Social Policy in Ontario

Flaherty strikes back at McGuinty

Posted on February 21, 2008 in Debates

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TheStar.com – Canada – Flaherty strikes back at McGuinty
Finance minister blames premier for Ontario’s struggles and offers little hope of budget help
February 21, 2008
Les Whittington, Ottawa Bureau

With a possible federal election looming, Finance Minister Jim Flaherty is trying to lay the blame for Ontario’s economic woes at the feet of Premier Dalton McGuinty.

Flaherty ratcheted up his war of words with McGuinty yesterday, suggesting in a speech to the Canadian Federation of Independent Business at the Royal York hotel that the Ontario Liberals’ tax policies are behind the current slowdown in the province’s economy.

Ontario was once the “envy of the country,” Flaherty said, but, even though the rest of the country is expanding economically, Ontario’s growth has been below the national average, partly due to “a lack of innovation, a lack of foresight and a lack of leadership.”

Flaherty, who will deliver the federal budget on Tuesday, held out little hope for an economic stimulus package to help central Canada, which has seen hundreds of thousands of manufacturing jobs disappear in the past few years.

McGuinty has accused Flaherty of ignoring Ontario during a time of economic crisis because of what the Ontario premier says is a right-wing Conservative ideology fixated on tax cuts as the only remedy for improving the economy.

“These are words of war and, if he wants a war, he’s going to get one,” said Ontario Economic Development Minister Sandra Pupatello, who attended the speech and spoke for the Ontario Liberals yesterday.

Flaherty’s accusations of economic mismanagement directed at McGuinty are “an appalling string of bald-faced lies – totally unacceptable for a finance minister of this nation,” Pupatello told reporters.

Flaherty said Ontario has the highest corporate taxes in the country and he urged the Liberals to follow British Columbia’s lead and cut them. He said the Ontario government has provided bailouts and subsidies for “favoured firms and threatened to impose higher taxes on imports – the kind of protectionism we just don’t need.”

The exchange between Flaherty and the Ontario Liberals comes before a possible federal election. If the federal Liberals vote against the budget on March 4, there could be an election on April 14.

Yesterday, a Canadian Press Harris-Decima poll suggested the Conservatives would win 35 per cent of the vote if an election were held today, the Liberals 33 per cent, the NDP 13 per cent and Green party 9 per cent. The survey said the Bloc Québécois would get 35 per cent of the vote in Quebec.

Flaherty said McGuinty’s approach reminds him of the government of former premier Bob Rae, which raised taxes and presided over an increased deficit.

McGuinty “sounds like Bob Rae,” Flaherty said on CBC Newsworld.

The premier “needs to get his house in order,” Flaherty said. Helping individual sectors is fine, not business by business, Flaherty added. In response, Rae, now a federal Liberal, said, “I’ll admit I ran a deficit during the worse recession since the Thirties. I also built housing, saved companies and kept people working and off the streets.

“It’s the Harris/Flaherty cuts that slashed income supports, cut vital programs and cancelled subways. And guess what? They even managed a $5.6 billion deficit when growth was good and unemployment was down as their going-away present to the people of Ontario,” Rae said of the provincial government of Mike Harris, with Flaherty as provincial finance minister.

Pupatello said Ontario taxpayers have always helped other regions of the country, but now that Ontario needs assistance, the federal Conservatives are turning their backs on the province. “It’s totally unacceptable that he (Flaherty) would refuse to look at Ontario’s support requirements today.”

She said that, with a federal election in the wind at a time of economic difficulty, Flaherty and the Conservatives are trying “to take the spotlight off themselves and the responsibility that they have for Ontario.”

Ontario’s economy has been battered by the rise in the loonie, high oil prices, the decline in the housing sector in the U.S. and longstanding problems in the auto sector.

A bank economist yesterday seemed to suggest that the Liberals were right and Flaherty’s stance that the Ontario government is to blame is incorrect.

Lower taxes can be helpful, but aren’t a guaranteed fix for Ontario’s economic troubles, said Craig Alexander, TD Bank’s deputy chief economist.

“The reality is that this is a very difficult environment,” he said, referring to the U.S. slump and the impact of the higher loonie on Canadian manufacturers trying to sell to American customers.

“Tax cuts can improve productivity but that doesn’t mean that they can’t be part of a broader policy approach” that would include targeted support for certain industrial sectors.

But the economist noted that spending increases and tax cuts in Flaherty’s previous budgets have left the federal Conservatives with very few financial resources to fund economic stop-gap measures.

Meanwhile, Ontario NDP Leader Howard Hampton said yesterday McGuinty should quit playing the “blame game” against Ottawa and spend the $1 billion in federal money already earmarked for Ontario.

“It is bizarre,” Hampton told reporters yesterday at Queen’s Park. “The McGuinty government is sitting on about $1 billion of federal money that is available for these things right now.”

– With files from Robert Benzie

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