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01/30/2004 Archived Entry: "Self-promo/Ontario finances"

Posted by steve @ 02:13 AM EST [Link]

SELF-PROMO ALERT: I have a piece in today's Kitchener-Waterloo Record arguing that the McGuinty government must cut spending in order to balance the budget, not tax and spend us to "prosperity." Click "More" to read it.

Fighting the deficit calls for stern measures

By Steven Martinovich

The McGuinty government has yet to table a formal budget but one does not have to be a mind reader to know that life for Ontarians will soon be more expensive. According to a provincial economic outlook released in mid-December, if the government stays the course we'll see a $5.6 billion deficit for 2003-04, $4.7 billion for 2004-05 and $4.5 billion for each of the two fiscal years after that. Of course, those numbers are based on optimistic projections about the economy and revenue.

In an effort to limit those projected deficits the McGuinty government has already axed tax credits for seniors, a final round of personal tax cuts and scheduled corporate tax cuts. In fact, many of the announcements the government has made since the election have been what politicians euphemistically call revenue enhancement measures. Taxes and user fees are both expected to rise substantially over the coming years.

Not that it will do much good. According to a Fraser Institute report released on January 28, the average household could pay more than $550 in higher taxes and user fees this year alone and the budget would still be in deficit. Although the McGuinty government has been public in their ideas of how to reduce the deficit, including everything from asset sales to means testing programs, what they haven't publicly stated is that program spending is set to rise this year. The government not only wants to have its cake and eat it as well; they want you to pay for both the having and the eating.

To give you an idea of the effect increased spending will have on the deficit, the province could institute every single deficit cutting scheme publicly commented on by government ministers and still ring up a budget deficit of nearly $1 billion this year and nearly $2 billion in 2005. That means future hikes in taxes and user fees to cover the difference. Assuming, of course, that the determination to cut the deficit survives the first formal budget.

The McGuinty government rode to power partly on their claim of fiscal responsibility. This Liberal government won't be like those of the past that indiscriminately raised taxes, voters were told, and the free spending of the Progressive Conservatives during their final years in power would come to an end. Although the Tories were ever only accused of cutting programs, the fact is that real per capita program spending is higher now than it was in 1995. And those tax cuts that the Liberals and NDP attacked as the height of irresponsibility barely made a dent on the average Ontarian's tax burden. The average family in this province pays 48 per cent of their income in taxes, not much different from a few years ago.

If the McGuinty government is truly serious about balancing the budget than it's time to admit that higher user fees and tax hikes won't be enough, or for that matter an appropriate way of cutting deficits, that it must commit to the difficult process of spending cuts. Just like a household that finds it's spending too much, the government must take a hard look at where it spends its money and make cuts. That process also includes the realization that soaking taxpayers for money will merely stifle already weak economic growth, making Finance Minister Greg Sorbara's battle against the deficit that much more difficult in coming years.

The first formal budget will give us a true measure of the Liberals and McGuinty. If McGuinty's promises of governing responsibly come to fruition, he will take the difficult road that may well anger his supporters. That means real spending cuts and a balanced budget. If McGuinty represents government as usual it means more of the same tax and spend that Ontarians can't afford. The Liberals were elected after having promised a new style of government; let's hope that doesn't mean expensive as well.

Steven Martinovich is a freelance writer in Sudbury, Ontario.