Tough decisions on economy

By Admin Thursday February 23 2012 in Editorial
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Isn’t it funny that so-called tax-and-spend Liberals are the ones being called on to do the heavy lifting when we inevitably reach a stage where deficits again take precedence in government fiscal management?



Mike Harris, the former Progressive Conservative premier of Ontario, took the scissors to the province’s budget during the 1990s, but that only came after the belt tightening brought on by federal Liberal finance minister, Paul Martin.



Harris made four per cent in cuts to the province’s budget back then which proved to be quite painful, especially to the poor. Now, the election promise by current Liberal premier, Dalton McGuinty, to pay down the deficit and have a balanced budget by 2017 would require a 16 per cent cut in spending.



The pathway to keeping that promise is in the 362 recommendations in a report from economist Don Drummond, commissioned by the McGuinty government.



The math behind this problem is simple enough: The government takes in less revenue than it spends. This practice has continued for years and had not been a significant worry, but compounding the problem now is the decline in Ontario’s overall economy.



Not unlike America’s economy, the glory days of which seems to be nothing more than a fond memory, Ontario is no longer the leading light it once was to the Canadian economy. Employment in manufacturing, for instance, beaten down by low-cost production in other countries, is at its lowest level since 1976 at only 11.6 per cent of total jobs, when more than a decade ago it was at 18 per cent.



There is no question that this is not your grandparents’ Ontario. We have government-brokered free trade agreements and passion for free-market structures to thank for that.



McGuinty has called Drummond’s prescriptions for radical reform “a road map”, and has already indicated that all the economist’s recommendations would not be acted upon – all-day kindergarten, for instance. But, is that enough?



In a nod to conservatives, McGuinty has said that he will not raise taxes to balance the budget. That leaves cuts in spending as the obvious alternative, since there has yet been no definitive statement on job creation.



Drummond has acknowledged that the range of cuts his recommendations call for are “unprecedented in postwar Canada”, but where will those cuts come from? The people who will be least affected by any radical changes are seemingly undisturbed by what that could mean for the rest of us, and there is a kind of bloodlust for such changes.



People – especially those in the media and other political operatives or observers (university types, for example, or economists) – who are not too badly off are always quick to call for cuts and talk about the deficit. Cuts won’t hurt them even if they have to pay more for their goods and services or medical care.



Drummond most pointed recommendations are in the areas of health care and education, both of which take up the lion’s share of the provincial budget.



We agree with the move to create a more efficient health care system. Doctors working in Ontario are the highest paid in Canada and Drummond has called for a wage freeze. He has also recommended linking the cost of payment for drugs to income rather than the age of seniors, and to increase the role of nurses across the system. In other words, the health care system can reduce costs by becoming more efficient.



However, don’t expect the powerful medical professionals to relent easily. Nor, for that matter, will teachers, who are already gearing up for the fight. The Ontario Secondary School Teachers’ Federation calls Drummond’s recommendations, including raising the retirement age of teachers and phasing out 70 per cent of non-teaching staff by 2017-18, “extremely confrontational”.



It took Paul Martin years to reduce the federal debt, and that was in good times. It can be done, it should be done and as a matter of priority, but not in as short a time as McGuinty has stated, and certainly not at the expense of gutting spending for the needy as Harris did.



They must also look at raising revenue (yes, that includes taxes), not just cutting programs.


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