Thursday, May 03, 2018

The upside down world of Ontario politics and economics 2018

Current polls suggest an easy victory for Doug Ford on June 7, although this is not yet certain. Assuming he wins, what should we expect that to mean?

To listen to his rhetoric it would mean tax cuts. He has suggested cutting the current corporate tax rate from 11.5% (already lowest in the country) to 10.5% and has even suggested a tax cut for those on the minimum wage (an alternative to actually raising the wage, an action that would leave those affected worse off).

To finance tax cuts would mean cutting spending, which Ford suggests can be achieved by finding efficiencies and not destroying jobs. In an interview with CBC radio morning host Robin Bresnahan he said, as Tabitha Southey put it in Maclean's:
...his “economic plan,” ... is to find close to $6-billion in “efficiencies.” Bresnahan enquired what exactly these efficiencies might be, a question that seemed to alarm the freshly minted PC leader, as if “efficiencies” were in fact small skittish creatures easily spooked by journalists asking questions about them.
Of course most of what government spends is on wages and salaries for teachers, fire fighters, paramedics, nurses, doctors, road maintenance crews, bus drivers etc. etc. Even if we make the unlikely assumption that Ford would find such "efficiencies", they would unequivocally cost jobs and wages.

Beyond that many of his supporters make the assumption that the Wynne government has been spending wildly and it is time to rein in the excess (to some extent Wynne wants to encourage a variation of this view). Some Conservatives probably think of this as similar to what the Harris government confronted when elected to office in 1995. In fact that is not the case. The Ontario government spends less on government programs relative to its population than any other province and that has been true for years. It ranks 10 out of 10. However, that was not true in 1995.

Using the federal fiscal reference tables made available annually by the federal Finance Department and Statistics Canada population numbers I have created several tables to make comparisons.  In one, I ranked all provinces and their program spending over time. The results can be seen in the table below:

If one looks at this chart one can see that Ontario, as recently as 1995-96 (a year that gave us three months of the NDP under Bob Rae and nine months of Mike Harris) ranked second in overall program spending per capita. This was mainly the consequence of the last budget of the Rae government, although Harris started cutting once he got into office. By the time that the PC Harris-Eves government left office they had dropped Ontario's ranking on program spending to 9th and within a few years under Dalton McGuinty the province dropped to 10th place, a rank it still occupied a year ago.

The reality is Ontario spends too little not too much. A couple of examples. There is a website dedicated to increasing spending on school upkeep and maintenance called Fix Our Schools that succeeded in getting an increase in funds for school maintenance last year in part due to its own commendable efforts, but also after a scathing report from the Auditor-General on  the deplorable condition of Ontario schools. There is still a deficit of unmet maintenance of $1.6 billion.

Another example is health care. A recent issue of Toronto Life did a reasonable job of documenting some highly negative consequences of cuts to health care:
Ontario’s hospital-bed heyday was in the 1980s. It’s been pretty much downhill since then. Premiers Davis, Peterson and Rae kicked off the cuts, in what was partly an ideological attempt to deinstitutionalize medical care in the province. The bulk of the rest was the work of Mike Harris, who shut down 39 hospitals and forced the amalgamation of dozens of others. In 1990, Ontario had 33,403 acute care beds, and, even as the population kept growing and aging, by 2014, we had only 18,588. 
Since 1997, a low point in spending, increases to hospital funding have been mostly very modest, and in recent years have often been eclipsed by inflation. The 2008 recession made that bleak scenario even bleaker: 2017 was the first year in five that hospital budgets weren’t outright frozen, even as patient volume, labour costs, energy costs and regulatory requirements all continued to go up. Out of necessity, our hospitals have become lean. Today, Ontario spends on average $389 per patient less than the other provinces. It shows.
Of course some of the reduction of hospital beds reflected things such as moving mental patients out of hospitals into the community. One long term consequence of this, a rise in homelessness, as this web site notes contributions to homelessness include: "... inadequate discharge planning for people leaving hospitals, corrections and mental health and addictions facilities."

Of course the spending inadequacies go way beyond these examples.

What underlies this situation is the other legacy of Mike Harris - taxes that are too low.  We can't afford realistic levels of spending for health care and education and many other needed public services. What Ontario needs are higher rates of taxation, including for the affluent readers of Toronto Life (a point noticeably absent from the article). Despite 15 years of Liberal government it is the ideology of Mike Harris that still dominates government spending overall in Ontario. In terms of total revenues per capita Ontario was 9th out of 10 in the latest data after a decade as 10th out of 10.

This needs to change. If Ford wins Ontario will get the opposite of what it needs.

Of the major parties only the NDP offers some modest tax increases, on corporations and the affluent mostly. However, those increases are largely to finance new spending rather than needed fixes to existing gaps. The NDP also offer a couple of tax cuts (including one that will benefit some upper income citizens).  More ideas to increase revenue are needed from all parties.

I would argue that there is also a major journalistic failure here. What I have described above does not reflect media coverage of Ontario politics and economics. Our major institutions such as the Globe and Mail instead amplify the prevailing mythology, saying such as things as: "This is a dire time for Ontario taxpayers."

This news story and the report from the Financial Accountability Officer, on which it is based, worry about future deficits but imply only spending cuts can close the gap. Neither points out what is obviously true: that if we are worried about deficits shouldn't the province with the lowest per capita revenues be thinking about at least some tax hikes. Deficits are not one-sided affairs.

But can Ford triumph? Can tactical (commonly called strategic voting) keep him from winning a majority?  I will address this in subsequent posts.