Ontario's budget forecasts $19B deficit, even with little COVID-19 spending
PC government plans to spill $5.4B more red ink than during the height of the pandemic
The COVID-19 pandemic brought in some unprecedented measures, from lockdowns, to mass vaccination programs to deep deficit spending.
Today, society is well on its way to emerging from the pandemic. The economy is on the rebound, and people are getting back to work.
Why, then, is Ontario's Progressive Conservative government planning to run a deficit far higher than it did during the two years of the pandemic, a period of extraordinary government spending and stimulus funding?
The 2022-2023 budget released Thursday is forecasting a deficit of $19 billion (excluding $1 billion of reserve funding). Consider that in 2020-21 — a fiscal period that was entirely entrenched in the pandemic — the deficit was $16.4 billion. This current year, it's expected to come in at $13.5 billion.
To put it another way, the government plans to spill more red ink — $2.6 billion worth, to be exact — that it did at the height of the pandemic.
Not usual time for deficit spending
When Doug Ford and his Progress Conservatives were running to form government back in 2018, they talked tough about their opponent's poor fiscal management.
"Ontario doesn't have a revenue problem. It has a spending problem," the PCs' last campaign documents say.
The PCs slammed the deficits run by the former Liberal government. Since arriving at Queen's Park, the Conservatives have been singing a different deficit tune.
During their first year in office, they posted a $7.4 billion deficit for the 2018-2019 year, far higher than the $3.7 billion deficits that the Liberals left behind. The following year, the PCs posted an even larger deficit of $8.7 billion.
The next two years of deficits were due to pandemic spending — and fair enough. In the first year of the pandemic, the government ran a deficit of $16.4 billion; the second year, the deficit actually decreased to $13.5 billion.
Now, the Conservatives are looking to deepen the deficit again, to $18.9 billion — at least on paper.
Still, it's an odd time to be promising increasing deficit spending, which is generally used to stimulate the economy. But these days, our economy is plenty stimulated, with the inflation rate running around six per cent, and the unemployment rate at a record low.
These are not the market conditions during which economists would usually recommend deepening the deficit.
- Canada's inflation rate now at 30-year high of 5.7%
- Canada's unemployment rate dropped to lowest level on record in March to 5.3%
The timing is also odd given the pandemic. Many people understood why governments took on extraordinary spending during the COVID-19 pandemic.
Pandemic 'exposed ... lack of investment': finance minister
Ontario Finance Minister Peter Bethlenfalvy said Thursday that the pandemic "has exposed some of the lack of investment" by previous governments.
"I believe that we've found the right balance, to invest in Ontario, to build things, get good jobs, support workers and rebuild this economy in the context of a fiscally responsible plan," he said.
That is not how the federal government has reacted to the end of the pandemic.
After record deficit-spending in the past two years, the federal Liberals plan to cut the deficit in half to $52 billion this year. And they plan on spending less than they have in the past two years.
The Ontario provincial government is taking a vastly different approach. It's looking at increasing program spending over what's it's shelled out in the past two years. In 2020-2021, the PCs spent $169 billion on programs. Next year, they're looking to spend $185 billion, a nine per cent increase over the first year of the pandemic.
If you ignore COVID-19 spending, the increase in expenditures is even more pronounced. Two years ago, the provincial government spent $150 billion, excluding time-limited COVID-19 funding. For the coming year, it plans on spending $178 billion — 18 per cent more.
Bethlenfalvy, acknowledging that his government's budget is more a re-election platform than a firm fiscal plan, wouldn't confirm that if his party is re-elected, this budget would be the one tabled after they return to Queen's Park.
So perhaps a re-elected Progressive Conservative government would indeed shrink its deficit spending after June 2. If that's the case, it also raises questions about what other numbers might change from the budget tabled Thursday.