Ontario Finance Minister Rod Phillips delivers an economic update Wednesday.
When Ontario Finance Minister Rod Phillips stood in Queen’s Park on Wednesday to deliver an economic update in place of the 2020 budget he had one job – make sure the cure for COVID-19 isn’t worse than the pandemic itself.
By cure I mean the response from an economic standpoint, not the actual vaccination health care professionals and scientists around the world are working on right now.
In presenting Ontario’s Action Plan the minister focused on three key areas – business, households and public services. Largely left out are the economic realties of Ontarians living without a paycheque right now, but in the Minister’s defence that is Ottawa’s priority.
The province’s number one responsibility and budget line item is health care and that is where the focus of the economic update or mini-budget needed to be.
There are additional programs – a lot of them actually – to support businesses, mainly in tax payment and fee deferrals to assist with a loss of income. There are also supports for households in the direct reduction of energy price per hour and others.
Still there are increases including a 1.5 per cent bump in education spending, but I will come back to that later.
Firstly, two things about the response from a health care perspective. The response comes from the best advice from health care professionals based on their needs at present and projected into the future response to the pandemic.
This includes equipment, opening of new facilities and testing and is based on projections from medical professionals. Most likely any number they are giving the government is padded and the government is padding the need even further.
Additionally, and Minister Phillips and Premier Doug Ford have mentioned this on a multitude of occasions, this is just the first step – the first response.
Simply put the Ontario Government presented the largest spending plan in its history as a first response. In fact imbedded in the response are funds to be accessed as a second step before the deficit balloons any more.
“We now predict that it will be $20.5 billion for 2020-2021,” said Minister Phillips when speaking of the province’s budget deficit.
Still, understanding the cure cannot do more damage than the emergency itself, he went on to say.
“Our plan calls for extraordinary prudence, including a $1 billion contingency fund for Covid-19, a standard contingency fund of $1.3 billion and an unprecedented reserve of $2.5 billion – the largest in Ontario’s history. These funds are ready to be allocated according to the evolution of the emergency of Covid-19.”
This kind of response is reminiscent to the responses of some governments to the economic crisis of 2008. Two governments in particular, Ottawa and British Columbia, both tore up balanced budget legislation to immediately respond to the emergency at hand.
In many ways the fact both of those jurisdictions had balanced budgets and were able to spend in a way to respond to the crisis saved Canada’s bacon. Present day Ontario and Ottawa are nowhere close to having balanced budgets.
The unprecedented spending coming out of both governments while essential, is going to have dramatic implications for years and years to come. The implications will only get worse as the governments create more debt in response to the crisis.
Don’t be surprised in fact that we see tax increases at every level in the years to come to tackle the financial impact. And believe it or not, even as much as I oppose them, I’ll admit tax increases may be unavoidable.
The entire fiscal update was based on the idea that Ontario’s economy is going to flat-line for the next year at least. Zero growth that is, and I think that is hopeful.
So thankfully in Ontario there is padding on the economic update allowing the province to spend more as it is needed. Hopefully, the deficit will hold at $20.5 billion, but the reality is it may not.
In Ottawa, I can’t image what it will come out at. At the very least we saw the Federal Liberals ability to tax and spend at will, removed from the federal package through the work of opposition parties and the media.
And to think it took an entire electorate to take away the Federal Liberal’s ability to tax and spend at will last October.
The Globe and Mail has done more for the country through the articles about SNC-Lavolin and the unlimited tax and spend caveats, than any news organization has done since the Washington Post and Watergate.
So there it is, more money than has ever been spent in the history of the province and the sober reality more and more may yet get spent. All this largesse to the rousing applause from all at Queen’s Park.
No wait, not quite all.
Immediately after Minister Phillips announced his update we heard from the official opposition.
It seems the 1.5 per cent increase for teachers won’t keep up with present inflation sitting is 1.8 per cent. Of course this is if inflation stays at 1.8 per cent with zero economic growth. I’m not an economist, but simple math tells me the inflation rate may go down, unless of course Ottawa starts printing money.
The next criticism is the lack of direct payments to Ontarians. I don’t know where the idea came that the government should go door-to-door handing out bags of money – I suspect socialism.
Again, the role of the province is health care first. Yes an argument can be made about prevention, but they are really just trying to deal with what is in their face.
The simple fact is the Ford Government is being as responsive as possible. Additionally, they understand more may still need to be done and they are tying to make sure money is available if that indeed ends up being the case.
The simple truth is this will likely get worse before it gets better.
This week was just the start.
Kelly Harris is Principal of Harris Public Affairs and former Membership Chair of the Public Affairs Association of Canada (Ontario Chapter). He is a regular commentator on Global News Radio 640 and columnist for Queen’s Park Briefing. He has spent the last decade working with Canada’s credit unions and served as Director on the Board of the Canadian Credit Union Association. An internationally published journalist, he has held senior positions in the Gordon Campbell Government in British Columbia and Tim Hudak’s opposition at Queen’s Park. An avid traveller, cyclist and father to Busher, an orange tabby, named after Toronto Maple Leaf Great Harvey “Busher” Jackson.