matched by give-backs from the corporate sector. Corporate taxes will remain lower than anywhere in the U.S., while government subsidies to private firms remain virtually untouched. Economist Don Drummond advised the government last year that low corporate taxes obviated the need for outdated corporate subsidies. The premier’s Jobs and Prosperity Council also called for streamlining those subsidies.

Refundable tax credits (cold cash) for corporations have more than tripled over the past decade, from $270 million to $940 million. And what are the Liberals doing about this inordinate increase? Appointing yet another panel — the third in a year — that will report back in six months.

ON PENSION REFORM, Ontario is giving up ground. A year ago, angered by Ottawa’s refusal to reform the Canada Pension Plan, former treasurer Dwight Duncan boldly retaliated: he blocked a bogus counter-proposal from the federal government for so-called Pooled Registered Pension Plans, dismissing them as glorified RRSPs that would resolve little. Duncan vowed to hold Ottawa’s pet project hostage until it co-operated on CPP reform.

But since taking over as finance minister, Sousa has acquiesced to pressure from Ottawa and Bay St. (which salivates over lucrative fees), announcing in his first budget that he will no longer stand in the way of these pointless PRPPs. Sousa’s surprising concession suggests Ontario is giving up the good fight.

FOR NOW, THE BIG FIGHT IS AT QUEEN’S PARK. Whether the budget’s war of attrition morphs into a spring election battle, or dissolves into a phony war, depends on Horwath’s reading of the fine print. But beyond politics, economics looms as Ontario’s bigger challenge. And no amount of post-budget manoeuvring by the three parties will resolve our larger problems anytime soon.

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