Ontario's Premier Walks a Tightrope

New democrat pushes reform while trying to woo business

HALFWAY through his besieged government's five-year term, the leader of Canada's richest and most populous province is fighting to save his social democratic party's vision - to right society's wrongs.

Ontario Premier Bob Rae is trying to walk the line between critics who say he isn't pursuing social reforms vigorously enough, and those who say his party's reforms are bankrupting the province.

Since its surprise election victory in 1990, Mr. Rae's provincial New Democratic Party (NDP) has embarked on massive social reform. It is the first time a social democrat party - whose core support comes from labor and social action groups - has governed Ontario. Part of a national ground swell in recent years, provincial NDP parties now govern Ontario, Saskatchewan, and British Columbia.

The problem in Ontario, observers say, is that the party's grand plan is now mired in deficits and sagging public support. Polls show a current approval rating in the mid-20 percent range, down from its 37 percent plurality in the 1990 vote.

At stake is a new social compact for 10 million Ontarians that includes reforms in pay equity for women, labor legislation, employment equity for minorities, children's rights, health-care, car-insurance, and a province-wide day care system.

"The basic challenge we face is that we're carrying out some of these reforms in the middle of a very, very serious recession," Mr. Rae said in a recent interview in Boston. Though Ontario's economy has begun to show signs of life, the unemployment rate is high at 11 percent.

In one key way, Rae has attacked his deficit just as United States President Clinton hopes to attack his - by keeping health care costs under control. By reaching understandings with physicians, and by refusing extra payouts to hospitals that exceed their budget, health care costs rose just 1 percent in the last fiscal year, compared with 12 in the previous year. Rae says his most significant achievement is "protecting the integrity of Medicare in the middle of a fiscal crunch."

Still, deficits have ballooned as recession brought falling tax revenues. With a fiscal year 1992-93 budget of $54.8 billion (Canadian; US$44.1 billion), the deficit reached nearly $12 billion, up from $10 billion a year earlier. (Under the Liberal Party, Ontario had a 1990-91 budget of $46 billion, a deficit of $3 billion.)

Rae, however, has run afoul not only of deficit hawks, but also critics in his own party who accuse him of sacrificing reforms in concern for the deficit. Car insurance reform, a campaign promise, has been shelved as too costly, and pension reform has been put on hold.

"I think the thing we've come up against is what all governments come up against - and that is you can't do everything at once," Rae says.

But critics in his own party say Rae has betrayed the party's fundamental beliefs, creating "public cynicism."

"The premier is obsessed with deficit reduction at the expense of social policy," says Peter Kormos, an NDP parliament member formerly in Rae's Cabinet. "People thought we were different ... but they've discovered we are more similar to our predecessors than we are different."

Still, there is no question the government has moved on many fronts. Health care reform has been a notable success. Despite a bitter fight with business, legislation was enacted making it easier to unionize and harder to break strikes. A job retraining program and pay equity for women are in place. Laws to enhance children's legal rights and to create province-wide day care for children over three are under consideration.

"There's strength in Rae's approach - in not being as ideologically hidebound as his party has been," says Richard Johnston, chairman of the Ontario Council of Regents. Rae's government has been hurt by recession and an industrial restructuring "more profound than anyone realized," and the absence of any federal plan to help, Mr. Johnston says. "I think some day [the NDP] may be vindicated. The mythologies built up in the press about this government - that they are anti-business, incompetent, and unable to deal with the deficit - are so entrenched that they will be difficult to break."

Indeed, despite Rae's parting with party doctrine - and a $150 million fund to help businesses increase competitiveness - the gap between government and business may be hard to bridge.

"There is this fundamental suspicion of business among the NDP that is very apparent," says Thomas d'Aquino, president of the Business Council on National Issues. "When you bring in all these reforms... during a severe recession and in an atmosphere of severe mistrust - put all this together and you have a bit of a time bomb."

Labor groups see it differently. "In all of my years I have never seen a more vicious, sustained, or concentrated attack on a government by business," says Bob White, president of the Canadian Labour Congress. "After two years, they still haven't accepted this government, and I don't think they will."

Yet Rae isn't giving up. He spends much of his time wooing provincial businessmen and foreign investors. He has become a cheerleader for Ontario exports, attacking recent US trade actions that raised tariffs on Canadian steel, autos, and lumber.

But unless the economy recovers, the NDP may not have another opportunity. "This is a terrible time to be in government," says Hugh Thorburn, professor of public policy at Queens University in Kingston. "The NDP legacy will be a trail of substantial changes in legislation... But he's going to be blamed at the polls when people recall tough times were NDP times."