Murray Campbell
The Globe and Mail
October 11, 2003

Will he or won’t he? Run a deficit, that is.

Dalton McGuinty has yet to take over the machinery of the Ontario government, but already there’s a controversy about what he will do if, as expected, the province’s accounts are a mess. The Liberals have been planning for a $2-billion deficit on a $70-billion budget but we are getting nudge-nudges that it’s much worse than that.

The premier-designate has been briefed on the state of Ontario’s finances but he’s committed to silence until he is sworn in Oct. 23. Meanwhile, he’s not speculating about speculation that he might run a deficit, which is a departure from his "no deficit ever" stand during the election campaign (regardless of what the Liberal spin machine says).

None of this should matter. There’s nothing wrong with temporary bouts of debt; indeed, the economy is based on consumers borrowing to buy cars, houses and 42-inch televisions. It’s just that the right, aided by a generation of profligate politicians, has engineered a new orthodoxy that budget deficits are always bad.

Mr. McGuinty buys into this, otherwise he wouldn’t have signed the Canadian Taxpayers Federation pledge not to run deficits or to raise taxes. Of course, on the morning of Oct. 24, he and his new cabinet will awake to discover that all those problems they used to bait the Progressive Conservatives about are suddenly their problems.

Still, this shouldn’t be too bad even if the worst predictions about the fiscal situation are borne out. The Liberals have left themselves a fair amount of wiggle room in implementing their $5.8-billion campaign pledges by saying that the implementation of their promises could be phased in more slowly. They will get away with it for a little while because the public simply wants a sense that things are headed in the right direction. In many cases, a change from Tory to Liberal rhetoric will do the trick.

One issue, however, resists shucking and jiving. And that’s electricity. There are so many problems mounting from so many different directions that any government delay would be disastrous.

For decades, governments of all stripes have struggled with the task of providing cheap, reliable electricity, but the Conservatives’ bungled attempt at privatization and deregulation made things much, much worse. As it stands, residential and small-business consumers are luxuriating in a fool’s paradise where retail electricity rates bear little relation to the cost of generating and distributing power. This price cap, which Premier Ernie Eves imposed 11 months ago, is adding tens of millions of dollars of debt to Ontario’s books every month and driving away private investors who see the electricity industry as a source of profit.

In addition, the nuclear power plants that are the backbone of the generation system are aging and will soon need to be replaced. In particular, the Pickering A station is so costly and unreliable that it deserves to be closed forever. Over all, about 40 per cent of the generating capacity will need to be replaced in the next 15 years. "We are drifting toward a nightmare scenario," said Tom Adams of Energy Probe, an advocate of deregulation and privatization.

Liberal policy in this area is a hybrid. It keeps the price cap until it dies a natural death in 2006 and then it will re-regulate at some unspecified price. It hopes the private sector would build new plants but pledges it will do the job itself if no firm steps forward. It proposes conservation and energy-efficiency and renewable-energy programs but nothing is specific yet.

The new government’s challenge will be to replace the 7,500 megawatts of electricity produced by the coal plants it pledges to shut down by 2007. The move is predicated on reliable nuclear generation and ample supplies of natural gas for new plants. Both are uncertain.

Mr. McGuinty and his new team will have to get to work on its electricity policy fast. There is no room for delaying or phasing in.