Fiscal hawks are an endangered species in Canada.
In Ottawa, the Trudeau government is betting — actually borrowing — that Canadians don’t care about government debt.
Most of the time that’s a pretty good bet.
Canadians don’t seem particularly perturbed about governments running perpetual deficits. Trudeau and company have barely blushed over breaking their promise to balance the budget (maybe that was a stretch goal) and forecasting deficits until 2050 or beyond.
Meanwhile, in Ontario, the Ford government is facing the bitter reality that comes after years of profligate spending.
For over a decade governments have increased the various services Ontarians receive (think full-day junior kindergarten) without recovering the cost of these programs from tax revenue.
In this fiscal wonderland, where increased public spending doesn’t require increased taxes, citizens get all sorts of free things. Having happily left the constraints of reality, people can hardly be blamed for wanting to keep the free stuff flowing.
But reality is not so easily discounted.
Struggling under what, by any reckoning, is an enormous public debt and a systemic budget deficit, the Ford government is staring at some grim economic realities.
Interest on that massive debt is now the fourth largest, and fastest growing, component of the budget.
The bond rating agencies that help determine the cost of financing debt are not big fans of never-ending deficits. If the Ontario government does not move quickly to reduce spending, the cost of borrowing will continue to escalate.
Worse, previous governments have racked up debt in relatively good times. Now in the later years of an economic growth cycle, the Ford government can’t count on an expanding economy to right the provinces balance sheet.
Huge interest payments, anxious lenders and a looming economic slowdown make a compelling case for rapid, even radical reductions in government spending.
But that’s not easy.
Most of the Ontario government budget is transferred to partners like municipalities, universities, schools and hospitals. None of those transfer partners are particularly eager to “partner” in cutting costs.
About 80% of the budget goes to wages, and most of those wages are subject to collective bargaining with public sector unions.
Last time I checked the unions were not interested in helping the government lower spending.
The Ontario government stands alone in any attempt to bring fiscal sanity to the budgeting process. The folks who spend the money are insatiable in their demands for more.
And a majority of people seem content with endless cycles of bigger budgets and more borrowing (see the reference to the Trudeau government).
Those are the political and fiscal realities that faced Ontario Finance Minister Vic Fedeli when he tabled the first Ford government budget.
Some fiscal hawks were not impressed, but Fedeli found the right balance to nudge the budget in the right direction.
He will take a full five years to restore the budget to balance. The debt and interest payments will continue to pile up over that time, leaving Ontario exposed to significant risks if the economy slips into recession.
But Fedeli is moving as fast as he can to bring the cost of government in line.
Turning the spending tap off takes time, especially if transfer partners and unions do everything possible to resist.
The spending constraints outlined in the budget will undoubtedly have the usual suspects squawking for more borrowed cash.
This fiscal hawk hopes the Ford government sticks to its plan. The squawkers have had their way long enough.