Transcript: Can Ontario Afford Its Economic Promises? | Nov 09, 2020

Steve sits in the studio. He's slim, clean-shaven, in his fifties, with short curly brown hair. He's wearing a blue suit, checkered shirt, blue tie, and a red poppy pin.

A caption on screen reads "Can Ontario afford its economic promises? @spaikin, @theagenda."

Steve says LAST WEEK, ON BUDGET NIGHT, WE HEARD FROM THE FINANCE MINISTER, THE OPPOSITION CRITICS, AND THE WORLD OF SMALL BUSINESS. TONIGHT, WE FOLLOW UP BY HEARING FROM THREE LONG-TIME POLICY ANALYSTS. WHAT'S THEIR TAKE ON A BUDGET THAT WILL SPEND MORE MONEY AND GO DEEPER INTO DEFICIT THAN ANY PREVIOUS BUDGET... AND BY A MILE. IS IT ENOUGH TO SAVE THE ECONOMY, AND WILL IT BE WORTH IT WHEN THOSE BILLS COME DUE? LET'S ASK: IN BURLINGTON, ONTARIO: CRAIG ALEXANDER, CHIEF ECONOMIST AND EXECUTIVE ADVISOR AT DELOITTE...

Craig is in his fifties, clean-shaven and bald. He's wearing glasses, a gray suit and shirt, a burgundy plaid tie and a red poppy pin.

Steve continues IN FROM THE PROVINCIAL CAPITAL: IN LITTLE ITALY: SHEILA BLOCK, SENIOR ECONOMIST, CANADIAN CENTRE FOR POLICY ALTERNATIVES...

Sheila is in her fifties, with short white hair. She's wearing glasses and a striped gray blouse.

Steve continues AND IN RIVERDALE: DREW FAGAN, A FORMER DEPUTY MINISTER IN THE ONTARIO GOVERNMENT, NOW PROFESSOR, AT THE MUNK SCHOOL OF GLOBAL AFFAIRS AND PUBLIC POLICY AT THE U OF T.

Drew is in his late forties, clean-shaven, with short gray hair. He's wearing a white shirt and a purple sweater vest.

Steve continues IT'S GREAT TO HAVE YOU THREE ON OUR AIRWAVES AGAIN. LET US... I WAS JUST ABOUT TO SAY, IN CASE YOU MISSED THE FINANCE MINISTER'S SPEECH, AND I'M SURE YOU THREE DID NOT, BUT IN CASE SOME OF OUR VIEWERS DID, SHELDON, IF YOU WOULD?

A clip plays on screen with the caption "November 6, 2020."

In the clip, Finance Minister Rod Phillips rises inside the legislature during and speaks.

A caption appears on screen. It reads "Honourable Rod Phillips. PC. Minister of Finance."

He says BUDGET PRUDENTLY DURING GOOD TIMES IN ORDER TO HAVE FLEXIBILITY IN TOUGH TIMES. UNFORTUNATELY, THAT DIDN'T ALWAYS HAPPEN IN ONTARIO. BUT THE GOOD NEWS IS THAT OUR GOVERNMENT MADE SIGNIFICANT PROGRESS TOWARDS A SUSTAINABLE FINANCIAL PATH BEFORE COVID-19. THAT PROGRESS ENABLES OUR 45 BILLION DOLLAR RESPONSE AS OUTLINED IN TODAY'S BUDGET. AS THE PEOPLE UNDERSTAND, THE CURRENT LEVEL OF GOVERNMENT SPENDING IS NEITHER SUSTAINABLE NOR DESIRABLE IN THE LONG RUN, BUT AS A GLOBAL PANDEMIC CONTINUES AROUND THE WORLD, IT IS ABSOLUTELY NECESSARY TODAY. MR. SPEAKER, OUR DEFICIT IS PROJECTED TO BE 38.5 BILLION DOLLARS, UNCHANGED FROM WHAT I REPORTED IN THE FIRST QUARTER FINANCES THIS SUMMER. WE ARE PROJECTING THAT THE DEFICIT WILL DECREASE TO 33.1 BILLION DOLLARS NEXT YEAR AND 28.2 BILLION DOLLARS THE FOLLOWING YEAR.

The clip ends.

Steve says NOW, I HAVE HEARD IT SAID IN POLITICS THAT THE PUBLIC CAN GET ITS HEAD AROUND THE NOTION OF CHARGING TAXPAYERS 16 BUCKS FOR A GLASS OF ORANGE JUICE, BUT 38.5 BILLION DOLLARS IS TOO BIG A NUMBER AND TOO INCOMPREHENSIBLE FOR ANYBODY TO UNDERSTAND. THAT'S WHERE WE BRING YOU THREE IN. HOW SHOULD WE REACT TO A NUMBER THAT BIG?

The caption changes to "A huge deficit."

Sheila says WE HAVE TO PUT THAT NUMBER IN CONTEXT. WE ARE FACING A PUBLIC HEALTH CRISIS THAT WE REALLY HAVEN'T SEEN IN THIS COUNTRY FOR AT LEAST 100 YEARS. WE ARE FACING AN ECONOMIC CRISIS THAT IS A RESULT OF THAT PUBLIC HEALTH CRISIS. AS A RESULT, THE DEMANDS ON GOVERNMENT ARE MUCH LARGER AND NEEDED THAN THEY HAVE BEEN SINCE THAT TIME. AND SO I THINK THAT'S THE KIND OF CONTEXT THAT WE MADE TO TAKE THIS INTO, AND A LOT OF OUR METRICS WILL BE HARD-PRESSED TO COMPARE THEM TO. SO I ABSOLUTELY THINK WE HAVE TO TAKE IT INTO THAT BIGGER CONTEXT.

Steve says CRAIG, WHAT'S YOUR VIEW ON IT?

Craig says THE REASON WE RUN PRUDENT FISCAL POLICY DURING GOOD ECONOMIC TIMES IS SO YOU CAN ACTUALLY AFFORD TO RESPOND TO A CRISIS. AND I THINK THE REAL CHALLENGE THAT ONTARIO HAS HAD IS THAT HEADING INTO THE PANDEMIC, ITS FINANCES WERE EXTRAORDINARILY WEAK AND AS A CONSEQUENCE, THIS HAS CONSTRAINED THEIR ABILITY TO RESPOND. BUT NEVERTHELESS, THE GOVERNMENT DID ABSOLUTELY THE RIGHT THING. IT DID A 180-DEGREE SHIFT FROM BEING A GOVERNMENT THAT WAS AIMING TO BALANCE THE BOOKS IN 2023 TO A GOVERNMENT THAT WAS WILLING TO ACCEPT RECORD DEFICITS FOR SEVERAL YEARS, AND SO IF YOU THINK ABOUT IT, PRE-PANDEMIC, THE GOVERNMENT WAS RUNNING A DEFICIT OF 9 BILLION DOLLARS OR ATTRACTING A 9 BILLION DOLLAR DEFICIT THIS YEAR. IT'S NOW GOING TO BE 38.5 BILLION DOLLARS. BUT THAT'S THE PRICE TAG FOR FIGHTING THE PANDEMIC, AND SO IT'S COMPLETELY UNDERSTANDABLE, IT'S REASONABLE, AND WHILE THE GOVERNMENT'S FINANCES ARE UNSUSTAINABLE, IT'S SOMETHING THAT WE HAVE TO ACCEPT. SO IT'S REALLY GOING TO BE A CHALLENGE IN TERMS OF THE PATH FORWARD, BUT THE GOVERNMENT IS TRYING TO BE PRAGMATIC IN HOW BIG THE DEFICIT GETS AND IN ADDRESSING THE PANDEMIC.

Steve says DREW, IN MORE NORMAL TIMES, THIS KIND OF NUMBER WOULD BE UNTHINKABLE. SO MY QUESTION TO YOU IS, WITH YOUR CONVERSATIONS WITH THOSE IN THE PUBLIC SECTOR OR IN GOVERNMENT OR IN ACADEMIA OR THE WORLD OF ECONOMICS, DO YOU FIND ANYBODY TODAY WHO IS SAYING, OH, MY GOODNESS, 38.5 BILLION DOLLARS, THAT NUMBER IS OUTRAGEOUS AND UNACCEPTABLE?

The caption changes to "Drew Fagan. Munk School of Global Affairs and Public Policy."

Drew says THERE IS CONCERN AND IT'S A RECORD DEFICIT AND HIGH COMPARED TO PREVIOUS CRISES. IT'S TWICE THE DEFICIT FROM THE FINANCIAL CRISIS OF 2009-10. IT TOOK YEARS FOR THAT DEFICIT TO DECLINE. WE NEVER GOT INTO THE BLACK. WE GOT TO THE EDGE A FEW YEARS AGO. PART OF THE CHALLENGE IS THE SIZE OF THE DEFICIT, 38 BILLION DOLLARS, AND THE EXPECTATION THAT IT WILL TAKE YEARS TO GET THAT DEFICIT BACK UNDER CONTROL. AS CRAIG NOTED, THE GOVERNMENT, THIS NEW GOVERNMENT, HAD A PLAN TO BALANCE THE BUDGET BY 2023-24. NOW THAT'S OUT THE WINDOW. IT'S LIKELY TO TAKE A FEW MORE YEARS. AND THAT IS CHALLENGING IN THE MEDIUM TERM, AS MINISTER PHILLIPS ADMITTED.

Steve says SHEILA, IT'S GOING TO TAKE PROBABLY MORE THAN A FEW YEARS TO GET BACK TO BALANCE. THERE'S NO PLAN TO GET BACK TO BALANCE IN THIS BUDGET. THE GOVERNMENT I GUESS INTENDS TO PASS A LAW GIVING THEM EXEMPTION FROM THE LAW THAT SHOWS A PATH BACK TO BALANCE. DO YOU FIND THAT PROBLEMATIC?

The caption changes to "Sheila Block. Canadian Centre for Policy Alternatives."

Sheila says I THINK WHAT I MOSTLY FIND PROBLEMATIC IS IF IT'S A GOVERNMENT THAT IS CONCERNED ABOUT GETTING BACK TO BALANCE, WHY DID THEY BAKE A BILLION DOLLARS DOLLAR A YEAR TAX CUT INTO THIS BUDGET? SO I THINK ABSOLUTELY I AGREE WITH CRAIG THAT GOVERNMENT NEEDED TO STEP UP. IT DID STEP UP. WE'RE NOT CERTAIN WHETHER IT STEPPED UP IN THE RIGHT WAYS OR SUFFICIENTLY. BUT IF YOU WANT TO GET BACK TO BALANCE, YOU HAVE TO LOOK AT BOTH SIDES OF THE LEDGER. AND THIS BUDGET INCLUDED PERMANENT TAX CUTS AND TEMPORARY SPENDING MEASURES.

Steve says CRAIG, ARE YOU AS OFFENDED AS SHEILA WITH THOSE BILLION DOLLARS' WORTH OF TAX CUTS?

The caption changes to "Craig Alexander. Deloitte."

Craig says I THINK THE TAX CUTS THAT ARE IN THE BUDGET ARE BASICALLY PART OF THE EFFORT TO HELP SUPPORT BUSINESSES DURING THESE DIFFICULT TIMES, AND, YOU KNOW, AS IS THE ELECTRICITY SUBSIDY THAT WAS ALSO PROVIDED IN THE BUDGET. I MEAN, IF WE THINK ABOUT THE IMPACT OF THE PANDEMIC ON BUSINESSES, THE FEDERAL GOVERNMENT IS DOING A LOT OF THE HEAVY LIFTING THROUGH THINGS LIKE THE WAGE SUBSIDY FOR BUSINESSES THAT HAVE HAD A LARGE DROP IN THEIR REVENUES. THE FEDERAL GOVERNMENT IS ALSO... HAS ALSO EXTENDED ACCESS TO CREDIT THROUGH BUSINESS DEVELOPMENT COMPANY AND EXPORT DEVELOPMENT CANADA. SO THERE IS A LOT OF FEDERAL EFFORTS TO HELP SUPPORT BUSINESS. SO I REALLY THINK WHAT THE GOVERNMENT DID WAS SORT OF LOOK AT, WHAT COULD THEY DO TO REDUCE THE COST OF... THE COST ON BUSINESS IN THE NEAR TERM. SO THOSE TAX CUTS ARE PART OF THAT EFFORT.

Steve says DREW, DO YOU WANT TO BREAK THE TIE HERE?

The caption changes to "Drew Fagan. University of Toronto."

Drew says YEAH. WELL, A BILLION DOLLARS IS NOT INSIGNIFICANT, BUT, YOU KNOW, IT'S A BIG NUMBER, BUT IT'S ON A BASE OF 150 BILLION DOLLARS WITH REGARD TO THE SIZE OF THE SPENDING GENERALLY OR A LITTLE BIT MORE. SO BY AND LARGE WHAT THEY'VE DONE HERE IS INCREASE SPENDING TO A GREAT EXTENT. EVEN, YOU KNOW, SOME MONTHS AGO THEY WERE PLANNING FOR AN INCREASE IN 20 BILLION DOLLARS IN SPENDING. NOW IT'S BIGGER STILL. THE DEFICIT HASN'T CHANGED FROM A FEW MONTHS AGO, BUT IT'S SUBSTANTIAL, RIGHT? SO WHETHER THEY GOT THE BALANCE RIGHT, IT'S LARGELY BEEN ON THE SPENDING SIDE. THERE'S ANOTHER POINT TO MAKE I THINK WITH REGARD TO THE DEFICIT, AND THAT IS WE REALLY NEED TO THINK OF THE FEDERAL DEFICIT AND THE PROVINCIAL DEFICIT TOGETHER, AND WE'RE NOW, IN TERMS OF DEBT AS A SHARE OF GDP, AT ABOUT 100 percent, THE DEBT OF THE FEDERAL GOVERNMENT AND THE PROVINCIAL GOVERNMENTS ROUGHLY ABOUT THE SIZE OF THE ECONOMY. THAT'S A BIG NUMBER. AND IT'S NOT THAT WE CAN'T HANDLE IT NOW, BUT IF THERE, AS YOU NOTED EARLIER, A TREND IN THE MEDIUM TERM WITH REGARD TO A CONTINUING AND TAKING YEARS TO GET IT TOWARDS ZERO, THAT COULD POSE A REAL CHALLENGE.

The caption changes to "Watch us anytime: tvo.org, Twitter: @theagenda, Facebook Live, YouTube."

Steve says THAT'S A GOOD POINT. LET ME PICK UP ON THAT. AS DREW CORRECTLY POINTS OUT, THERE'S A NUMBER OF DIFFERENT WAYS TO MEASURE A SIZE OF A DEFICIT AND-OR DEBT, ONE IS THE PURE NUMBER, 38.5 IS A BIG NUMBER, THE OTHER IS AS A PERCENTAGE OF THE GROSS DOMESTIC PRODUCT AS A PERCENTAGE OF THE VALUE OF THE ECONOMY. AND ON THAT SCALE...

A slate appears on screen, with the title "Budget 2020. Debt as percent of Ontario GDP."

Steve reads data from the slate and says
THE DEBT-TO-GDP RATIO IS GOING FROM 39.7 percent, WHICH IS WHERE IT IS RIGHT NOW... THIS IS ONTARIO ONLY... TO 49.6 percent. THERE, WE'VE GOT THE CHART UP RIGHT NOW, 39.7 percent TODAY, GOING WITHIN A FEW YEARS UP TO ALMOST 50 percent. AND I GUESS I WANT TO KNOW WHETHER OR NOT THAT RINGS ALARM BELLS FOR ANY OF YOU. SHEILA, HOW ABOUT THAT?

Sheila says SO PERHAPS UNSURPRISINGLY IT DOESN'T RING TOO MANY ALARM BELLS FOR ME. AND THERE ARE A COUPLE OF REASONS FOR THIS. I GO BACK TO, THIS IS AN UNPRECEDENTED TIME WHERE WE REALLY NEED GOVERNMENTS TO STEP UP. THE SECOND THING TO NOTE IS THAT THE COST OF BORROWING HAS ACTUALLY DECREASED, AND SO DESPITE THE BIG INCREASE IN THE DEFICIT, THE ONTARIO GOVERNMENT'S INTEREST COSTS HAVE NOT INCREASED FROM LAST YEAR TO THIS YEAR. SO THAT'S HOW MUCH THAT CHEAPER BORROWING IS HAVING AN IMPACT ON THE AFFORDABILITY OF CARRYING THAT DEBT. AND I THINK THE THIRD ISSUE IS THAT WE'VE SEEN THAT BOTH THE FEDERAL GOVERNMENT AND THE BANK OF CANADA HAVE REALLY INDICATED A WILLINGNESS TO STEP IN AND STEP UP AND SUPPORT PROVINCIAL GOVERNMENTS. SO WHILE I DON'T FIND THIS ALARMING AND I THINK IT'S REALLY AN INDICATOR OF HOW THINGS HAVE CHANGED. IF YOU WOULD HAVE ASKED ME THIS PRE-PANDEMIC, I MIGHT HAVE HAD A DIFFERENT ANSWER TO YOUR QUESTION.

Steve says NO, I UNDERSTAND. CRAIG, LET ME GET YOU TO FOLLOW UP IN THIS RESPECT: WE'RE GOING TO BORROW 12.5 BILLION DOLLARS THIS YEAR TO PAY OFF THE INTEREST ON OUR DEBT, AND WE'RE GOING TO PAY THE SAME NUMBER NEXT YEAR, DESPITE THE FACT WE'RE GOING TO BORROW 38.5 BILLION DOLLARS MORE, WHICH REALLY GOES TO SHOW YOU WE'RE REALLY CATCHING A GOOD BREAK WHEN IT COMES TO LOW INTEREST RATES. SO BY THAT MEASURE SHOULD THE DEBT-TO-GDP RATIO SCARE US AS MUCH AS SOME PEOPLE ARE AFRAID OF IT?

Craig says WELL, IT SHOULDN'T WORRY US AS MUCH IF INTEREST RATES WERE HIGHER. SO THE DEBT SERVICE COSTS ARE NOT INSIGNIFICANT, BUT BECAUSE INTEREST RATES HAVE FALLEN SO MUCH, IT'S ACTUALLY ALLOWING GOVERNMENTS TO CARRY MUCH BIGGER DEFICITS AND DEBT LOADS THAN THEY HAVE IN THE PAST. BUT THAT STILL DOESN'T MEAN YOU SHOULDN'T BE MINDFUL OF THE AMOUNT OF DEBT THE GOVERNMENTS ARE TAKING ON. SO, FOR EXAMPLE, IN THE BUDGET, THE GOVERNMENT SAYS THAT IN 2022 IT EXPECTS TO BE PAYING ROUGHLY 14 BILLION DOLLARS IN INTEREST ON THE DEBT THAT IT'S ISSUED. THAT'S 14 BILLION DOLLARS THAT'S NOT GOING INTO EDUCATION OR HEALTH CARE OR OTHER SOCIAL PRIORITIES, AND SO EVEN WITH A SUSTAINED LOW INTEREST RATE, THE AMOUNT OF DEBT THAT'S BEING TAKEN ON IS GOING TO CARRY A COST. AND, YES, THE BANK OF CANADA IS CURRENTLY BUYING SIGNIFICANT AMOUNTS OF PROVINCIAL DEBT, HELPING TO KEEP INTEREST RATES LOW, BUT THE REASON THEY CAN DO THAT IS THAT MONEY ISN'T CIRCULATING LIKE NORMAL. ONE OF THE QUESTIONS I OFTEN GET IS, YOU KNOW, WITH THE BANK OF CANADA BUYING FEDERAL AND PROVINCIAL DEBT, IS THIS GOING TO CAUSE INFLATION? BECAUSE WHAT THEY'RE EFFECTIVELY DOING IS INCREASING THE AMOUNT OF MONEY IN THE FINANCIAL SYSTEM. AND THE ANSWER IS THAT IT DOESN'T CAUSE INFLATION WHEN THE MONEY ISN'T GOING TO SAVINGS AND INVESTMENT. IF YOU LOOK AT, FOR EXAMPLE, HOUSEHOLD FINANCES. THE AMOUNT OF DEPOSITS THAT CANADIANS HAVE HAS GONE FROM 50 BILLION DOLLARS PRE-COVID TO 416 BILLION DOLLARS. AND WHAT THAT DOES IS IT REALLY SHOWS YOU THAT THE MONEY IN THE SYSTEM ISN'T FLOWING NORMALLY. SO WHAT'S GOING TO HAPPEN IS AS THE RECOVERY HOPEFULLY CONTINUES THE BANK OF CANADA WILL GRADUALLY REDUCE ITS BOND-BUYING PROGRAM IN ORDER TO ENSURE THAT WE DON'T HAVE AN INFLATION PROBLEM DOWN THE ROAD. BUT WHEN THAT HAPPENS, IT CAN ACTUALLY INCREASE THE COST OF BORROWING FOR THE PROVINCES. WHEN WE THINK ABOUT THE ONTARIO SITUATION, THE GOVERNMENT IS GOING TO HAVE TO ISSUE BONDS NOT ONLY TO PAY FOR THE CURRENT PANDEMIC MEASURES OF THE DEFICIT... A 38.5 BILLION DOLLAR DEFICIT... BUT THEY'RE ALSO GOING TO HAVE BONDS THAT COME TO MATURITY. SO IN TERMS OF BOND ISSUANCE, IT LOOKS TO ME LIKE THE GOVERNMENT OF ONTARIO IS GOING TO BE ISSUING PROBABLY MORE THAN 100 BILLION DOLLARS OF BONDS AND THEN THE QUESTION IS GOING TO BE AT WHAT INTEREST RATES ARE INVESTORS WILLING TO BUY THAT DEBT? AND SO ULTIMATELY THERE'S NO QUESTION THAT THESE ARE ENORMOUS DEFICITS AND, YOU KNOW, AND ONTARIO IS ADDING A LOT TO DEBT. INTEREST RATES WILL REMAIN LOW, AND THAT MEANS THAT IT'S AFFORDABLE IN THE NEAR TERM. BUT WE DO HAVE TO RECOGNIZE THAT ONE OF THE GREAT LEGACIES FROM FIGHTING THE WAR AGAINST COVID IS GOING TO BE A LOT OF ONTARIO DEBT.

Steve says DREW, LET ME GET YOU TO PICK UP THE STORY FROM THERE IN THIS RESPECT: THESE PROGRESSIVE CONSERVATIVES OBVIOUSLY DID NOT GET ELECTED BACK IN JUNE OF 2018 WITH A VIEW TO BRINGING IN THE LARGEST SPENDING BUDGET OF ALL TIME AND THE BIGGEST DEFICIT OF ALL TIME. IN FACT, THEY WERE BROUGHT IN TO PUT THE BOOKS BACK INTO SHAPE. SO PUT YOUR FORMER DEPUTY MINISTER'S HAT BACK ON RIGHT NOW AND GIVE US A SENSE ABOUT HOW THE PUBLIC SERVICE IS REACTING TO HAVING TO DEAL WITH STUFF THAT THEY CERTAINLY NEVER SAW COMING DOWN THE PIPE WHEN THIS GOVERNMENT FIRST GOT ELECTED?

Drew says SO FIRST OF ALL I WAS TALKING TO A FORMER COLLEAGUE THIS MORNING AND SHE NOTED THAT WORKING AROUND THE CLOCK, RIGHT? I MEAN, THEY'RE LUCKY TO BE IN THE POSITION THEY ARE WITH SOLID JOBS AND RESPONSIBILITY, BUT IT'S HARD WORK RIGHT NOW WORKING THROUGH EVERYTHING. AND OF COURSE THEY HAD TO RESPOND IN MARCH AND THROUGHOUT IN THE SAME WAY THE POLITICAL CLASS IS, BY CHANGING THEIR STRIPES, IN EFFECT, OR CHANGING THEIR PERSPECTIVE. AND IT'S BEEN ALL HANDS ON DECK FOR THE LAST LITTLE WHILE, YOU KNOW? SO THE QUESTION IS KIND OF... PART OF IT IS THEIR COORDINATION AND HOW HARD THEY'RE WORKING WITH REGARD TO THIS. PART OF IT IS WORKING WITH THEIR POLITICAL LEADERS AS THEY CHANGE THEIR PERSPECTIVE. AND, YOU KNOW, I THINK THE FINANCE MINISTER RECOGNIZES THE CHALLENGE THEY'RE IN. THE GOVERNMENT HAS TRIED TO THREAD THAT NEEDLE. YOU KNOW, ONE STATISTIC THAT CAN JUMP OUT AT PEOPLE WHEN YOU SAY IT, AND IT MAYBE SOUNDS A LITTLE SCARIER THAN IT IS, IS THAT ONTARIO IS THE MOST INDEBTED SUB-NATIONAL GOVERNMENT IN THE WORLD. AND YOU HEARD THAT RHETORIC FROM THE PC PARTY WHEN IT TOOK POWER AND DURING THE ELECTION CAMPAIGN. PART OF THAT IS BECAUSE CANADA IS A VERY DECENTRALIZED COUNTRY AND THERE'S A LOT OF RESPONSIBILITY AT THE PROVINCIAL LEVEL. BUT CERTAINLY WITHIN THE BUREAUCRACY, THERE'S A FOCUS ON THE PROGRAMS THAT WE NEED TO, YOU KNOW, ROLL OUT TO DEAL WITH THIS CRISIS, BUT ALSO A FOCUS ON HOW YOU RESPOND... YOU KNOW, ECONOMISTS CALL THE MEDIUM TERM. HOW DO WE GROW BACK BETTER? HOW DO WE GROW FASTER AS AN ECONOMY? BECAUSE THE LONGER-TERM CHALLENGE FOR ONTARIO IS IT DOESN'T REALLY HAVE AS COMPETITIVE AS AN ECONOMY AS IT SHOULD HAVE. OUR GDP PER CAPITA, OUR LIVING STANDARDS AREN'T AS HIGH AS SURROUNDING JURISDICTIONS. AND I THINK THAT WAS TO BE THE FOCUS OF THE GOVERNMENT, THIS GOVERNMENT AND THE BUREAUCRACY. THEY'VE BEEN KNOCKED OFF THAT BY THE CRISIS. I THINK THEY'D LOVE TO GET BACK TO THAT BECAUSE THE TRUTH IS, WE'VE HAD A GENERATION IN WHICH WE'VE BEEN ON A SLOW AND STEADY DECLINE PROVINCE-WIDE.

Steve says SHEILA, CAN I GET YOU TO REACT TO THIS NOTION OF WHETHER YOU THINK THE PUBLIC SERVICE IS UP TO THE TASK OF... I MEAN, THESE ARE SIMPLY UNPRECEDENTED TIMES FOR ANYBODY WHO IS IN THE PUBLIC SERVICE TODAY AND WHETHER THEY ARE UP TO THE TASK OF DEALING WITH IT. WHAT DO YOU THINK?

Sheila says WELL, I THINK WHAT WE'VE SEEN THROUGHOUT THIS PANDEMIC IS HOW PUBLIC SERVANTS HAVE IN FACT STEPPED UP. AND WE'VE SEEN AT THE FEDERAL LEVEL POLICIES BEING DEVELOPED AND BEING REFINED THROUGHOUT. I THINK MY QUESTION WOULD BE MORE: HOW MUCH ARE CIVIL SERVANTS BEING CONSTRAINED IN WHAT THEY CAN DO CREATIVELY AND IN HOW THEY COULD RESPOND BY THEIR POLITICAL LEADERSHIP. AND I THINK THIS GOVERNMENT HAS HUNG BACK AND IS... YOU KNOW, WE HAD THE REPORT FROM THE FINANCIAL ACCOUNTABILITY OFFICE THAT SAID 97 percent OF SPENDING IN ONTARIO FOR THE PANDEMIC HAS BEEN AS A RESULT OF THE FEDERAL GOVERNMENT, 3 percent FROM THE PROVINCIAL GOVERNMENT. WE HAVE SEEN THIS BUDGET LOOKS A LOT TO ME LIKE AN OPEN-FOR-BUSINESS BUDGET. SO ABSOLUTELY I THINK WE NEED SOME VERY CREATIVE SOLUTIONS TO DEAL WITH WHAT I THINK THE TWO FUNDAMENTAL DILEMMAS THAT THE PANDEMIC HAS EXPOSED HERE, ONE OF WHICH IS THAT WE HAVE A GREAT DEAL OF INEQUALITY IN OUR ECONOMY, AND THE OTHER IS, WE HAVE VERY THREADBARE, BOTH SOCIAL SAFETY NETS AND PUBLIC SERVICES. AND I BELIEVE PUBLIC SERVANTS ARE UP TO THE TASK, BUT THEY NEED THEIR POLITICAL LEADERSHIP TO UNLEASH THEM.

Steve says ALL RIGHT. THAT'S WHERE I'LL GET CRAIG TO PICK UP ON THE NEXT PART OF THE STORY, WHICH IS, YOU KNOW, BASICALLY EVERY GOVERNMENT IN THE WESTERN WORLD IS SPENDING BIGLY, IF I CAN STEAL A LINE, BIGLY, TRILLIONS OF DOLLARS IN ORDER TO FIGHT THE RAVAGES OF THIS PANDEMIC. THE QUESTION WE'VE GOT TO ASK IS: ARE THEY SPENDING IT ON THE RIGHT THINGS. YOU'VE SEEN, CRAIG, HOW THE GOVERNMENT PLANS TO SPEND OVER THE PAST YEAR. ARE THEY SPENDING IT ON THE RIGHT THINGS, IN YOUR VIEW?

The caption changes to "Craig Alexander, @CraigA_Eco."
Then, it changes again to "Spending in the right places?"

Craig says ONE OF THE AREAS WHERE OBVIOUSLY SPENDING HAS GONE UP ENORMOUSLY IS IN THE HEALTH CARE SYSTEM. FIRST AND FOREMOST, WE'RE FIGHTING A PANDEMIC, AND THAT HAS TO BE JOB NUMBER ONE. I THINK ONTARIO'S BIG CHALLENGE IS THAT WE... YOU KNOW, WE'RE SEEING RISING INFECTION RATES RIGHT NOW. THE INFECTION RATES HAVE INCREASED QUITE DRAMATICALLY AS WE'VE GONE THROUGH THE REOPENING, AS KIDS HAVE GONE BACK TO SCHOOL, AS THE COLDER WEATHER IS ARRIVING, AND AS COVID SORT OF FATIGUE HAS SET IN. SO ONE OF THE GREAT CONCERNS FROM AN ECONOMIST POINT OF VIEW IS, ARE WE GOING TO BE ABLE TO KEEP OUR BUSINESSES OPEN AND AT THE SAME TIME MANAGE THE HEALTH RISKS? I THINK THAT, YOU KNOW, ONE OF THE LESSONS THAT WE HAVE FROM OTHER JURISDICTIONS IS THAT, WHAT WE REALLY NEED TO SEE IS MORE TESTING AND ALSO CONTACT TRACING. NOW, THE FEDERAL GOVERNMENT IS PROVIDING, YOU KNOW, FUNDING IN THAT AREA. BUT I HAVE TO BE HONEST. I'M AN ECONOMIST, NOT A HEALTH EXPERT. SO I DON'T ACTUALLY KNOW WHETHER WE'RE INVESTING ENOUGH IN THE HEALTH CARE SYSTEM AT THE MOMENT. I DON'T KNOW... YOU KNOW, WE'RE TALKING ABOUT A BUDGET AND A BUDGET IS ABOUT WHERE YOU'RE SPENDING MONEY. SO IF YOU TOLD ME THAT THE AMOUNT WE'RE SPENDING IS RESTRICTING OUR ABILITY TO DO TESTING AND CONTACT TRACING, WELL, I'D SAY WE NEED TO SPEND MORE ON THAT. BUT IF THE ANSWER IS THAT MONEY IS THE CHALLENGE, THEN NO, WE DON'T. IT'S HARD DURING A PANDEMIC TO ACTUALLY LOOK AT THE GOVERNMENT'S FINANCES AND SAY, ARE THEY EXACTLY SPENDING IN THE RIGHT AREAS? I MEAN, I THINK THE FIRST PRIORITY IS HEALTH CARE. THE SECOND PRIORITY IS HELPING SUPPORT THE ECONOMY. AND SO THINGS IN THIS BUDGET THAT DO THAT ARE THINGS LIKE PROMISING FUNDING TO HELP SUPPORT SOME HARD-HIT AREAS LIKE THE TOURISM SECTOR, LIKE ARTS AND SPORTS AND CULTURAL AND INDUSTRIES LIKE THAT THAT ARE GOING TO BE HIT THE HARDEST AND THEY'RE GOING TO BE THE SLOWEST TO RECOVER...

Steve says AND THAT WAS ALL IN THE BUDGET. THERE WERE PROVISIONS IN THE BUDGET FOR THOSE THINGS.

Craig says AND SIMILARLY IN THE BUDGET THERE'S MONEY FOR SKILLS TRAINING AND, YOU KNOW, WE ARE GOING TO HAVE A LOT OF WORKERS THAT EXPERIENCE LONG-TERM UNEMPLOYMENT. WE SAW THAT IN LAST FRIDAY'S JOB NUMBERS. AND SO AS A CONSEQUENCE WE'RE GOING TO NEED TO HELP THOSE WORKERS UPSKILL AND RESKILL SO THEY CAN GET BACK IN THE LABOUR MARKET. IT'S A QUESTION, IT MIGHT NOT BE MONEY. IT'S A QUESTION OF WE NEED TO DO A BETTER JOB IN TERMS OF ALIGNING THE SKILLS THAT WORKERS ARE GETTING WITH THE LABOUR MARKET NEEDS. SO, YOU KNOW, I THINK THAT THE GOVERNMENT... I THINK THIS BUDGET FROM A SPENDING POINT OF VIEW IS TRYING TO BE PRAGMATIC ABOUT THE FISCAL REALITIES, BUT AT THE SAME TIME, TRYING TO INVEST IN CORE AREAS. WE'VE HAD A BIG SHIFT IN THE ECONOMY TO DIGITAL. SO ONE OF THE BIG THINGS THAT'S IN THE BUDGET IS EXPANSION OF BROADBAND AND, YOU KNOW, PARTICULARLY IN RURAL ONTARIO. AND I THINK THAT, GIVEN THE SHIFT TO DIGITAL, GIVEN THE SHIFT TO REMOTE WORK, THIS IS THE RIGHT THING TO DO. SO THERE ARE THINGS TO LIKE AND THINGS TO DISLIKE IN THE BUDGET. BUT YOU CAN SEE HOW THEY'RE ACTUALLY TRYING TO INVEST IN WAYS THAT SUPPORT THE ECONOMY AND DEAL WITH THE HEALTH CRISIS. I WOULD PICK UP, THOUGH, ON THE THOUGHT THAT THE WAY WE GET OUT OF THIS FISCAL... YOU KNOW, THE FISCAL MESS WE'RE IN IS ULTIMATELY STRONGER GROWTH.

Steve says LET ME GET TO DREW ON THAT...

Craig says WE NEED A PRO-GROWTH STRATEGY IS REALLY WHAT WE NEED.

The caption changes to "Subscribe to The Agenda Podcast: tvo.org/theagenda."

Steve says YOU HAVE READ MY MIND BECAUSE THAT TAKES US JUST TO DREW FAGAN BECAUSE HE'S JUST CO-AUTHORED A COUPLE OF POLICY STUDIES WHICH BASICALLY OFFER A BLUEPRINT OR A ROAD MAP FOR THE PROVINCE OF ONTARIO. YOU'D PROBABLY LOVE THEM TO STEAL YOUR IDEAS AND ENACT THEM, DREW. BUT GIVE US SOME OF THE BULLET POINT HIGHLIGHTS OF WHAT YOU THINK A SMART ONTARIO GOVERNMENT GOING FORWARD WOULD DO TO REIGNITE THE ECONOMY IN THE MIDST OF THIS PANDEMIC?

The caption changes to "Building back better."

Drew says YEAH, AND TO THINK ABOUT THE FUTURE, LET'S JUST SITUATE OURSELVES HERE. I THINK IT SURPRISES ONTARIANS THAT, AGAIN, IF WE COMPARE THE SIZE OF OUR ECONOMY TO STATES THAT WE LOOK TO... MICHIGAN, NEW YORK, OHIO, PENNSYLVANIA... WE'VE BEEN HEARING THOSE STATES OVER THE LAST WEEK, YOU KNOW, INCESSANTLY. WE'RE A SMALLER ECONOMY. WE WERE THE AVERAGE SIZE OF THE SEVEN STATES SURROUNDING US 30, 40 YEARS AGO. WE ARE NOW THE POOREST, AS AVERAGE GDP PER CAPITA. I'M NOT SAYING AT THE LOW END AND CERTAIN THE EXTREMES OF AMERICAN SOCIETY MAY NOT BE SOMETHING WE WANT TO REPLICATE. AND THAT COMES OUT OF WEAK BUSINESS INVESTMENT, WEAK R and D INVESTMENT. YOU KNOW, WEAK PRODUCTIVITY. AND THOSE NUMBERS HAVE TRACKED FOR QUITE A WHILE. WHAT DO WE DO TO GOOSE GROWTH SOMEWHAT BACK TO WHAT WE HAD 20, 25 YEARS AGO? EVERYBODY IS FACING THAT. BUT WE'VE BEEN ON A SLOW DECLINE, SLOW, STEADY DECLINE TO A GREATER EXTENT. AND WE NEED TO THINK ABOUT INCLUSIVE GROWTH. AND THE PEOPLE AT QUEEN'S PARK, YOU ASKED ME ABOUT THE PUBLIC SERVANTS. THAT'S REALLY WHAT THEY WERE FOCUSING ON WITH REGARD TO REGULATIONS, WITH REGARD TO INCREASED CHILD CARE, WITH REGARD TO INFRASTRUCTURE INVESTMENT, WE NEED TO EMPHASIZE. WE TALKED ABOUT BROADBAND A FEW SECONDS AGO. TRANSIT, HIGHWAYS TO A LESSER EXTENT AND OTHER SECTORS AS WELL. WE HAVE TO ASK OURSELVES WHETHER WE'RE MAKING THE RIGHT INVESTMENTS AND DOING IT EFFECTIVELY. THERE'S ONE OTHER THING THAT REALLY SURPRISED ME WHEN WE WERE LOOKING AT THIS AND THAT IS ABOUT 30 OF THE 50 STATES AND PROVINCES IN THE UNITED STATES AND CANADA HAVE ACTUALLY DONE GROWTH PLANS, FIVE-YEAR GROWTH PLANS. SOME OF US USED TO THINK OF THOSE AS ALMOST SOVIET. BUT IT'S REMARKABLE THAT VIRTUALLY HALF THE STATES IN THE UNITED STATES... RED STATES AS WELL AS BLUE STATES... HAVE DONE GROWTH PLANS TO EMPHASIZE THE SECTORS AND TO FOCUS ON THE SECTORS AND SUB-SECTORS THAT WE SHOULD BE THINKING ABOUT MORE. AND THAT MIGHT BE SOMETHING... SASKATCHEWAN'S DONE IT. WE LOOKED AT ILLINOIS INTENSIVELY. THAT MIGHT BE SOMETHING THAT ONTARIO WANTS TO LOOK AT. PART OF THE CHALLENGE WITH ONTARIO IS THAT, EVEN AS WE LOOK OUT IN TORONTO AND SEE THE CRANES AND THE STEADY GROWTH AND THE TECH INVESTMENT AND THINGS LIKE THAT, ALMOST ALL THE JOB GROWTH OVER THE LAST DECADE IN ONTARIO HAS BEEN IN TORONTO AND OTTAWA. OUTSIDE THOSE TWO CENTRES, THERE'S BEEN ALMOST NO JOB GROWTH. WE REALLY NEED TO THINK ABOUT INCLUSIVE GROWTH GOING FORWARD, AND THAT'S REALLY WHAT THE PAPER WAS ALL ABOUT.

Steve says INCLUSIVE GROWTH. OKAY, SHEILA, BASED ON WHAT YOU'RE LOOKING AT, DO YOU SEE POLICIES PUT IN PLACE THAT WILL BRING US INCLUSIVE GROWTH GOING FORWARD?

The caption changes to "Sheila Block, @SheilaBlockTO."

Sheila says UNFORTUNATELY, I DON'T SEE IT. I THINK WHEN WE LOOK AT, AGAIN, THE BIG PICTURE FROM THIS PANDEMIC, IT'S RACIAL INEQUALITY, IT'S INCOME INEQUALITY, AND IT'S REALLY WHAT A FRAYED PUBLIC SERVICE AND PUBLIC SECTOR WE HAVE AT THE MOMENT. AND I THINK AT THIS POINT WITH INFECTION RATES WHERE THEY'RE AT, THAT WE REALLY NEED TO SWITCH STRATEGY. THE GOVERNMENT AT THIS POINT IS JUST HOPING TO HAVE A PRIVATE SECTOR-LED BOTH RECOVERY AND PERIOD TO GET US THROUGH THE PANDEMIC. WE ARE NOWHERE CLOSE TO THE END OF THIS PANDEMIC, UNFORTUNATELY. WE NEED GOVERNMENT TO LEAD AND WE NEED GOVERNMENT TO LEAD IN TERMS OF BOTH ECONOMIC GROWTH AND IN TERMS OF ADDRESSING THESE HUGE INEQUALITIES, BOTH IN HEALTH OUTCOMES AND IN ECONOMIC OUTCOMES.

Steve says CRAIG, LAST MINUTE TO YOU ON WHETHER OR NOT WE ARE GETTING THE POLICIES WE NEED FOR INCLUSIVE GROWTH.

Craig says WE'RE MOVING IN THE RIGHT DIRECTION. I MEAN, WHEN WE LOOK AT WHERE THE JOB LOSSES HAVE BEEN, IT'S BEEN DISPROPORTIONATELY LOW PAID WORKERS AND WHEN WE LOOK AT, YOU KNOW, WHAT COMPRISES THE POPULATION THAT WORKS IN LOW PAID JOBS, WHAT YOU CAN SEE IS THERE'S MORE WOMEN, THERE'S MORE YOUTH, THERE'S MORE VISIBLE MINORITIES, THERE'S MORE NEWCOMERS THAT ARE IN THOSE JOBS. AND SO THERE'S NO QUESTION THAT THIS RECESSION HAS HAD A VERY STRONG INEQUALITY DIMENSION TO IT. I THINK PART OF THE GOVERNMENT RESPONSE IN TERMS OF THE CANADIAN, YOU KNOW, THE CANADIAN EMERGENCY INCOME BENEFIT WHERE YOU'RE GETTING 500 A WEEK. BASICALLY WHAT YOU'RE DOING IS YOU'RE MAINTAINING THE INCOME THAT... YOU'RE REPLACING THE INCOME THAT THOSE LOW INCOME WORKERS WERE MAKING AND SO I THINK WE ARE SEEING PROGRAMS AND POLICIES THAT ARE DESIGNED TO ADDRESS SOME OF THAT INEQUALITY. ONE OF THE THINGS THAT WAS IN THE FEDERAL THRONE SPEECH WAS EXPANSION OF EARLY LEARNING. I THINK ONE OF THE LESSONS FROM THE CURRENT CRISIS IS THE IMPORTANCE OF CHILD CARE FOR LETTING PARENTS WORK, AND THIS ACTUALLY CREATES AN OPPORTUNITY, RIGHT? THIS IS AN ENORMOUS OPPORTUNITY FOR US TO INVEST IN HIGH QUALITY ACCESSIBLE, AFFORDABLE EARLY LEARNING THAT WILL NOT ONLY HELP PARENTS BUT ALSO HELP BUILD MORE RESILIENT KIDS TO BE THE WORKERS OF THE FUTURE. SIMILARLY, WE'RE SEEING, YOU KNOW, OTHER PROGRAMS THAT ARE DESIGNED TO SORT OF HELP BREAK DOWN BARRIERS. LIKE, THIS IS THE EXAMPLE ON THE SKILLS SIDE, RIGHT? WE NEED TO NOT ONLY INVEST IN SKILLS BUT WE NEED TO ENSURE THAT THE SKILLS THAT WORKERS ARE GETTING ARE THE ONES THAT THE MARKET NEEDS. AND SO THAT'S NOT A BUDGET ITEM, THAT'S ACTUALLY, YOU KNOW, A PROGRAM CONFIGURATION. AND WE DO NEED... LIKE, AGAIN, THIS GOES BACK TO THE BUILD BACK BETTER NARRATIVE. I AGREE WITH DREW. ONTARIO AND CANADA WAS NOT ON THE ROAD TO PROSPERITY PRE-COVID. WE WERE HAVING SLOWING TRENDS OF ECONOMIC GROWTH WHICH IS GOING TO MEAN THE STANDARDS OF LIVING WEREN'T GOING TO RISE MORE THAN 1 percent A YEAR AND THAT WOULD MEAN ONTARIANS FEEL THEY AREN'T GETTING AHEAD. THAT'S WHEN YOU GET POLITICAL OUTCOMES YOU DON'T WANT LIKE BREXIT AND TRUMP. SO WE REALLY NEED TO CHANGE THE TRAJECTORY. AND THE SILVER LINING OF THE PANDEMIC IS THAT IT'S CREATING THE OPPORTUNITY TO HAVE A REALLY CONSTRUCTIVE CONVERSATION AROUND CHANGE. HOW DO WE BUILD A MORE PROSPEROUS FUTURE? HOW DO WE BREAK DOWN BARRIERS FACING OUR PEOPLE? HOW DO WE ATTRACT MORE INVESTMENT? HOW DO WE GET MORE CAPITAL SPENDING? HOW DO WE BOOST ECONOMIC GROWTH? I TALK TO BUSINESSES ACROSS THE COUNTRY AND I AM IMPRESSED BY MANAGEMENT TEAMS REALLY THINKING ABOUT HOW THEY'RE GOING TO REFORM THEIR BUSINESS MODELS IN QUITE SIGNIFICANT WAYS. SIMILARLY, EVERYTHING IS ON THE TABLE WITH GOVERNMENT NOW. YOU CAN HAVE A CONSTRUCTIVE DIALOGUE ABOUT, WHAT DO WE NEED TO DO TO CREATE MORE PROSPERITY? WE'RE GOING TO LOSE A LOT OF SMALL BUSINESSES. I THINK ONE OF THE PRIORITIES IS GOING TO BE, HOW DO WE FOSTER MORE STARTUPS? HOW DO WE ACTUALLY GET MORE BUSINESSES REOPENED OR STARTED AGAIN OR LAUNCHED TO MAKE UP FOR THE BUSINESSES THAT DON'T SURVIVE THE PANDEMIC...

The caption changes to "Producer: Meredith Martin, @MeredithMartin."

Steve says CRAIG, I'M JUMPING IN HERE BECAUSE THE BIGGEST REALITY IS THE CLOCK WHICH YIELDS FOR NO PERSON, NO ECONOMIST, INCLUDING YOURSELF. THAT'S CRAIG ALEXANDER FROM DELOITTE, SHEILA BLOCK FROM THE CANADIAN CENTRE FOR POLICY ALTERNATIVES, DREW FAGAN FROM THE MUNK SCHOOL OF GLOBAL AFFAIRS AND PUBLIC POLICY. THANKS TO ALL OF YOU FOR COMING ON TVO TONIGHT AND HELPING US OUT WITH THIS. THANKS.

The caption changes to "Subscribe to The Agenda Podcast: tvo.org/theagenda."

All the guests say THANKS.

Watch: Can Ontario Afford Its Economic Promises?