Introduction: The Age of Anxiety
Canadians – and Ontarians – are worried about the future.
According to an October 2013 report by the EKOS polling firm, 48 per cent of Canadians expect that the next generation will be worse off, 25 years from now, than people are now. In Ontario, this number was 59 per cent – more than five times the number who thought the next generation would be better off.
Assessing Our Needs, Proposing Solutions
The budgeting method used by James Allan, Ontario Treasurer from 1958 to 1966, took a markedly different approach from the one employed by Ministers of Finance in recent years. To begin with, Allan’s calculations around his budgets began with an assessment of needs, not costs. Principal needs were those of people, which could be met by public services, or the economy, which could be met by public infrastructure (including the development of human infrastructure through education, health care, and social services). Once needs were established, the Treasurer then looked for financial resources to meet those needs.
In recent years, the province has often seemed to care more for the needs of its corporate executives and its creditors than its citizens. In the 2009 Ontario budget, for example, we saw the announcement of cuts to the corporate income tax rate and the continued phase-out of the Capital Tax, even though both of those measures transferred money directly from people (and the public services they need) to businesses. Tax cuts have also increased the provincial deficit. The introduction of the Harmonized Sales Tax (HST) in July 2010 transferred money from citizens to businesses, and the income tax cuts designed to offset those extra costs have been paid for out of reductions in public service – in other words, paid for by citizens. Not unlike the Harris-era income tax cuts that went disproportionately to the highest-income earners, the shuffling of dollars to the benefit of well-heeled business interests in the McGuinty era did little to lessen the anxiety that many citizens were experiencing. And while the fixation on the provincial deficit no doubt allows the province’s creditors to sleep comfortably at night, most citizens may be forgiven if they are more concerned about their own debts, which are now at record levels,
Looking ahead, Ontarians are now living in a time when government spending is negative and wages for workers in the provincial public sector have been driven below the rate of inflation as a result of the austerity policies the government first announced in 2010 and began to enact with increasing determination with the 2012 budget. Both measures are keeping the economy weak. To repair Ontario’s economy – and provincial finances – after the recession, three main things are needed: first, boosting domestic demand by putting more Ontarians back to work and restoring spending power for working people; second, further boosting demand and meeting people’s needs by increasing government spending on vital public services and infrastructure; and third, improving the trade picture by selling more exports, buying fewer imports, or both.
It is not as if the province is broke. Despite the recession, Ontario’s GDP is higher than it has ever been. More importantly, Ontario’s GDP per capita, which peaked in 2007 before the Great Recession, is now less than one per cent below that all-time record, and based on ordinary estimates of population and economic growth, will surpass it sometime in the first quarter of 2015.
The problem, however, is that it is more unfairly distributed than ever before. As Statistics Canada pointed out in December 2013, the richest one per cent of Ontarians now collect 12 per cent of the income in this province, a rate second only to Alberta.
According to the Organisation for Economic Cooperation and Development, whose members are the top industrialized countries, the actual value of the Canadian dollar should be in the range of 81 cents U.S.