Showdown time has finally come to Canada. Dalton McGuinty, Ontario's pushover premier, has suddenly grown a backbone. There'll be no more raises for teachers and doctors, and public-sector pensions will be trimmed. Austerity is here.
The public-sector unions are having fits. But Mr. McGuinty has seen the whites of the bond raters' eyes, and knows he has no choice. The next shoe drops on Thursday, when Stephen Harper tells us how he plans to chop the federal civil service.
None of this is a surprise. Everyone knew cuts were coming, and they would've happened no matter who was in office. When it's time to face the music, ideology doesn't matter. All that matters is the math.
But cheer up. The good news is, we're in much better shape than the Americans. Unlike them, we're a prudent people. We never ran amok the way they did. And we'll recover faster.
To see what happens when public spending gets out of control, pick almost any place in the United States. Local and state governments have dug themselves into an enormous hole. Runaway entitlements for public-sector workers are the main reason. Pension funds are eating up all the money. Many governments are being forced to choose between honouring their promises to retirees and fixing up crumbling schools.
In Vallejo, Calif., basic city services have been shut down to pay the pension bills. New York City's annual pension contributions have jumped from $1.5-billion to $8-billion over the past decade, says The New York Times. In Rhode Island, where 10 cents of every state tax dollar goes to retired public workers, the treasurer warns that, unless workers take a haircut, either the pension fund will go broke or cities will go bankrupt.
This is what happens when progressive politicians collude with unions, then lie about what their promises will cost. The progressive state blows up. That's the way Ontario and Quebec have been going. Fortunately, they haven't gone as far as California, New York and Illinois.
Meantime, don't shed too many tears for our beleaguered public-sector workers. They've done okay. The pay scale for Ontario's teachers, who rank among the best paid in North America, maxes out at more than $92,000 a year. Police officers in Canada are often able to retire – with full pensions – around 50. In Ontario, where doctors' salaries rose 70 per cent in the past decade, the average family physician now makes upward of $300,000 a year. The salaries of Canada's university professors climbed by 46 per cent between 2001 and 2009; they're now the best-paid professors in the world.
But the biggest challenge faced by government is not restraining wages. It's reinventing the way government works. Even Mr. McGuinty (who's sounding more and more like Mr. Harper every day) says the old model isn't working any more. Government bureaucracies are rigid, hierarchical, costly, rule-bound and unresponsive. The rest of the world is increasingly flexible, mobile, responsive, results-oriented, accountable and flat. The delivery of public services must change.
The real problem is not how much we pay the teachers, most of whom are capable, hard-working and dedicated. The real problem is the system, which is bloated, inefficient and full of deadwood. The schools are stuck with lousy teachers they can't get rid of. Even teachers don't believe these people should have jobs for life. But as long as their unions do, the teachers unions will become increasingly irrelevant.
In the U.S., the urgency of reform has made ideology increasingly irrelevant. New York's Andrew Cuomo, along with many other Democratic governors, is battling the public unions over pensions. And Democrats such as Rahm Emanuel, the combative mayor of Chicago, are taking on the teachers unions, firing the staff of low-performing schools and demanding performance evaluations. The old social compact between progressive politicians and public-sector unions has come to an end. Dalton McGuinty is just catching up.