Written by Greg Beneteau

“Still, Ontario has other tricks up its sleeve to clamp down on the deficit, like overhauling health-care funding to hospitals and possibly selling shares in provincial assets like the LCBO.”

Two different levels of government. Two different ways of ignoring a big problem.

At the provincial and federal level, governments are grappling with unprecedented deficits as they try to claw their way out of the Great Recession of 2008. The massive shortfalls threaten to bog down the economy with debt, and hamper recovery.

Rather then address the issue, our leaders have resorted to varying degrees of hand waving and hopefulness – anything to avoid painful cuts or career-ending tax increases. Looming elections tend to make one short-sighted, I suppose.

On the one hand, the provincial Liberal government is expected to release its budget in late March or early April. But if this week’s throne speech was any indication, Premier Dalton McGuinty is seeing the future through rose-coloured glasses.

Despite a record $24.7 billion budget deficit, McGuinty pledged to go easy on spending cuts in the “Open Ontario” budget. The government even managed to set aside funding for 20,000 new post-secondary education spaces in the province this year – “the equivalent of a whole new University of Guelph,” Lt.-Gov. David Onley said, reading the speech.

It’s an admirable goal: bump up the percentage on Ontarians with a university degree or college diploma from 62 to 70 per cent, helping to fill the high-skill jobs of tomorrow. What’s less clear is how the government will pay for it today.

McGuinty said the province would “aggressively promote Ontario postsecondary institutions abroad” with the goal of increasing international enrolment by 50 per cent over five years, from 37,500 to 55,000.

Unlike domestic students, there is no cap on tuition fee increases for students from abroad, making them potential cash cows for postsecondary institutions. McGuinty has said that Ontario should model itself after Australia, which turned international education into its third largest industry, attracting over 400,000 students and netting $14 billion annually.

Even if the idea of selling off spaces in our public institutions to those who can afford them doesn’t make you feel a bit squeamish, Ontario is nowhere near Australia’s levels when it comes to attracting foreign students. The money netted by an increase in enrolment seems like a drop in the bucket compared to the province’s looming deficit. It also does nothing to address the province’s tuition fees (still the highest in the country), its deferred maintenance costs or increasing class sizes in or provinces postsecondary schools.

Still, Ontario has other tricks up its sleeve to clamp down on the deficit, like overhauling health-care funding to hospitals and possibly selling shares in provincial assets like the LCBO.

In that regard, they’re light years ahead of the federal Conservatives, who jettisoned their fiscal sanity long ago.

The deficit for 2010-11 is pegged at $53.8 billion. Next year, it will be $49 billion (notably, much of related to stimulus spending). To bring Canada back to black, Finance Minister Jim Flaherty pledged to eliminate $17.6-billion in spending over the next five years by clamping down on the public sector, closing tax loopholes for the wealthy, and scaling back on foreign aid and the military.

From there, Flaherty claims the country will grow its way back into surplus without any new taxes (if you consider increasing EI premiums or air travel fees not to be taxes) or significant cuts.

The Conservative-appointed Parliamentary Budget Officer Kevin Page has a much grimmer outlook. Page, along with other economists, note that the government’s projections require the best-case scenario of growth every year. They also warn of a wave of retirements that will significantly decrease tax revenues and increase reliance on the country’s health care system and old-age benefits, putting Canada in deep structural deficit for decades unless the government implement deep spending cuts, tax increases or both

“The government’s current fiscal structure is not sustainable,” Page warned in a report in February. “Right now, we have a mindset that if we got to balance, everything would be fine. That’s a very short-term perspective.”

Short-term is the operative word, because it seems like the Conservatives have saved all their tough choices until after a possible election this fall. While total new spending over the next five years doesn’t even top $1 billion – a gesture of austerity during difficult times – they’ve also left themselves precious little room to do much of anything. And a long way to fall.