Ideas and Impressions: Ontario debt – The alarm bells are ringing

Ideas and Impressions: Ontario debt – The alarm bells are ringing

By Jason Moscovitz

While it’s never easy to predict how a new calendar year is going to affect everyday people in everyday life, here is a pretty safe prediction: Residents of Ontario are in for an economic shock of gigantic proportions in 2019, and if not, why not should be the question.

We’ve all heard about Ontario’s massive and growing debt over the past 20 years, but it’s as if Ontario’s historically rich status made it immune from anything really bad happening. We still can’t seem to focus on the new reality: Ontario is a thinly tattered thread away from being something bordering on economic basket case status.

The factual data is staggering. As the projected provincial debt for the year balloons towards $350 billion, the acuteness of this burden is best measured by comparison. Ten years ago, the debt was $170 billion, less than half of what it is today. Twenty years ago, Ontario’s debt was $114 billion.

Remember Buffalo Bob? The last time Ontario’s debt was under $100 billion was almost 30 years ago when the often-ridiculed Bob Rae and his New Democratic Party were in power. Spending more on services than Ontario can responsibly afford has no political stripe. The NDP, the Liberals and even, to a degree, the “Common Sense Revolution” Progressive Conservative party of Mike Harris spent money they didn’t have to keep voters happy.

It is hard to imagine but Ontario’s debt is now bigger than the combined debts of Quebec, Alberta and British Columbia. No mystery why, in April 2018, Ontario’s international debt rating assessment fell from stable to negative. Time to wake up and smell the burned coffee.

Recently, there was a good time, the best time, to address these serious issues. Just eight months ago, there was an election but somehow the winning side, Doug Ford and his Progressive Conservatives, never seriously addressed the debt. Doing that would have led to a discussion about government cuts and who wants to ruin the victory party with any semblance of reality. The supposedly fiscally responsible Ford tiptoed around the hard truth: Ontario, the once proud province with lots of money, is running out of enough money to even dream of the day of turning the corner on the debt.

The alarm bells are ringing and they are going to get increasingly louder in 2019. There is a clear inevitability about spending cut shocks coming soon. We are already overtaxed. Cutting spending is the alternative. In 2012, for the same dire reasons, alarm bells rang in Quebec. There was no way Quebec could remain viable without curtailing spending. Today Quebec is a good-news economic story with a surplus budget and significantly reduced debt load. But if you deal with Quebec’s healthcare system, you’ll know it cost a lot in other ways for the province to no longer be overly indebted with an economy stuck in the mud.

A massive reorganization of Quebec’s healthcare system – a nice way of saying cutting healthcare spending – was not pretty. As Quebec hospitals got grimier with longer waiting lines, Quebecers didn’t thank those who cleaned up the finances. The Quebec Liberal government spending-cutters were resoundingly thrown out of office in 2018 – but their fiscal framework has not been changed by the new government.

No one in Quebec who needs medical care likes to hear this, but when you cut it all away (no pun intended) the bottom line is that Quebecers may now have a publicly funded healthcare system closer to what Quebec can actually afford. The Alice in Wonderland healthcare system is gone.

As 2019 begins, Alice is still alive and well in Ontario. It is so hard, even painful to contemplate, but logic tells us change is coming to Ontario too, and the old age baby boom demographics are awful. Ontario can’t afford the healthcare system it has and there is no new money, except more borrowed money, to cope with the onslaught of baby boomers who will be engaging the system more and more.

There is no good-case scenario. There will be no miracles. Ontario, once the Canadian land of milk and honey, is out of cash and healthcare costs a fortune. Facing reality is going to really hurt.

Alice in Wonderland is about to leave the building.