When she wakes up to debt collectors banging on her door, Premier Wynne will have a lot less to smile about.
(This column originally appeared in the Toronto Sun)
By: Candice Malcolm
Premier Kathleen Wynne has a lot to smile about these days. For the first time in her premiership, there is a positive narrative emerging about Ontario’s economic performance and a slew of good news stories coming from Queen’s Park.
For instance, after months of complaining, Wynne finally got her meeting with Prime Minister Stephen Harper; a meeting the premier called positive and productive. She was lucky to land it, given that she publicly criticized Harper following their previous one (saying he “smirked” as she explained her government’s proposed forced-pension scheme and payroll tax — can you blame him?)
She then used the PM as a punching bag during last year’s provincial election (reportedly in a now-confessed ploy to distract the media from discussing the gas plant scandal during the opening days of the campaign.)
Regardless of her antics, the premier was rewarded with some face time with the PM and a chance to plead for more federal cash.
The good news doesn’t end there. As oil prices plummet, a shift in fortunes means that Ontario is actually projected to lead the country in economic growth. Because of external global events, and despite bad fiscal management by the provincial government — with its track record of tax hikes, countless spending boondoggles, and record borrowing — Ontario’s diverse and resilient economy is fairing quite well.
In an interview with the Globe, Wynne explained “Ontario is ready to shield Canada from the economic tsunami caused by declining oil prices and a sinking dollar.” She wants Ontario’s economy to be a “buffer” against volatility. There’s no denying the current strength of Ontario’s economy, but the dropping price of oil is a coincidence, not something her government actually achieved.
Before Wynne swoops in with claims Ontario will come to the rescue of Canada, she mustn’t overlook a serious blind spot in the province’s fiscal outlook: Ontario’s ballooning public debt.
The government of Ontario owes $277 billion in net debt; more than double the figure when Liberal premier Dalton McGuinty was first elected. The Wynne government claims deficit spending was purposely engineered because borrowing is so cheap. It saddled the province in debt, the argument goes, to take advantage of low interest rates.
But despite those record low rates, the cost of our debt has become the third-largest expense in the budget. Taxpayers send $11 billion to Queen’s Park each year just to pay interest on that debt.
Much like the price of oil, interest rates fall outside the control of the provincial government. It has no say over when interest rates will spike through the roof. Canada’s top tax expert, Jack Mintz, calculates each additional point added to interest rates translates into another $3 billion in annual debt payments for Ontario.
The Wynne government should brace itself; benchmark interest rates are projected to rise in 2015 for the first time in five years. The U.S. Federal Reserve is expected to go first, followed by the Bank of Canada.
When the interest rate on your credit card goes up, if you owe money, then your monthly payments go up, too. Wynne will have to deal with a $300-billion balance on the government credit card.
And when she wakes up to debt collectors banging on her door, Premier Wynne will have a lot less to smile about.