Why Dalton Left

Its no coincidence that on the same day as the Ontario Fall Economic Statement was released, Dalton McGuinty suddenly announced his resignation as Premier of Ontario.  After the political acrimony and angst of dealing with teachers, doctors, civil servants and the opposition in a minority government situation, the outlook for Ontario’s 2012-13 deficit is 14.4 billion dollars as opposed to the 14.8 billion outlined in the 2012 Ontario spring budget.  The marginal benefit of all that effort was a mere 400 million dollar drop in the deficit.

Over the next two years, there is anticipated a deficit of 12.8 and 10.1 billion dollars respectively.  Between 2011-12 and 2014-15, revenues are expected to rise 11 percent – from 109.8 to 121.6 billion dollars – despite the sluggish economy.  Unfortunately, expenditures are going to rise from 122.7 to 130.3 billion – an increase of 6.2 percent.  While revenues are anticipated to finally start rising faster than spending, the gap between total revenues and expenditures is so great that one has to wonder if Ontario’s fiscal outlook truly remains on track despite the government’s assertions.  The Premier's resignation should deflect attention from the fact that from a net debt of 235.6 billion dollars in 2011-12, the net debt is expected to reach 293.3 billion dollars by 2014-15 and interest on the debt over the same period will rise from 10.1 to 12.3 billion dollars.  All that is required to turn this precarious situation into an unmitigated fiscal disaster is a spike in interest rates. 

Spending is still rising and the net debt is still growing and the once Teflon Premier is now coated with an assortment of sticky political concoctions ranging from gas power plants to air ambulances to electricity prices.  The Premier is going to buy some time for his colleagues by proroguing the legislature to spare an immediate confidence vote but that is about all he is going to do.  The well-intentioned if naïve McGuintyesque vision of Ontario as a jurisdiction in the forefront of socially and economically progressive spending on health, education and the environment has run out of money.  It is not as much fun governing when the spending has to be restrained.  The Premier of Ontario has led his people to the fiscal frontier in a wagon train of spending and simply deposited them in the uncharted economic wilderness.  This is what passes for leadership in 21^st century Canada.

Comments

[Sina Motamedi]

I'm no fan of McGuinty (no fan at all!), but I think you're being very unfair. Just a few things:

- interest rates are still at historic lows, even for the province. an unexpected spike might occur if there is a perceived risk of default, and this is truly a risk since Ontario can't print dollars. but even still, the existence of the Feds as a lender of last resort to the provinces will probably keep Ontario's interest rates in line (even if a little higher) with what the Feds pay.

- although there is a smaller structural deficit, the current large deficits are still the result of the recent recession. in particular, a struggling US economy has hammered Ontario's manufacturing base. these large deficits will become smaller when (if?) US and Ontario economy return to potential. if you believe this recovery will happen, then these larger deficits are temporary. that is a point that should be made.

- I wish you would talk a little more about revenue, and not only focus on spending. the increase in spending you refer to may be worth it to Ontarians, but if so they will have to pay for it. your complaints above are really about deficits, and there two sides to that.

Cheers!

[DR]

It's amazing how unwilling people are to admit that Ontario has no real deficit problem. It's obvious to anyone with a brain in their head that the deficit for this year is being exaggerated to pressure the unions. It most likely will come in at under 10 billion, and the following years certainly will.

[Bob Smith]

That's certainly a plausible explanation, certainly that had to have weighted on his mind, but I don't think that explains all of it.

I think there are two possible explanations here. One, he always planned on getting out earlier in this term. Had he won a majority in the 2011 election and resigned now, now one would say "boo" about it. He would have left his post the same way that Jean Chretien did, on top, after winning 3 majority governments. Of course, he didn't win a majority in 2011, but he may well have hopped that he could pick-up another seat in last month's bi-election in order to get that majority back. Then he could leave on top and bequeath a majority to his successor. He didn't, but by that point, he may have made up his mind to leave.

The other explanation, is that he doesn't seen any way to advance his agenda (whatever it may be). From his perspective, he's the leader of a minority governments with no allies. He can play the opposition parties off against one another, but only if he's willing to adopt the policies of whichever party is least unreasonable at any moment in time. In effect, he's lost control of his agenda. The opposition parties are using their collective majorities in the legislature and in committees to batter the Grits into oblivion (the contempt proceedings against Chris Bentley being one example, the ORange hearings being another).

His one chance to regain control of his agenda was that he'd win a seat in last month's by-elections, and he played hard to do it (his luring of Liz Witmer into retirement was brilliant, and he tried to take control of the agenda by laying into the teachers, albeit too late). But having failed at that (and I suspect he's been trying hard to peel off other defectors, to no avail), he's left as the leader of a tired party (they've been in office 9 years now) battered by the economy and the opposition, with little likelihood of surviving the next budget vote. You might say that, having led his party this far, he might as well take the next electoral beating like a man, rather than fopping it off on whichever poor slob replaces him. On the other hand, no one held it against Brian Mulroney when he consigned the good ship PC into the hands of Kim Campbell (in not dissimilar circumstances), rather than defend his record in 1993.

I'm not a big fan of Dalton McGuinty, but I respect him as a canny political operator (certainly, as a Tory, I'm glad we won't have to face him again), so I'm tempted to respect his decision.

[Bob Smith]

In fact, the more I think about it, the more this reads like a canny political decision.

Let's face it, the Liberal government isn't going to survive past next spring - both the Tories and NDP are going to be eager to finish the Liberals off before there's any chance of recovery.

So, what happens then? Well, the most likely outcome is that one of the NDP or the Tories form a government, probably a minority government (I like Tim Hudak, but I'll still not convinced he has what it takes to put the Tories over the top). Bad, if you're a Liberal, but not neccesarily too bad if you're the swing block in the legislature. Instead of letting the NDP or Tories dictate your policies, you start dictating theirs.

Ah, but that only works if you're not in the middle of a leadership race. Hard to credibly threaten to bring down the government if you don't have a leader (as the Liberals learned at their cost in 2006 and 2009). If McGuinty fights and loses the next election, he resigns (he'd want to), and the Liberals are essentially out of commission for 6-12 months (while the inexperienced Tories or NDP struggle to find their feet).

On the other hand, by resigning now and prorogue the legislature, he gives his party a chance to choose a leader before the next election. The new guy or girl will probably lose it, but Ontario politics being what they are, he/she'll probably avoid the Kim Campbell fate (since there aren't a couple of new parties honing in on Grit turf). They get some valuable election leadership experience (the absence of which played key roles in the defeat of previous opposition leader - Harris (90), McCleod (95), McGuinty (99), Eves (03), Tory (07), Hudak (11)) and they can hit the ground running on Day 1.

I don't know, that sounds plausible.

Then again, he may just be tossing himself on his sword to save Chris Bentley (in which case, he's nobler than I give him credit).

[Livio Di Matteo]

Bob:
Given how unmanageable the situation was becoming at Queen's Park, the decision to prorogue the legislature was definitely a clever move by both removing the opposition's stage to direct attacks at the government and buying time to pick a new leader.

[Tim]

I am thrilled to have a post up on this so quickly. A couple of comments. While my memory is a bit hazy I seem to remember that Kim Campbell was NOT the first choice of Brian Mulroney in the subsequent PC leadership election and Mulroney was behind the scenes trying to manovre Jean Charest into 24 Sussex(and in fact in the final days before the PC Leadership vote Charest was catching up to Campbell quite dramatically). Again this is just my hazy memory others Bob Smith?? probably remember all of this better. McGuinty by leaving as he has might have a bit more behind the scenes influence than Mulroney did in 1993 to put in place a favorite sucessor. (I think if Jean Charest had been PC Leader in 1993 Canadian political history afterwards would have been far different). One person I have heard mentioned along these lines is MPP Yasir Navqi whom some say is as Mulroney=McGuinty Charest=Navqi.

I think Hudak still has a very hard road to follow. He burned a lot capital with the public by opposing the HST while not opposing it and other populist hijinks(ala Randy Hillier and the landowners). I agree that one and done is not good strategy for developing party leaders but again it depends on what the Liberals put up as McGuinty's sucessor. There were actually a few commentators that suggested that McGuinty might have been able to cut a budget deal in the spring and stave off an election until 2014. I think McGuinty was smart enough not to listen to these commentators. I still have to think some more about how Hudak might be able to pull off an election victory.

[Bob Smith]

Tim,

I didn't mean to suggest that Campbell was Mulroney's annointed successor (I don't recall the dynamics of that race, but I wouldn't be surprised if you're right), just that she ended up as his successor.

On Hudak, I'm not sure the positions you mention neccesarily resulted in burned bridges since I doubt the voting public will remember them (they were certainly silly positions, though - the "I'm opposed to the HST, but won't repeal it" position, apart from being stupid policy, undermined his credibility).

I think Hudak's problem is that he never really defined who he is, or adopted a clear set of policies which distinguished him from McGuinty. As a result, the Liberals were able to define him on their terms (in much the same way the federal Tories defined equally aimless leaders in Dion and Iggy) while Hudak was unable to present him as a meaningful alternative to the Grits. Based on some of the position papers we've seen from Hudak over the past 6 months, I think it's safe to say that he won't be repeating that particular mistake (although he may be committing fresh new ones). For now, if there were an election in the spring, he'd probably be the favourite to win a minority, but not a sure thing.

[Mark]

McGuinty was going to resign early into this term. He did it. Considering the bullshit the opposition has been flinging at him and his party over the last month from the power plants (what's that PC/NDP? you would have cancelled the plants too?) to the dumps teachers keep trying to take on his head after all he's given them and I would say 'adios!' too. Minority governments with Conservatives sitting across the table don't work, just ask Paul Martin.

To suggest that it has anything to do with the FES truly overstates the importance of economics in political decision-making.

Also, while I agree Ontario spends too much, what is your solution right now? The budget was balanced before the recession hit and most other advanced countries are running deficits waaaaaay higher than 2.2%. The IMF has pointed out that austerity isn't really working anywhere and like it or not, the Libs were really trying to reign in spending growth. They at least had a plan while the PCs are telling us to expect corporate and income tax cuts that will pay for itself while the NDP is broadcasting platitudes.

[Bob Smith]

"what's that PC/NDP? you would have cancelled the plants too?"

Well there's no doubt the the NDP and Tories aren't all that principled on the point (although, Dalton McGuinty has little grounds for complaint on that front - given how thoroughly he shanked John Tory for proposingto provide public funding for religious schools, all while sending his own kids to publicly-funded religions schools), the key distinction is that they weren't the ones who contracted to build those powerplants in the first place. In any event, what's killing the Liberals now isn't the decision to cancel the power plants, but their apparent failure to fully disclose documents relating to it. As Nixon learned, it's not the crime, it's the cover-up that kills.

"Minority governments with Conservatives sitting across the table don't work, just ask Paul Martin."

Somewhat weird to blame that on the Tories, since Martin was ultimately brought down by all three opposition parties. It's also weird comparison since the Ontario Liberal's biggest foes right now are the NDP (who are chanelling the unions who used to back McGuinty), while the Tories are (ingraciously, to be sure) offering to back the Liberal's main piece of legislation (namely, wage freeze legislation), playing Jack Layton to McGuinty's Martin. The realities of both the Martin and McGuinty governments is that they were (are) minority governments at the end of a long-period of majority rule, with lots of hair sticking to them. Those are inherently unstable, regardless of who the opposition is.

I agree with you that the budget numbers probably don't have much to do with his resignation, if only because McGuinty hasn't seemed to care much about the budget numbers heretofore. They probably don't help, though.

[Livio Di Matteo]

Hi Mark:
Ontario's fiscal problems predate the recession which hit in 2009. For Ontario, the annual average growth rate of provincial government revenue from 2000 to 2011 is 4.6 percent while expenditures grew at a rate of 5.7 percent. If you recall, Ontario actually did raise taxes during the early part of the McGuinty era. Yet, if you look at the period 2003 (when Premier McGuinty took office) to 2011, over those nine years, the budget had a deficit for six out of the nine years. Let's take out 2009 to 2011. For these six years, there was a deficit half of the time. For the period 2003 to 2008, the budget surplus ranged from a high of 2.3 billion dollars to a low of -5.5 billion for an average of -1.7 billion dollars. The Ontario government has been increasing its spending faster than its revenues for a long time. The solution? Reduce spending, raise revenues or a combination thereof.

[Tim]

The Liberals, PC's, and NDP all supported closing the Lakeview Generating Station back in 2003 which is at least the start of this particular mess. The two plants were proposed on the basis of replacing the power Lakeview generated. The energy file in Ontario is a real mess and has been long before McGuinty arrived on the scene(i.e. Eves closing of the open market in electricity after Harris left). Unfortionately I am not sure any provincial government in Canada really has a handle on the file. The NB Liberals were brought down on electricity issues and at least some of the issues in BC Liberals have right now have to do with BC Hydro. I suppose at one extreme you have Alberta which did what Mike Harris wanted to do and went for full deregulation. However, at a political level the Alberta PC's have faced a lot of problems with electricity prices and transmission planning issues just like McGuinty. The thing the Alberta PC's have going for them is the opposition parties especially the Wildrose have a hard time ideologically try as the might advocating for something other than the current system(Wildrose can't argue for government intervention they can argue for private property rights vis a vis building new transmission lines). One out for the provinces collectively in my opinion would be to say that the power grid is essentially now a interprovincial and international work and undertaking and constitutionally it is now the federal governments problem. This is fairly unlikely but there is the example of Don Getty in Alberta privatising Alberta Government Telephones into Telus and turning regulation of telecommunication in AB over to the CRTC. In this insistance you already had a patchwork were Bell Canada and BCTel in their respective territories were regulated by the feds while elsewhere telephone service was controlled by provincial crown corporation subject to provincial regulation.

[Jacques René GIguère]

Tim: point of pedantry: while QC was once a patcwork of CRTC and provincially regulated entities, we never Crown phone companies. We somtimes marvelled how QC and AB were mirror image : provincially -owned hydro and private phone here and private electricity-public phone there.