Ontario now a leading exporter of bad public policy
Ontario has historically been an engine of economic growth in Canada. Unfortunately, over the past decade poor policy decisions have helped reduce Ontario to an economic laggard and have-not province. And governments in Ottawa and in Alberta seem determined to make the same mistakes as Ontario.
For starters, the fiscal plan recently presented by the Trudeau government in Ottawa shares many key features with the approach to public policy that has already failed in Ontario.
Specifically, the federal Liberals are refusing to actively reform and reduce spending to eliminate the deficit. Instead they plan to steadily increase spending while hoping for revenue growth to gradually eliminate the deficit.
This is exactly the approach Ontario took when it faced a large budget deficit starting in 2009. The results do not suggest it’s a model worth copying.
Ontario’s 2009 budget projected the province would run a cumulative budget deficit of $52.9 billion for the next six years before balancing the budget in 2015. In reality, the government has failed to meet even these modest targets for fiscal discipline.
Ontario’s budget is still not balanced, and the province’s cumulative deficit from 2009 to the end of last year was approximately $81.9 billion. That’s 50 per cent more than was projected in 2009. As a result, provincial debt has climbed from 27.9 per cent of the economy to 39.6 per cent.
The government in Queen’s Park now boasts it will finally balance its budget in fiscal year 2017/18. But this is only after tremendous damage has been done, and billions of extra dollars in debt have been accumulated, which will need to be serviced and/or repaid by future generations.
Despite the failure of the Ontario model, Ottawa seems determined to walk down the same road. And what’s more, they aren’t the only ones.
Alberta’s NDP government recently presented a new budget that more-or-less ignores the huge deficits facing that province, as the government plans to carry on with spending increases year-after-year.
The Alberta government’s deficit reduction “plan” is to avoid meaningful and needed spending reform while hoping for strong revenue gains to shrink the deficit. Sadly, this approach will likely produce similar problems for Albertans as it has for Ontarians.
It’s not just on fiscal policy that Alberta is calling plays out of Ontario’s playbook. On the energy file, Alberta’s government is poised to enact policies that share important features with Ontario’s costly Green Energy Act (GEA).
This is troubling, considering that a 2013 study authored by University of Guelph economist Ross McKitrick and energy policy analyst Tom Adams showed that the GEA and its mandated spending on renewable energy helped make Ontario’s power prices among the highest in North America. Specifically, that study found wind power accounted for one-fifth of the average commodity cost for electricity while producing just four per cent of the province’s electricity. In short, Ontario spent a lot of money for not much power.
Alberta’s plan to spend heavily on renewables in the years ahead suggests they may be poised to make many of Ontario’s mistakes.
Ontario’s policy mistakes are part of the reason for the province’s poor economic performance over the past decade and the province’s descent into have-not status. It’s therefore concerning that governments in Ottawa and Edmonton are emulating Ontario’s failed model.
During Ontario’s economic heyday, the province thrived by manufacturing goods and exporting them. Now we must add “poor public policies” to the list of Ontario’s major exports.
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