The Canada We Want in 2020

On Tuesday the Liberal government tabled its long-awaited budget to wrestle the province’s eye-watering deficit to the ground and avert a fiscal meltdown in Ontario. The budget sets out a path to deficit elimination within five years. Predictably, it is already being assailed by the right as too little too late, and by the left — embodied to a large degree in the public sector unions — as draconian and regressive.

In fact, as austerity budgets go, this is among the most progressive we’ve seen in this country — meaning the fiscal tightening falls mostly on those who can afford to take a financial hit, rather than those who cannot. This ensures the budget will pass the legislature with help from the NDP, even though their public service union supporters are rejecting it outright.

What are some of the budget’s progressive features?

For starters, the government is refraining from following through with its much trumpeted corporate tax cuts. This will save $1.5 billion over the next three years.

Even more significantly, the government is not cutting benefits to the lowest-income, most vulnerable Ontarians, opting instead to merely slow the growth of these transfers (The Ontario Child Benefit, Ontario’s signature anti-poverty measure, will continue to grow through 2014 but at a slower rate). Some social assistance benefits will be frozen but there are no planned cuts, though this is a favourite target of previous governments.

This approach to the disadvantaged is not only progressive but politically courageous. Low-income people — who exhibit chronic low-voter turnout syndrome — cannot be counted on to vote in large numbers and return the premier to office at the next election, nor will they be advancing a spirited defence of his progressive impulses in the op-ed pages and on the talk shows.

Another progressive-minded reform in this budget is its requirement that relatively well-off seniors — those who have an income of $100,000 per year or more or couples with incomes of $160,000 or more — pay higher deductibles for their prescription drugs. Income testing social benefits is about as progressive as one can get and has been a hallmark of Canadian social policy at the federal and provincial level for two decades now. It is long overdue in this case.

The biggest cuts in the McGuinty budget are in respect to the salaries, pensions and other benefits in the broad public sector — including teachers, doctors and nurses — who have seen their wages and benefits rise significantly in recent years, and who, frankly, can afford to contribute something to help the province solve its fiscal problems. Doctors’ salaries, for example, have increased more than $5 billion over the past eight years, and now account for 23 per cent of total health costs.

Basically, the government plans to cap the wage and benefits bill of the broad public sector at its current level, once collective agreements run out, and keep it that way for a few years to flatten the compensation cost curve. This move does not add up to draconian, regressive austerity, as the public sector unions are implying. Anyone who thinks it does should consider that the federal government, which has a far less serious fiscal situation than Queen’s Park, is about to “surplus” 20,000 to 30,000 public servants in the name of austerity.

And if the public sector unions think they will get support from Ontarians in their looming fight with Queen’s Park, they can think again. In contrast to the public sector, most Ontarians have seen almost no real wage gains for years, have seen defined benefit pension plans go the way of the dodo, and are acutely aware of these wage and pension disparities.

Some might counter this analysis by arguing if the government was really progressive it would raise income taxes on “the rich” to help solve the fiscal crisis. But we know that increasing taxes on incomes in a weak economy, and thereby depressing consumer demand, is not the path to growth. And as for business taxes, the government’s decision to hold corporate tax rates at their current level rather than cutting them further (as was planned) or raising them, seems a balanced and progressive approach given the province’s anemic economy.

Dalton McGuinty’s “austerity with a human face” budget is by no means perfect. Its deficit elimination target is based on steadily increasing GDP growth projections that might not materialize. Any growth forecast more than a year out in this uncertain global economic environment is dubious. And the government’s health-care restraint plan lacks convincing detail about how it would flatten that cost curve.

But when compared to the austerity budgets of other governments in this country over the past 20 years, McGuinty’s plan gets pretty good marks on the progressive scorecard. The public sector and their unions need to acknowledge that fact.

Ottawa Citizen, March 29, 2012