Drummond report crushes Ontarians’ morale–and the table

By Erica Alini - Wednesday, February 15, 2012 at 5:16 PM - 0 Comments

You might as well call him Dr. No–as in, no full-day kindergarten, no more small class sizes, no pay increases for doctors, and so on.

Don Drummond, a former TD economist and chair of Ontario’s commission on public-service reform, has unveiled his much-anticipated report on how to restore the fiscal health of Canada’s largest province. Drummond’s two-volume, 532-page tome crushed Ontarians’ morale on Wednesday–as well as the table onto which Ontario Provincial Police officers unloaded copies of the report during the media lock-up this morning, according to the Toronto Star.

Drummond has predicted that Ontario’s deficit will balloon to $30.2 billion in the next seven years, unless the province manages to contain total yearly spending increases to 0.8 per cent. Nearly a third of his suggested cuts concern healthcare–unsurprising, given that public spending there has been growing at an eye-popping average annual rate of 6.3 per cent over the past five years.

But it’s not just doctors who are up in arms against the Drummond report. There’s enough in there to make just about anybody mad: The document, in fact, recommends raising the retirement age for teachers; scrapping a new 30 per cent Ontario tuition grant for undergraduate students (unless the budget for post-secondary education can be otherwise contained to 1.5 per cent annual growth); axing a 10 per cent rebate on electrical bills; closing one of the two head offices of the Ontario Lottery and Gaming Corporation, as well as shutting two casinos in Niagara Falls.

“Ontario faces more severe economic and fiscal challenges than Ontarians realize,” Drummond said. And that, in all likelihood, was the main point of his report: to deliver a shocking wake-up call, as Adam Radwanski noted in The Globe and Mail last weekend.

“Our message will strike many as profoundly gloomy,” Drummond said Wednesday. “It is one that Ontarians have not heard, certainly not in the recent election campaign, but one this commission believes it must deliver.”

And it’s Rent-Seeking by a nose

By Colby Cosh - Tuesday, February 14, 2012 at 3:33 AM - 0 Comments

(Nathan Denette/CP)

On Monday, Ontario Finance Minister Dwight Duncan gave the Economic Club a sneak preview of economist Don Drummond’s upcoming report on some ways in which the province might conceivably clamber back into surplus sometime within the 21st century. Duncan noted that the Ontario horseracing industry receives more than $300 million a year in money from the slot machines hosted at Ontario racetracks. “Wow, that’s a huge subsidy,” I hear you saying. Silly reader. No business ever admits to being subsidized! Continue…

Not a matter of if, but when

By Aaron Wherry - Monday, January 30, 2012 at 12:50 PM - 0 Comments

Peter Van Loan says the government wants to make sure OAS is sustainable “10 years, 20 years and 30 years from now.” John Ivison’s sources tell him the government is looking at a 10-year timeframe. Don Drummond says the government would have to phase in changes over the next 20 to 25 years. Frances Woolley pinpoints 2023.

So the question is not if the pension age will be increased, but when. 1959 was the year with the highest number of births ever recorded in Canada 461,703 babies. After that, the number of births fell slightly, and then dropped precipitously with the advent of the birth control pill. (Immigration reduces the relative impact of, but does not eliminate, the baby boom bulge.)

For an increase in the entitlement age to achieve substantial cost savings, it will have to be in place when those 1959 babies hit 65 in 2024. So I’m predicting that the entitlement age will gradually be increased, in 6 month increments, with a new entitlement age of 67 in place by 2023.

Hard to get (III)

By Aaron Wherry - Monday, August 23, 2010 at 10:18 AM - 0 Comments

Last month, a number of individuals from a number of organizations co-signed a letter seeking a meeting with the Industry Minister to discuss the government’s changes to the census.

I dropped a note to Al Hatton—the president of the United Way, whose name, phone number and email were provided at the bottom of that letter—and am told the group did not get a meeting with the minister. They were told, I am told, that the minister’s schedule did not permit a meeting and that it was suggested they instead appear before the industry committee. (One of those who co-signed the letter, Don Drummond, was a witness at the first day of committee hearings.)

On slaying deficits and what to do next

By John Geddes - Thursday, September 10, 2009 at 10:14 AM - 18 Comments

The Don Drummond interview I posted earlier has prompted a bit of discussion about how any federal government will dig its way out of today’s alarmingly deep deficits.

Drummond deftly sketches how hard it will be to balance the books without touching the wide areas of spending now deemed sacrosanct—payments to seniors, to provinces, to fund the military.

Indeed, Finance Minister Jim Flaherty has vowed not to touch transfers to the provinces. And Prime Minister Stephen Harper and Liberal Leader Michael Ignatieff alike have promised no tax hikes.

I’m skeptical about how any plan with those sorts of conditions attached could possibly work, but I’m trying to keep an open mind. Meanwhile, it might help to think back on how the Liberals actually managed to slay the deficit back in the 1990s, and what they did next.
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Don Drummond on testing times ahead

By John Geddes - Thursday, September 10, 2009 at 9:06 AM - 7 Comments

This week’s issue of Maclean’s features a story about how the aftermath of the recession is likely to play out in a federal election—whenever the campaign comes. A key figure in the story is Don Drummond, the former federal Finance official whose insider knowledge of Ottawa has made him an indispensable commentator since he joined TD Bank Financial Group as chief economist in 2000.

In the story, Drummond talks recession and recovery. He explains why stimulus spending had little to do with making the downturn hurt less than the worst projections; low interest rates and other monetary policy measures, he says, did the heavy lifting. And he predicts that beating back the federal deficit, which both Tories and Liberals vow to do without raising taxes, will be enormously difficult because so much government spending is viewed as uncuttable.

But he had even more interesting analysis to offer than could fit in the magazine piece. In this additional edited portion of our conversation, Drummond discusses why, even if the recession didn’t hit as hard as many feared, the climb back is likely to be an unusually long, tough slog.

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About that tax credit

By Aaron Wherry - Thursday, September 3, 2009 at 10:24 AM - 52 Comments

An economist suggests there’s not much to worry about.

Toronto Dominion Bank chief economist Don Drummond, a former federal Finance Department official, said an election would create some “uncomfortable” uncertainty regarding the program. However, he says as long as the measure is ultimately approved by Parliament before the 2010 tax filing season, the credit would not be affected.

“If I was the Commissioner [of the Canada Revenue Agency], I would just stay cool and leave it in limbo,” Mr. Drummond said. “People won’t be filing until February, March and April of 2010 anyhow. So I’d probably just say ‘Hey, I’m waiting to see what happens before the end of the year.’ ”

About that political instability

By Aaron Wherry - Thursday, September 3, 2009 at 10:19 AM - 6 Comments

Economists consider what that other economist has said about the ruinous effect of an election right now.

TD Bank chief economist Don Drummond, a former senior Finance official, noted that during elections and for longer periods if the government changes hands, there is a slowing in spending by departments, particularly of discretionary spending.

However, the effect on Ottawa’s $12-billion infrastructure stimulus designed to fight the recession would be minimal, if at all, he added…

Economists have a little more sympathy for Harper’s contention that an election risks political instability and could affect confidence in markets and the economy in general, although even here, they say the prime minister is stretching a point.

Under normal circumstances, the shutting down of government during the six weeks of an election would have little repercussions on the behaviour of businesses, markets and consumers, noted Ian Lee, MBA director of the Sprott School of Business at Carleton University in Ottawa.

He pointed out that Japan, which fell the hardest during the recession, just recently completed an election and yet still managed to be one of the few countries to manage growth during the second quarter. By contrast, Canada’s economy shrank by 3.4 per cent during the period.

How I spent my summer vacation

By macleans.ca - Thursday, September 3, 2009 at 8:00 AM - 9 Comments

Click on the images to find out, in their own words, how each of these famous Canadians spent their summer.

Tax increase or spending cut?

By Aaron Wherry - Monday, July 6, 2009 at 6:13 PM - 64 Comments

More from the Parliament Budget Officer, this time in an interview with Canwest.

Page also believes that the deficit can be eliminated only with “significant discretionary actions,” the least painful of which, in his view and the view of other private sector economists, would be to increase the country’s consumption tax — the GST.

“It would be very difficult to see a surplus within the next five years without significant discretionary actions to bring it back into balance,” Page said in an exclusive interview with Canwest News Service and Global National on June 25, just as he was putting the finishing touches to the forecast he will publish Wednesday.

Loyal readers may remember this discussion.

About those taxes (III)

By Aaron Wherry - Wednesday, April 15, 2009 at 1:58 PM - 23 Comments

Sent an email to TD’s Don Drummond seeking an informed opinion.

Q: Do you have any reaction to Michael Ignatieff’s musings over the past day about the necessity of future tax increases?

A: I would need to see a transcript of what he said or even better his plan … The federal government can get back to budget balance if they apply a dose of spending restraint once the economy begins a sustained recovery. The government will need to keep program spending growth below 2 per cent per annum.  That will be tough but it is highly feasible. If they do that tax increases will not be required. Nor would they be appropriate.

To put that in perspective, here, as best my rudimentary math skills can figure, is how program spending has fluctuated over the last six years, and how it’s projected to over the next six.  Continue…

The Commons: Abbott & Costello fix the economy

By Aaron Wherry - Monday, February 9, 2009 at 6:36 PM - 15 Comments

The Scene. Michael Ignatieff, perhaps the best-schooled leader of the opposition since at least the last one, opened the proceedings with reference to the American philosophers, William Abbott and Louis Costello.

“Mr. Speaker, 129,000 jobs were lost in January. Personal bankruptcies increased by more than 50 per cent in December,” he said. “On Friday, the Prime Minister said that there will be no more help for Canadians even if the economy continues to worsen. Then, his Minister of Finance said exactly the opposite. So who is on first?”

Who was away this day. Absent too was What. So it fell to Ted Menzies (I Don’t Give A Darn in this analogy) to table the government’s official response. ”Mr. Speaker, it is a very plain and simple message that the Prime Minister and the Minister of Finance delivered,” Menzies said. “It is as simple as this: The finance minister has said that if the economy continues to decline, this government will not abandon Canadians. The Prime Minister was referring to the fact that he will not accept any amendments to this budget.”

Despite this reassurance that Canadians would be neither abandoned, nor have Parliamentary democracy imposed upon them, the Liberal leader continued with his casting of doubt. Mr. Menzies, easily distracted, responded with complaint about the lack of deference shown his government by the Bloc Quebecois and NDP.

“The only contradiction in this House of Commons is the fact that we have two parties, the Bloc and the NDP, that are refusing to work with the majority representation of Canadians that want to get people back to work and stem the job loss,” he said. “We have the Bloc and the NDP who, before they even read the budget, said they did not care about Canadians losing their jobs.”

A moment later, Mr. Menzies, besmirched apparently by the sound of his own voice, was declaring that now is a not a time to be “playing politics.” Continue…

So how do we like Iggy so far?

By Aaron Wherry - Friday, December 12, 2008 at 3:46 PM - 72 Comments

He gave a so-so press conference. He talked to Duffy and Newman and Lloyd and Peter and Anna Maria. He’s consulting with Frank McKenna and Don Drummond and has now met with the Prime Minister. He said nice things about Alberta and Quebec. He has threatened and cajoled. He has endorsed the coalition without committing himself to it.

The word transformational is being thrown around. Potter restates his argument against academics in politics. Doug Bell points out that Ignatieff’s political abilities are perhaps not to be underestimated. Salutin, Riley, Hebert, Simpson, Weston, Martin, Martin, Walkom and Jonas have registered their opinions. The Globe, Post and Star have editorialized. There was a profile in the Guardian and a write-up in the Economist.

And, for the moment, Mr. Dion remains the primary object of ridicule on the Conservative party website.

So, first things first, it would appear that the new Liberal leader is being taken seriously. Of course, Stephane Dion was taken seriously too, for at least a few minutes. And Paul Martin went several months before making himself a complete laughingstock. So there is plenty of time yet for Mr. Ignatieff to turn his leadership into the stuff of farce.

Still, it’s a start. Continue…

How bad will it get?

By Steve Maich - Thursday, November 27, 2008 at 9:00 AM - 50 Comments

Last week brought another massive plunge on world stock markets, followed by yet another government bailout of a troubled bank—this time a US$300-billion lifeline from the U.S. Federal Reserve to Citigroup. The S&P/TSX Composite index has now dropped by 44 per cent since June, wiping out more than four years of market gains, and marking the sharpest decline for Canadian stocks on record. Millions are wondering and worrying about job security, the value of their homes and what’s happening to their dreams of retirement.

With North Americans now embarking on the biggest shopping season of the year, the economy is at a critical point, and Maclean’s assembled five of Canada’s brightest financial minds to answer some of the most pressing questions in the air: Continue…

Macleans.ca Interview: Don Drummond

By Kate Fillion - Thursday, November 6, 2008 at 9:00 AM - 11 Comments

Q: The Canadian dollar has swung wildly in a period of just a few months. Is it currently undervalued?

A: My perspective is that two things drive the Canadian dollar. One is the default value: on average, Canadian business is about 85 per cent as productive as U.S. business, so if nothing else happened, we should see a dollar averaging about 85 cents. The second big influence is where commodity prices are relative to their longer-term trend. We saw the dollar dip down to 62 cents when commodity prices crashed, and we saw it go to $1.10 when they soared. Commodity prices right now, despite the big pull back, are around their long-run trend value, so it’s not a shock to me to see the dollar hovering fairly close to that default value of 85. Now there’s a third phenomenon, and it seems a little perverse: the U.S. has been the catalyst of much of the worldwide economic problems, yet there has been a flight to safety in U.S. Treasuries, and that has bid up the U.S. dollar and bid down the Canadian dollar. I think that will wear away, and we will see the loonie trading in that 80- to 85-cent range for quite some time, though it could dip back down to the 70s if commodity prices pull back again.

Q: You recently predicted federal deficits, though the Prime Minister hasn’t owned up to that yet. What are you projecting? Continue…

Economic cognitive dissonance …

By kadyomalley - Thursday, July 24, 2008 at 11:59 AM - 0 Comments

So, just to make sure that we’re all clear on this: Don Drummond is an oracle of economic wisdom when it comes to issues surrounding the labour market, an aging workforce and global competiton, but should be ignored entirely when he challenges the claim that the Liberals’ Green Shift will unduly harm rural Canadians and send gas prices soaring into the stratosphere. Everyone got that? Good.

[Oily the Splot was unavailable for comment.]

Hot off the HRDC newswire:

Don Drummond to Head Labour Market Information Advisory Panel

OTTAWA, ONTARIO – The Honourable Monte Solberg, Minister of Human Resources and Social Development, and the Honourable Murray Coell, British Columbia’s Minister of Advanced Education and Labour Market Development, Co-chairs of the Forum of Labour Market Ministers (FLMM), today announced that Don Drummond, Senior Vice President and Chief Economist of the TD Bank Financial Group, and former Associate Deputy Minister of Finance Canada, will chair an Advisory Panel on Labour Market Information.

“Providing timely and relevant labour market information to all

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