Two years ago, the federal Parliamentary Budget Office released a report on the fiscal sustainability of the Canadian government, as well as of the territories and provinces. The news wasn’t good for Ontario: it had a “fiscal gap” of 0.9 per cent of GDP, meaning that the government needed to either raise taxes or cut spending by that much — 1 per cent of GDP amounts to $7 billion or so — to bring the province’s long-term spending into balance.

Well, it’s two years later, the PBO has updated its spreadsheets with new data, and things have turned around significantly: according to the 2020 Fiscal Sustainability Report, Ontario’s fiscal gap is much smaller — only 0.1 per cent of GDP. Much more important, it’s a “negative gap.” Put it another way: if Ontario had to raise taxes or cut spending in 2018, it now has a little room to cut taxes or increase spending, according to the methodology of the PBO’s report.

In case there were any questions about who should get the credit for this turnaround, the PBO’s report is pretty clear: elections matter, and the change in government at Queen’s Park mattered. The PBO based its projections on last year’s Fall Economic Statement, the most up-to-date set of financial and economic commitments from the Progressive Conservative government.

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A 1 per cent change in direction may sound underwhelming, but the effects are profound. The whole point of the PBO’s sustainability reports is to give governments a form of long-term guidance by projecting today’s policies forward in time to see what the results would be. The PBO’s projections end in the 2090s, and a small change in the present magnifies over decades.

This is clear in the PBO’s projections for provincial debt. In the 2018 report, Ontario’s debt was projected to increase relentlessly, reaching 127 per cent of GDP by 2092. The new projection shows Ontario’s debt-to-GDP ratio now dropping in coming decades before, by the 2090s, starting to grow again slightly to 22 per cent — or a third less than the current level.

This all needs to be read with caution, of course. The projections are necessarily limited by what they’re intending to do: PBO staff aren’t trying to make realistic projections about which political parties will win elections over the next century and what those governments will do; instead, they’re simply taking today’s status quo and explaining — using a handful of broadly predictable variables, such as Ontario’s aging population and the health-care spending that will require — what that would mean going forward.

One notable question that the PBO’s report leaves unanswered relates to some tax cuts the PCs announced but have not yet implemented — including a cut to the gasoline tax the Tories promised in their 2018 election platform but haven’t yet moved forward on. From the PBO’s perspective, the government has room for some small tax cuts or spending increases, and obviously any government would prefer to be running for re-election saying it’s kept its promises.

Whether the government believes it has the room for tax cuts is another matter entirely. The debt-to-GDP ratio is kind of abstract, but it’s something the Tories railed against when it was growing under the Liberals, and it’s the kind of indicator that Peter Bethlenfalvy, president of the Treasury Board and minder of the government’s nickels and dimes, is concerned about. Even more pressing, though, is the province’s deficit, which the Tories still hope to eliminate sometime after the next election. A tax cut, even one promised in their election platform, would make that harder.