Ontario Liberals push forward with lush budget despite economic warnings on the horizon

Many things have changed in Ontario since April, when the Liberal government first introduced a spendy $130.4 billion budget that was eventually rejected by opposition parties, triggering a provincial election.

The Liberal Party of Ontario now holds majority government status and Tim Hudak has stepped down as PC leader after voters rejected his tough-love message of fiscal restraint.

But one thing that hasn't changed is the financial vision of the Liberals, who re-introduced that same budget Monday despite concerns that the spending plan would wreak havoc on the province's economy, push it deeper into debt and scare off future investment.

Despite these fears, Finance Minister Charles Souza stuck to the same budget that forced the election, expressing confidence in the plan and vowing to balance the budget by 2017-18. This time around, opponents at Queen's Park don't have enough votes to block its passage.

Souza copy-and-pasted the once-contentious budget and unveiled it as a signal that despite the election, and the results that gave his party a stronger mandate, their economic vision for the province would stand pat.

"As I was saying ..." Souza quipped as he re-introduced the budget following a two-month delay. He was met with laughter and applause from his Liberal colleagues.

The highlights of the budget include a promise to create a provincial pension plan modeled after the Canadian Pension Plan, a one-per-cent levy on residents who earn more than $150,000 per year and a bevy of spending promises that include a $29 billion investment in public transit and infrastructure projects, $11 billion for schools and $11.4 billion for hospital construction.

"Our budget delivers a plan for a brighter, stronger future for Ontarians," Souza announced. "It creates greater opportunity and security for people everywhere around the province. Ontarians entrusted us and our plan and today we begin to move forward."

Both the Progressive Conservatives and the NDP indicated they would vote against the budget, just as they did in May. Interim PC leader Jim Wilson, who replaced Hudak after the party's dismal showing at the polls, says the Liberals are hiding behind the election results to pass the same flawed budget.

“I don’t think the people of Ontario voted for this budget as the government says," Wilson told the Toronto Star. "They voted against us because of the mistakes we made. It was that clear.”

NDP Leader Andrea Horwath, who was criticized by some supporters for rejecting the budget last time around, said possible layoffs and a "fire sale" of provincial assets are hidden inside the budget.

It is hard to be surprised by the repeat budget. The Liberals campaigned on the plan and attacked Horwath over her decision to reject what was widely perceived as an "NDP-friendly" spending plan.

On top of that, voters returned the Liberals to power with a stronger mandate and no need to curry favour from either opposition party. Still, the Liberals face dire warnings about the province's economic future.

The province faces down the barrel of a $12.5 billion deficit and this budget prompted Moody's to shift its economic outlook from stable to negative.

"After several years of weak to moderate economic growth, and higher than previously anticipated deficits projected for the next two years, the province is facing a greater challenge to return to balanced outcomes than previously anticipated," Moody's stated in its forecast. It went on the state that Ontario's rating could be downgraded if the government doesn't show signs that it is addressing the current fiscal pressure. In other words, the budget they didn't like in the spring is not going to sway them in the summer.

But Moody's isn't the only indicator that economic troubles lay ahead for Ontario. New details released from Statistics Canada outline a plunging employment rate in Ontario, which lost 34,000 jobs in June.

The Huffington Post further noted that the number of people employed in the manufacturing sector dropped below 750,000 people, the lowest level since 1976. Manufacturing jobs are considered a key indicator of a region's financial health.

Federal Finance Minister Joe Oliver has also urged Ontario to cut its deficit, and the Fraser Institute recently panned the province for failing to encourage economic growth and competitiveness.

Despite all this, the Liberals remain bullish about their strategy. Souza pointed out on Monday that the provincial debt is $24 billion lower than expected, because the government has beat its deficit targets for the past three years. He also said the government was committed to balancing the budget by 2017-18, adding that the investments they make now will pay off in the future.

“We need to position our province for the future. The time has come for a plan that will improve not only the lives of Ontarians today, but also the lives of our children and grandchildren tomorrow,” he said.

The unveiling of the budget was all quite anti-climactic. With its passing inevitable, opposition parties limited their resistance to a few catcalls. Still, much has changed in the past two months and one wonders whether there were perhaps a few ideas worth adding or amending before the budget was reintroduced.

Then again, using the once-rejected spending plan was a great way to underline the new authority the Liberal party holds: majority government status gifted to them in an election forced by the opposition.

Just consider this the Liberal government's way of spiking the football after a touchdown.

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