Status Quo Won't Work For Four More Years
Thursday, October 18, 2007
Blue dresses aside, Dalton McGuinty has successfully followed the Bill
Clinton model of campaigning. Express empathy and 'share the pain' of the
voter. On the policy front, offer little change other than to promise to spend
more on everything. On October 10th, Ontario voters bought this approach and
have again handed Mr. McGuinty the reigns of power and the keys to the
treasury. However, there is one other part of the Clinton script that Mr.
McGuinty needs to follow. In addressing the status quo he said, "I have news
for the defenders of the status quo; your time has come and gone. It is time
Change is needed now in Ontario as reports show the economy is in trouble.
Only two days after the premier was handed a new mandate, the Royal Bank of
Canada (RBC) issued a fiscal update which indicates that the status quo is
driving Ontario to last place in Canada. RBC blames Ontario's poor performance
on the government's past fiscal plan which is highlighted by punitive tax
RBC has drastically lowered its Ontario growth forecast for 2008 to 1.8% which
is importantly lower than the numbers used to calculate the revenues needed
for the Liberals' new campaign promises. If this growth rate materializes then
Ontario's finances are at risk.
The Liberal campaign policy document used private-sector forecasts to predict
GDP growth to be 2.3% and inflation to be 1.9% for a nominal GDP growth of
4.3%. One of those firms it used was RBC. However, RBC now projects inflation
of 1.8% driving a nominal GDP of 3.6%. This is 0.7% lower than that on which
the Liberals predicated their spending plan. While these numbers can be eye-glazingly
boring, the 0.7% difference translates into a 16% overestimation of GDP growth
- the key driver to any revenue assumption. So for the sake of Ontario
finances, something has to change or the numbers just won't add up.
Years of high taxes and out of control spending have driven Ontario to a point
where it is no longer the Canadian leader in growth. RBC recommends that
reducing the high tax burden would be a good start. Yet, instead of tax
relief, the McGuinty plan calls for increased program spending, including
$1.15 billion for corporate welfare. If spending money on job creation
programs like this actually worked, then every Ontarian would have two jobs.
Instead, that money would better be applied in a fair manner through
broad-based tax relief for all businesses in areas like accelerating the
elimination of the capital tax; or reducing the 14% business tax, which is
higher than in BC, Alberta and Saskatchewan.
While he is at it, Mr. McGuinty could also offer some personal tax relief by
reducing the health tax. While he did regain a majority, he did so with only
42% of the popular vote. An impressive majority - 56.4% - of voters chose a
party that promised to reduce or eliminate the health tax.
While Mr. McGuinty had planned to run a status quo government for the next
four years, private-sector fiscal forecasts are already showing that famed
comedian Georg Carlin was right when he said, "the status quo sucks."
Moreover, if Mr. McGuinty follows the status quo, Ontario will be in for a