Kathleen Wynne’s new government in Ontario has four years to show the bond vigilantes she’s smarter than they are?

Jul 4th, 2014 | By | Category: Canadian Provinces

Lt.-Gov. David Onley reads the throne speech at Queen's Park in Toronto on Thursday, July 3, 2014.

As best as we can make out, there is something … well, tacky at best …  about the way Moody’s rating agency changed   “Ont. outlook to negative from stable …  as it reaffirmed Ontario’s Aa2 ratings”, just before a new throne speech kicked off the 41st Parliament at Queen’s Park.

According to Moody’s vice president Michael Yake : “Although the province has not yet tabled a new budget following its June election, indications are that it will be little changed from the May budget, which Moody’s indicated was credit negative for the province … Failure to redress the fiscal challenges would add further pressures to a debt burden that has worsened in recent years.”

Just for starters, all this brings to mind Paul Krugman’s contention of a few years back that “it’s hard to think of anyone less qualified to pass judgment on America [or Canada, Mr. Krugman would no doubt broadly agree] than the rating agencies … The people who rated subprime-backed securities are now declaring that they are the judges of fiscal policy? Really?”

For this and other reasons of his own, perhaps : “Finance Minister Charles Sousa …played down Moody’s significance: ‘The bankers aren’t freaking. We have controlled our spending, we have taken the necessary steps and we’re not done just yet.”

Further reflection also brings to mind another of our counterweights postings, from not quite three years ago : “Disciplining the bond vigilantes with the Province of Ontario Savings Office .. a teachable moment from the 1930s.”

Eugenie Bouchard from Montreal.

At the end of the recent Ontario election campaign, the retired provincial Conservative guru Chris Stockwell told a lively TVOntario panel discussion that “money always wins in the end.” Yet in the middle of the 1930s depression, Ontario’s populist Liberal premier of the day, Mitch Hepburn, “declared that ‘the centralized money machine … must be taught that the power of money stops somewhere.’” The premier “had ‘heard rumblings that the financial interests were going to discipline us by making no bids for our bonds.’” So a $20 million provincial bond issue was successfully sold through the province’s own savings office and the provincial treasury headquarters – “the first such issue to be handled solely by the Ontario government.”

* * * *

Eugenie Bouchard off the tennis court.

Now that the July 3, 2014 Ontario throne speech has been given – and the message that something very much like the May 1 budget will be effectively tabled again in the new legislature on July 14 – it probably ought to be made clear that some observers do seem to be having trouble understanding how the new Wynne-Sousa-Matthews-Hunter-etc strategy of both “spending” and”restraint” at the same time can work.  (See, eg : “Ontario Throne Speech: Liberals’ promise big spending, alongside major restraint.”)

Premier Wynne seems to be saying that this just misunderstands the government’s position. She is confident her team knows what it is doing. And – so long as most of her 5-person majority in the legislature remains healthy – she now has four years to test the proposition. Our instinct is to give her the benefit of the doubt, until it is crystal clear that her combined “economic advance” and”human betterment” approach to Ontario’s current problems is just not working.

One thing we do seem to know is that the aggressive austerity policies that the rating agencies like have not really worked and are not really working either, wherever they are being seriously tried! We need to be doing something different. And maybe Premier Wynne and her team actually are coming up with something that works better. Whatever else, it’s worth giving them a chance. (And, you might say, that is finally what the voters – the people of Ontario – have decided to do, even in a very nuanced way.)

Meanwhile, as an experiment of sorts, we’re going to be starting a new page, on the bar at the top of this page, called Ontario election blues 2014. As we explain there : “Only time will tell whether the Ontario provincial election held on June 12, 2014 was some intriguing watershed in the political history of Canada’s most populous province. But we found that we were drawn to covering this election in some depth – without thinking all that much about why at the time. And just in case it does prove unusually significant, we’re posting a digital record of our coverage  (for a while at least).”

Eugenie Bouchard on the court to practice.

This page is still under construction at the moment ; the links for all the postings are not yet complete. We intend to have everything up and running, however, by this time next week.

Finally, big congratulations and best of further luck to Eugenie Bouchard from Montreal, Quebec  and Milos Raonic from Thornhill, Ontario – both of whom are setting Canadian records at the Wimbledon tennis blowout this year. And, if you still want to read more, try these four vaguely relevant articles from other sources: “Interim PC Leader Wilson says party must stop attacking people” ; “Meet the longshots: Mayoral candidate Richard Underhill” ; “‘You’re the gravy train, Rob!’: Toronto Mayor booed at Canada Day parade” ; “Dow Jones index punches through 17,000 on jobs data …  Good news on exports, manufacturing, jobs push Toronto and New York markets to record levels.” (And why is President Obama so unpopular these days  again ????)

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