MORRISBURG — Ontari-owe. My friend and former colleague, John Bolton was the person who I believe coined the phrase Ontari-owe, just after Liberal leader Dalton McGuinty won his governments re-election in 2011. Ontari-owe is a great name for this province, which has become the Greece or Detroit of Canada, a financial basket case.
Standard & Poor’s published a press release on Monday titled, “Province Of Ontario Downgraded To ‘A+’ From ‘AA-‘ On Very High Debt Burden And Very Weak Budgetary Performance”. Downgraded. Not to conjure up Basil Fawlty, but what does it all mean?
You don’t have to have a degree in economics to understand that going from AA- to A+ can’t be a good thing. You also don’t have to have a degree in economics to understand that the words “Very High Debt Burden” and “Very Weak Budgetary Performance” are not good words to have in the same sentence. Just as it does not take an economics major to understand that a negative report from Standard & Poor’s, one of the big three bond-rating agencies which evaluate the credit-worthiness of companies and governments, is not good. In fact it is akin to having someone cut up a credit card because you maxed out the gold card.
What this downgrade further reinforces is that Ontario is still on the path to insolvency; a fiscal insolvency that the government leadership is either woefully ignorant of, or blissfully optimistic that it will balance itself.
The news media will carry-on about the S&P downgrade, and you will likely see in the Tuesday and Wednesday news cycles interviews with Premier Kathleen Wynne and Finance Minister Charles Souza, both downplaying the downgrade. They have to do that to try to stem the tide of panic in the backrooms and corridors of power at Queen’s Park.
Lower bond ratings means the cost of borrowing money becomes more expensive. Every time the government hits the gold card to pay for something, the interest and borrowing costs will now be much higher. With economic growth in Ontario, and the country, stagnating it is difficult to see how the budget will balance themselves.
Our leader’s plan to fix this is to launch a bloated pension scheme, create new taxes revenue tools, and launch a large-scale government transit initiatives that we have no money for. Our government is a failure, and our economy and debt load proves this.
Once S&P downgrades, the other two bond rating agencies will do so as well, which will mean that even more of the money the province has to borrow just to service the debt, will cost more. This cycle will keep repeating itself until the province reaches the Junk Bond market, and it’s not that far off in the end. This, the former economic engine of the country.
The opening verse of the Expo ’67 song from the Ontario Pavilion was “Give us a place to stand; And a place to grow; And call this land Ontario.” If the song was updated to modern times, it might be sung like this, “Give us leaders who fail; And let debt to grow; And call this land Ontari-owe.”