Many have asked why the CTF decided to give this budget a “passing grade.” First, we said it barely passed, and as my colleague Scott Hennig aptly points out – a ‘D’ is still technically a passing grade!
This budget isn’t great, but it isn’t terrible either. Given the low expectations we’ve developed of this government—both under Premier Wynne and her predecessor Dalton McGuinty—we’ve come to expect large deficits, ignored debt, and bells and whistles designed to excite big government activists.
Here’s a brief analysis of the highs and lows of Budget 2013:
The good: no new taxes, payroll tax relief, and headways on the Drummond report:
- The government didn’t raise taxes. It didn’t hike corporate taxes or introduce new transportation taxes as many feared. That’s always a good start.
- In fact, they raised the threshold for small businesses to pay the Employer Health Tax, from $400k to $450k. Reducing payroll taxes is very good.
- 60% of the Drummond Report has apparently been delivered. This was a key component in CTF’s pre-budget recommendations, so we had to give them credit for making strides in the right direction.
- 16 of 25 ministries came in under budget in 2012-13.
- All aspects of government worker compensation plans are frozen until the deficit is eliminated.
- Movement (or lip service) on government sector pension reform
The bad: the budget falls flat on all major economic indicators:
- Deficit remains dangerously high – forecasted at $11.7 billion this year
- Spending increased by $3.6 billion this year, and overall government spending in Ontario will be $127.6 billion
- The government of Ontario will borrow $33.4 billion this year
- Debt will grow to $272.8 billion by the end of the year
- $10.6 billion will be spent on servicing the debt
- $11 billion in individual handouts and benefits, not including social assistance
- Ontario’s debt-to-GDP-ratio will inflate to 39.3 per cent
- GDP will grow 1.5 per cent in 2013, while spending increases 2.9 per cent
- Government worker compensation accounts for 50 per cent of spending
The ugly: too much economic activism and counter-productive social justice programs
- Imposed auto insurance rate-reduction. This is populist economic activism at its worst. The auto insurance industry in this province is private – the government should not be allowed to legislate rates or impose price-setting. This is akin to a state-takeover.
- Increased welfare payouts. $200 extra per month will stay in the pockets of welfare recipients. This is not only bad for taxpayers footing the bill; it is also a counter-productive incentive that causes increased dependency.
- $295 million slush-fund for youth employment – hand-outs and bureaucratic overhead won’t improve the employment outlook for young Ontarians. Competitive tax rates and wages will create real opportunities in the productive sectors of the economy.
Miscellaneous: some housekeeping items for folks who read the budget
- Improved figures and coming in below the budget forecast—which was lauded over and over in Budget 2013—is not a real achievement. It simply begs the question – why should we trust government accounting?
- Temporary construction jobs through government infrastructure projects do not reflect real growth in the economy.
- Metrolinx and Wynne’s Big Move project were outlined in this budget. However, while the spending side of this project was cemented in the budget, it still isn’t clear how they’re going to pay for it. The only “revenue tool” we know will be used is High-Occupancy Toll, or HOT lanes.
- The long-term forecast is very unclear. The government proclaims it will achieve a $0.5 billion surplus in 2017-18. They’ll have to cut a heck of a lot of spending to get there, and their pathway to that balanced budget is cloudy.