Social Policy in Ontario

It is vague in spots and, at times, unrealistically optimistic.

But for a province stuck in neutral, the Ontario Liberal government’s expansionary budget is a big step in the right direction.

Whether Premier Kathleen Wynne will be able to stay in office long enough to take Ontario down this path is another question.

There are two overarching theories for dealing with the global slump that began five years ago.

The first is austerity. Proponents argue that if governments slash their spending and eliminate deficits, business will feel chipper enough to invest and create jobs.

This is the theory embraced by Tim Hudak’s Progressive Conservatives. Until this year, it was also endorsed by the governing Liberals.

The only problem is that, as European governments engaged in the austerity project discovered, it hasn’t worked.

The competing argument holds that governments must take the lead in fostering economic recovery, even if doing so delays efforts to get public finances back in balance.

Japan has tried a version of this, with some success.

With this budget, Wynne’s Liberals have officially joined the expansionary camp. They plan to increase program spending by $2.4 billion over the next two years even though, because of the slump, revenues are expected to decrease.

As a result, the Liberals expect the provincial deficit to increase to $12.5 billion this year and stay higher than previously estimated until 2017.

How would the extra money be spent? The 368-page budget document is vague on details. But the money is slated for measures that should do some good — including transit expansion, building hospitals and helping the poor.

The government also plans to take advantage of low interest rates. Borrowing to fund capital projects would rise to almost $38 billion next year.

And, yes, this would increase the provincial debt. But if the money is used appropriately, it would be well spent.

Hard-line fiscal conservatives, of which there are plenty in Ontario, won’t like any of this.

Nor will purists approve of Wynne’s plan to spend $2.5 billion over 10 years to subsidize profitable multinationals willing to locate in Ontario. In fact, I don’t much like corporate welfare, either.

But in the practical world where politicians operate, such job-creation bribes appear to be necessary — which is why governments of all stripes (including Prime Minister Stephen Harper’s federal Conservatives) offer them.

The jewel in the crown of this budget is Wynne’s plan to create an Ontario version of the Canada Pension Plan.

Her Ontario Retirement Pension Plan will not solve all retirement income problems. It does not apply to all employed persons. And many of the specifics still need to be worked out.

Still, it is an unusually bold scheme for a government that has been marked by timidity. It would require those not adequately served by company pension plans — on both the employer and employee side — to contribute.

And it would provide beneficiaries of the plan a definite and inflation-indexed payout at retirement — up to a maximum of about $13,000.

It’s the kind of scheme called for by labour unions and others worried about the deficiencies of the CPP.

Is this budget penned with a spring election in mind? You bet it is. The Liberals are deking left in the hope of outflanking Andrea Horwath’s New Democrats. They calculate that this document will allow them to dominate the non-Tory vote.

Could Wynne have done better? Yes, again. Given that companies are sitting on their profits instead of investing them, the economy could easily weather a corporate tax hike.

As well, this budget leaves many provincial services, such as long-term care, woefully underfunded.

Finance Minister Charles Sousa’s claim that he can balance the books by 2017-18 is, to say the least, optimistic.

But, for whatever reason, Wynne’s government — finally — is veering off in a direction that makes sense. When New Democrats are debating whether or not to support this budget, they might want to keep that in mind.

< http://www.thestar.com/news/canada/2014/05/01/ontario_budget_a_step_in_the_right_direction_walkom.html >