Tag Archives: Ontario

The Ontario Problem

My friend Blazing Catfur was pessimistic about yesterday’s Ontario elections. Too many government workers and low information immigrant voters combined with HUDAK’s lack of appeal added up to a Liberal victory. I haven’t lived in Ontario for 30 years but that made sense to me. I hoped for a better outcome but it was not to be.

I don’t think the outcome is good for Ontario but that is their business. For the rest of Canada the election of a full blooded tax and spend Liberal is potentially a Godsend.

The creaking engine of Canadian Confederation, transfer payments, is sixty years old. For a long time they were justified as necessary to keep Quebec in Canada. A priority for Ontario if not the West. We largely ignored the issue because Ontario was the largest contributor to the scheme.

Now Ontario is a have not province in its own right and likely to become all the more so under the Liberals. As Whynn pays off her public service union buddies and expands the Ontario government she is no longer doing it from a position of economic strength.

Ontario’s fiscal recklessness is being paid for by the rest of Canada. That will not last long unless there are some signs Ontario is willing to put its house in order.

The election of profligate Liberals is Ontario’s priviledge; but there is no reason why the rest of Canada should continue to pay Ontario’s bar tab.

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To My Friends in Ontario

Tomorrow you are going to the polls. The choices are, to be kind, unappealing. But the analysis could not be clearer.

Two parties, the Liberals and the NDP, propose to continue as Ontario has been going. One, the Conservatives, to a limited extent, has realized “business as usual” will not work.

Years of Liberal mis-government have turned Ontario into a have not province with an unsustainable public debt. While the world economic events which have hollowed out Ontario manufacturing were largely beyond the Liberals’ control, the idiocies of wind power, gas plant cancellations and public sector growth and expense are the Liberals’ fault. They could, and should, have said no. They didn’t and now Ontario is in the soup.

The NDP, having supported Liberal minority government, shares some of the blame and certainly has been a negative policy influence as it agitated for more government spending and more public “servants”. However, ultimately the NDP’s culpability is dwarfed by the Liberals’. Supporting a minority government does not give you the ability to actually make policy.

The Conservative Party has, at least, noticed that there is a problem. Ontario cannot afford the government it has. Worse, the tax costs of trying to support that government are directly hurting the Ontario economy.

“Never change a winning game, always change a losing one.” is sports advice Ontario voters need to take to heart.

Economists point out that Ontario’s per capita debt is larger than California’s. That debt is being created to pay for unsustainable government services. Services which are not contributing to the productivity of the Ontario economy. To pay for those services and the debt, Ontario taxes will have to rise. And, so long as the government is kept at its current levels, there will be no end to those tax rises. At some point the economically productive will begin to leave the province. Viable businesses will relocate.

There is no particular reason why Canada’s banks, investment firms, insurance companies, innovators and ever leaner manufacturers need to be in Ontario. The Bank of Montreal moved its head office to Toronto years ago, and the Bank of Nova Scotia long before that. There is no reason why they cannot move again as it becomes more and more difficult to attract world class talent to a high tax environment.

The situation is made all the more dire because of the impending collapse of the one industry which has been booming (at least in Toronto) over the last decade: real estate. You don’t have to be Garth Turner to understand that a significant correction is in the offing for the real estate market. A correction which will have a direct impact on the construction industry as well as the banks, lawyers, designers, home appliance salesmen and real estate agents. And, as real estate slows down, the government’s revenues from transfer taxes will take a hit.

The reason real estate will slow is also bad news for a heavily indebted province: interest rates will almost certainly rise and with them the cost of servicing Ontario’s debt.

You don’t have to especially like the Conservatives or their leader to realize that they are the only party which shows even a hint of acknowledging that Ontario’s business cannot continue as usual. While I don’t think the Conservatives are nearly realistic enough, they show signs of comprehension.

For most of Canada’s history Ontario has been effortlessly and annoyingly dominant. Having a big population, most of the economy and a lot of the money meant that Ontario was the key province in Confederation. Its economic weight was, to a degree, offset with Quebec’s political heft.

The world has shifted. Quebec has elected a government of apparent economic realists. The West has pulled even economically on a per capita basis and, unlike Ontario, the West has growing economies and fiscally prudent leadership.

Tomorrow, when my friends in Ontario vote, they are making a choice between a gradual and unstoppable descent into bankruptcy on the order of some of the rust belt US states or an attempt to stop and reverse the rot.

Robert Heinlein once pointed out that you may not have any political party you want to vote for, but you almost certainly have a party you must vote against. In Ontario voting against the Liberals is critical and the only way to do that is voting for the Conservatives.

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