I refused to play the Conservatives’ fiscal game. So should Wynne – by Bob Rae (Globe and Mail – July 17, 2014)

The Globe and Mail is Canada’s national newspaper with the second largest broadsheet circulation in the country. It has enormous influence on Canada’s political and business elite.

Bob Rae was premier of Ontario from 1990 to 1995

Critics on the right are now claiming that Kathleen Wynne’s Ontario government is on the road to fiscal rack and ruin – that it could, in one commentator’s words, push Ontario “back to the Bob Rae years.” That provokes these comments.

One would have thought that the experience of the last few years would have made the right wing narrative look pretty goofy but, no, these guys just can’t help themselves. In 1990, interest rates were kept deliberately high, the dollar rose predictably, U.S. companies shut factories in Canada as the newly minted free-trade agreement encouraged rationalization, and a bloated real estate market plummeted. All in one go, all at one time.

The shock to the Ontario economy was sharper and more severe than in 2009, and, as a direct result, public spending increased and revenues fell. This is what happened to Prime Minister Stephen Harper and Ontario premier Dalton McGuinty in 2009. It would have happened in Ontario even if Mike Harris had been elected in 1990. Remember that Tory premiers Bill Davis and Frank Miller ran deficits after the 1980 recession as well.

So, to compare 1990-91 with 2014-15 is to ignore where we were in the cycle, and what governments since the 1930’s have done when faced with such a drastic drop in prosperity.

What many commenters gloss over is that the government I led maintained public investment, saved tens of thousands of jobs and, yes, made difficult decisions on expenditure restraint – for the simple reason that most of what any provincial government spends goes to wages – and that we chose to restrain take-home pay instead of cutting jobs and services.

We had a transit plan, which the Conservatives cancelled. We would have had a train to the airport and a subway to York University, as well as an integrated GO and TTC a full fifteen years ago, if underground tunnels had not been filled in with concrete. We had a housing plan, which the Conservatives cancelled, and affordable housing has languished terribly since 1995. We did not, admittedly, slash income-support programs, or fire thousands of nurses or teachers. Those events were to come.

Ontario had the fastest rate of growth in the G-7 after 1993, and as corporate profits and incomes improved, the tax base strengthened after 1995, when the Conservatives took over. They succeeded in temporarily balancing the books by selling the 407 for far less than it was really worth. But Ontario fell back into deficit – with low unemployment and reasonable growth before the Conservatives were defeated by Mr. McGuinty in 2003.

The right has filled the airwaves about Ontario being “bankrupt” then and now. This is arrant nonsense and propaganda. Ontario always has, and always will, pay its bills. The debt and deficit bogeymen were used to justify decisions – like the subway and housing cancellations – that were shortsighted and for which we are still paying a heavy, and completely unnecessary, price.

The challenges facing the Wynne government are different. Interest rates are low, but the debt is far higher. It is more than triple what is was in 1995. More than $200-billion has been added to the provincial debt in the last twenty years.

For the rest of this column, click here: http://www.theglobeandmail.com/globe-debate/i-refused-to-play-the-conservatives-fiscal-game-so-should-wynne/article19653699/#dashboard/follows/