The new federal budget could spell trouble for Toronto and Ontario
The governments of Canada’s biggest city and most populous province reacted with serenity to the new federal budget.
But should they have been quite so mild? Both Mr. Tory and Ontario Premier Doug Ford fashion themselves as fiscal conservatives. They profess to believe that governments should live within their means, avoid excessive debt and go easy on taxpayers. Mr. Ford has been a critic of government overspending since he was the right-hand man to his brother Rob at Toronto city hall, when the brothers promised to “stop the gravy train” and restore order to city finances.
Despite a flood of new tax revenue from a robust economy, Ottawa won’t come close to balancing its books until 2027. And even that modest goal is dubious. Just about every government budget includes a chart showing how deficits will decline step by steady step in the years ahead. It seldom goes that way in real life.
The tendency among junior governments is to welcome big spending from Ottawa, as long as lots of it is coming their way. That is short-sighted. A federal government with a debt of well over a trillion dollars – yes, that’s trillion with a T – is not a reliable long-term partner. As interest rates rise, the cost of carrying all that debt will rise with them, making it harder for Ottawa to come through on its commitments to provinces and cities – at least without a big increase in taxes.
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