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How will Ontario dig itself out of the giant fiscal mess in which it now sits? Ontarians should not hold their collective breath expecting much of an answer from the 2010 provincial budget. It is most likely Premier McGuinty will announce little more than a hope that the province will grow back to fiscal health in the distant future. Taxpayers should not accept such pap. Instead, Ontarians deserve a credible and detailed plan to fix this fiscal mess. The plan will need to involve the use of an axe – especially for spending.

When Mr. McGuinty took power in the Fall of 2003 program spending for that year was $64.3 billion. For the fiscal year ending in March 2010 it is projected to have grown to $104.3 billion. This is an increase of 62 per cent over six years. This is clearly not sustainable.

If Premier McGuinty had limited spending increases to the combined rate of inflation and population growth, Ontario would have no deficit today. Instead, because he has grown spending, on average, by more than 10 per cent per year Ontario faces a serious fiscal crisis. The deficit is projected to be $24.7 billion this year alone, with no end in sight.

This is why in the 2010 budget must contain a very credible and detailed plan for eliminating the deficit. This plan must come with no more increases to taxes, fees and levies. Instead, it must come through reducing the size and cost of government.

Credible independent evidence that spending is off-track came mere hours after the latest fiscal update at the Fall Economic Outlook when bond rating agencies downgraded the province’s rating. The impact of this downgrade is that the cost of borrowing rises.

This is the same downward spiral the federal government saw in the 1990s. Rising deficits fuelled by increased spending and growing debt costs forced the federal government to get spending under control. Unfortunately, they also increased taxes. If Ontario doesn’t get spending under control, Ontario can expect even more tax hikes from Mr. McGuinty.

Eliminating a large deficit is neither easy nor painless. People on the public payroll will have to recognize they enjoy generous compensation and that they must share the pain for balancing the budget. For this reason the premier, cabinet and MPPs should take a pay cut. This would provide good leadership in tough times.

The Ontario government continues to believe that intervening in the economy by channelling cash directly to companies in corporate welfare schemes, creates jobs.  If corporate welfare worked at creating jobs, every Ontarian would have two by now. The practice must end.  Recent, and continued intervention into the auto industry involving billions of dollars in grants and cash in exchange for an equity position is a classic example of a failed policy. Despite the massive cash infusion year after year, jobs continue to be shed.

Regrettably, the only jobs Premier McGuinty seems to care about are the public sector ones he has created using taxpayer money fuelled by his long list of new taxes. The best way for him to protect more jobs in Ontario over the long run is to put in place tough measures to reduce spending.

The bottom line is the budget’s bottom line. As long as it continues to bleed red ink, instead of reaching for a pen to sign this budget, Premier McGuinty should reach for an axe.

By: Kevin Gaudet
Posted: March 24, 2010
Topic: Ontario

Type: Commentary

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