Ford’s deficit hype conceals Ontario’s dirty secret

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TheStar.com – Opinion/Star Columnists
May 8, 2019.   By

We can see Doug Ford is a man who is comfortable swinging an axe through some of our most cherished social programs.

But to truly understand Ontario’s smiling premier — to look deep into his soul, as it were — we must consider why he is being so brutal.

He insists he has no choice, that the Ontario’s mounting deficits force him to cut the province’s budgets for health care, education, child care, libraries, legal aid, student loans, flood control, tree planting and anything else that moves, grows or matters in our lives. (A similar claim of necessity was made by the debt-plagued New Zealand government in the 1990s when it ordered the shooting of a newborn hippo at the zoo, explaining it couldn’t afford to expand the pen.)

Nevertheless, preventing debt from spiralling out of control sounds like a plausible explanation for Ford’s spending cuts — until one notices his tax cuts. That’s when it becomes clear the premier is, well, lying.

Let’s not forget that a deficit is simply the shortfall in the province’s budget — and it can be the result of too much spending or too little revenue.

The Ford government wants us to believe that Ontario’s deficit is caused by too much spending. But after years of stagnant social spending in Ontario, that’s a hard case to make.

Indeed, by any reasonable measure, Ontario is a laggard in social spending. As Ontario’s non-partisan Financial Accountability Office (FAO) notes, Ontario already has the lowest program spending (per capita) among Canada’s 10 provinces — before Ford’s spending cuts click in.

So pointing to Ontario’s ultralow social spending as the cause of Ontario’s deficit is about as credible as Donald Trump’s claim that his inaugural crowd was bigger than Obama’s.

If not spending, then what is driving Ontario’s deficit?

Again, the FAO provides some revealing clues, noting that Ontario also has the lowest revenue (per capita) of any of the provinces. While the provincial average for revenue (per capita) is $12,373, Ontario only collects $10,415 (per capita) — a significantly smaller amount.

Therein lies the dirty secret of Ontario’s deficit — too little revenue.

And Ford is making the problem worse by cutting taxes a further $3.6 billion a year, notes Sheila Block, senior economist with the Canadian Centre for Policy Alternatives (CCPA).

Even Moody’s, the Wall Street credit rating agency, pointed to Ontario’s low revenue — and Ford’s tax cuts driving it lower — as the main deficit culprit when it downgraded the province’s credit rating last December.

All this suggests Ford is faking his concern about the deficit.

He harps on it to justify his spending cuts, but actually makes it worse by collecting less tax revenue. (Sadly, the media rarely focus on the province’s revenue shortfall, helping Ford perpetuate the myth that deficits are always a spending problem.)

Ford’s measures — despite his claim to be acting “for the people” — redirect resources from ordinary people to corporations and the rich.

The spending cuts will save the province money so Ford can reduce corporate taxes, even though a decade of corporate tax cuts has failed to produce the promised additional business investment. Never mind. There will be more for corporations to distribute among their shareholders.

And, in the name of “protecting what matters most,” Ford is reopening a host of loopholes favouring high-income individuals — like the scam that enables business owners to “sprinkle” income among adult family members, who face a lower tax rate, even when those relatives don’t work for the family business.

In an op-ed in the Star earlier this week, Ford’s Treasury Board president Peter Bethlenfalvy insisted the government’s measures aren’t driven by ideology, just by math.

Well, here’s some different math. Another approach would be to actually address the province’s real deficit problem: its revenue shortfall.

The CCPA shows how this could be done — by cancelling Ford’s tax cuts, adding a very small increase in corporate and personal taxes (excluding those with taxable incomes below $50,000). The result would be a declining deficit, and the restoration — even expansion — of our social programs.

It could be called a budget “for the people.” But in this case, it would actually be true.

Linda McQuaig is a Toronto-based freelance contributing columnist for the Star.

https://www.thestar.com/opinion/star-columnists/2019/05/08/fords-deficit-hype-conceals-ontarios-dirty-secret.html

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