How Ontario became a have-not

Posted on November 20, 2008 in Debates, Governance Debates, Social Security Debates – Canada – How Ontario became a have-not
Published: Thursday, November 20, 2008. Mike Harris

I know it is unusual for a former premier to comment on current events, but given the fiscal and economic crisis facing Ontario and Canada, and the tragic news that Ontario is now a “have-not” province, I want to add my voice to those calling for bold thinking and far-reaching new ways of looking at our economic problems.

When I left office in 2002, I left with the satisfaction that, while there was still more to do, Ontario was fundamentally back on track. Our government, first elected in 1995, brought Ontario back as the engine of the Canadian economy after 10 lost years of mismanagement and overspending by previous Liberal and NDP governments.

We cut personal, capital, corporate and other taxes almost 200 times, dramatically reduced the size of government, forced the broader public sector to become much more efficient and eliminated Ontario’s massive deficit. We scrapped Bob Rae’s job-killing labour law and gave people a hand-up, not a hand-out, by creating work-for-welfare. In doing so, we created an environment that led to unprecedented economic growth, the creation of almost a million new jobs and 700,000 fewer people trapped in the cycle of welfare dependency. In 2002, our economy was booming and we had a budget surplus. Ontario was the envy of the world and the foundation was in place to ensure our province’s future prosperity. As I said in one of my last speeches as premier, I only regret that we didn’t move faster, and push even harder, to make the changes we did.

Since then, the government of Ontario has slid back into its self-destructive old habits. Massive increases in public spending and the return of high taxes are dragging Ontario down and risking the economic future of our province. Ottawa’s recent declaration of our “have-not” status is the culmination of a five-year decline. This announcement proves that Ontario isn’t just on the edge of a fiscal and economic crisis — we’ve toppled over a cliff, and no one really knows how far down we might fall.

It is true that high energy prices and their impact on the economies of Western Canada and Newfoundland have affected the threshold used to determine “have” and “have-not” status. But this is only part of the story.

The main reason for Ontario’s unprecedented “have-not” status is that economic growth in this province is weak, and is falling further and further behind the rest of the country. This decline did not have to happen. Going from first to worst in economic growth was preventable.

A major reason for our faltering economic growth is that Ontario’s manufacturing sector is being hammered by high taxes. For far too long, Ontario has relied on a weak Canadian dollar to provide manufacturers with a “competitive” advantage. Now, energy and resource prices are driving up the value of our dollar and the U. S. economy is slowing. The so-called “dollar advantage” has been revealed as an illusion, and high taxes are now exposed as the millstone around the neck of our manufacturing sector.

The Ontario government’s own Task Force on Competitiveness, Productivity and Economic Progress provides powerful evidence of Ontario’s high taxes. Its 2007 report shows that Ontario has the highest taxation on new business investment in Canada. Even more compelling, it also reports that Ontario has the second-highest taxes on new business investment in the developed world.

To make matters worse, Ontario also has one of the highest personal income tax rates in the country, creating a major disincentive for talented people to settle, stay or remain here. This further weakens our economic and competitive position.

During a time of escalating international competition, a massive credit crunch and a probable recession, the Ontario government should be moving aggressively to reduce taxes and other barriers to growth. Failure to act will strangle the life out of Ontario’s manufacturers, and drive them from this province, killing, maybe forever, the jobs they provide. The government must take action before it is too late.

To compound the high tax problem, since its election in 2003, the current Liberal government has gone on a spectacular spending spree that now threatens the future financial health of this province.

Following the failed paths of the David Peterson and Bob Rae regimes, over the last five years the provincial government has increased spending by an

average of 8% each year. During this same period, the Ontario economy grew in nominal terms by 4% annually. This means that the Ontario government is actually spending twice as much as it can afford. It has created a spending machine, and this machine can only be fuelled by red-hot economic times. This is simply not sustainable.

Had the government been living within its means for the past five years, Ontario would be in a much stronger position to respond to the wider global emergency than it is today. Instead, faced with a global liquidity crisis, a recession and plummeting revenues, the government is now looking at the very real prospect of returning to the massive, long-term structural deficits that we worked so hard to eliminate, and/or returning to massive cuts in government spending on public services. What a wasted opportunity.

Now more than ever before, Ontario needs strong leadership and fresh thinking to set things right. We need a major course correction and we can’t afford to wait a moment longer. The elites and their status quo way of thinking are already closing ranks. Without powerful action to reverse our economic and competitive decline, we are jeopardizing not just Ontario’s future but perhaps the future of the entire country.

– Mike Harris was premier of Ontario from 1995-2002.
Copyright © 2007 CanWest Interactive, a division of CanWest MediaWorks Publications, Inc.. All rights reserved.
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Reader comment:

Ryan-RTH, 11:06 AM EDT · Thursday, November 20th, 2008

The Tories posted a $5.5 billion deficit after an 8 year boom; starved basic infrastructure so roads are crumbling, water and sewer systems are decrepit, and traffic congestion is terible; downloaded social services to cities, bogging down the province’s economic engines down; and cut funding for education and health care to unsustainable levels. Ontario is stuck playing catch-up for Harris’ false economies.

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