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Moody’s decision to downgrade Ontario’s credit rating last week was manna from heaven to commentators and media pundits bristling at the notion that activist government could be making a comeback.

For years, pundits have kept governments in a straightjacket when it comes to spending, intimidating the public into believing that the deficit gods are vengeful and unforgiving, and that Greece is only a short hop, skip and a jump away.

But along comes Kathleen Wynne, fresh from winning a majority government in Ontario, having the audacity to talk about the need for an “activist agenda.”

In the face of such open provocation by the new premier, it fell to Moody’s to lay down the law.

Unembarrassed by its utter failure to warn creditors in the U.S. sub-prime mortgage debacle, the Wall Street credit rating agency weighed in on the Ontario debt, its intervention warmly welcomed by Canada’s media elite. 

In fact, Moody’s only tweaked things slightly — it maintained Ontario’s perfectly acceptable current rating (Aa2), but downgraded the outlook from stable to negative — not a huge change, and one that didn’t even lead to higher interest on Ontario bonds.

Even so, the pundits were quick to underline the severity of the situation.

“It’s a very big deal,” solemnly cautioned Stockwell Day, former Conservative finance minister, on CBC-TV’s Power and Politics. “It should be taken very seriously.”

The National Post’s John Ivison dismissed as “baloney” the Ontario Finance Minister Charles Sousa’s suggestion that Ontario has a revenue problem.

“It’s not a revenue problem. It’s a spending problem,” thundered Ivison in his broad Scottish accent, sounding like a Dickensian character responding to the request “please sir I want some more.”

“This is a problem that has no solution unless the province starts looking at how much it spends,” said Ivison, firmly expounding the view of the hard-right National Post, which employs him.

In fact, even Moody’s noted that Ontario has the “levers” to deal with its deficit either by cutting spending or by expanding revenue.

But Ivison would tolerate no such baloney. It is spending cuts or nothing.

In fact, Ivison’s (and the Post’s) view has nothing to do with the real choices available. Rather, theirs is an ideological viewpoint, reflecting their desire to render government small, inactive and lacking the tools and revenue to create public programs, regulate industry or redistribute income.

Their formula for achieving small, disabled government is simple: slash taxes (particularly on corporations and upper-income folk), leaving government with no choice but to cut spending — or risk deficits and the wrath of Moody’s, Ivison, the National Post, etc.

The Harper government, deeply committed to this ideology, has followed the formula closely. It has slashed taxes to the point that Ottawa now collects less revenue (as a proportion of GDP) than it did in 1940 — before we had national public programs for health care, pensions and unemployment insurance.

With such reduced revenue, the government insists it has no choice but to cut spending. Got to get those deficits down, Moody’s is coming, etc.

As a result of Harper’s spending cuts, Ottawa is projected to spend only 14 per cent of GDP by 2018/19 — the lowest level of spending by Ottawa in 70 years.

All this cutting has overlapped with a harsh recession, leaving roughly 2.9 million Canadians either unemployed or underemployed — largely invisible individuals whose lives have effectively been put on hold but who don’t get featured time on Power and Politics.

The real problem right now isn’t the deficit, but getting the economy back in shape — a point even acknowledged by David Dodge, former governor of the Bank of Canada and former deputy minister of finance.

Dodge noted that rather than focusing so urgently on deficits, governments should be borrowing money to invest in badly needed infrastructure, since long-term interest rates are very low.

The Harper government promised to expand infrastructure spending in its 2013 budget, but it scheduled 75 per cent of that spending to take place after 2020. That’s another six lost years for those 2.9 million unemployed and under-employed Canadians.

But for the right-wing crowd, the real fear is that Canadians might be fed up with austerity and cuts.

Stockwell Day described Wynne’s plan to create a provincial pension system as “the most generous social spending plan in a generation.”

Say it ain’t so!

Asked in an Environics poll to choose between two views of government, 68 per cent of Canadians selected “Governments are essential to finding solutions to important problems facing the country” while just 27 per cent chose “Governments are more often than not the cause of important problems facing the country.”

While the conservative revolution and media deficit hysteria have left us with dwindling revenues, the dream of an activist government apparently lingers somewhere deep in the Canadian soul.

Winner of a National Newspaper Award, Linda McQuaig has been a reporter for the Globe and Mail, a columnist for the National Post and the Toronto Star. She was the New Democrat candidate in Toronto Centre in 2013. She is the author of seven controversial best-sellers, including Shooting the Hippo: Death by Deficit and other Canadian Myths and It’s the Crude, Dude: War, Big Oil and the Fight for the Planet. Her most recent book (co-written with Neil Brooks) is The Trouble with Billionaires: How the Super-Rich Hijacked the World, and How We Can Take It Back.

This article is reprinted with permission from iPolitics

Photo: Premier of Ontario Photography/flickr

Linda McQuaig

Journalist and best-selling author Linda McQuaig has developed a reputation for challenging the establishment. As a reporter for The Globe and Mail, she won a National Newspaper Award in 1989...