$12.4 billion in tax revenue lost due to recession, not overspending — CCPA

Officially Ontario ended its recession in 2009, but the effects still linger in 2013.

The Canadian Centre for Policy Alternatives estimates the “great recession” of 2008-09 and the slow recovery has taken the Ontario economy $70 billion off course. That means $12.4 billion in lost annual revenues to government – or more than our current deficit.

Austerity has not been successful in other jurisdictions, yet the Wynne government has so far said it will stay the course, impacting public services including health care.

The United Kingdom has now endured a triple-dip recession as a result of deep cuts in public spending by the Cameron government. Could more austerity by the federal, provincial and municipal governments send our own economy into negative territory, impacting both private and public sectors?

Traditional thinking has been you stimulate during lean years and grow out of your deficits in more flush times. In 2003 the Conservative government left Ontario a surprise deficit of $5.5 billion. Despite significant reinvestment in the public sector – including health – the province was able to quickly grow out of the deficit and run three years of balanced budgets.

Both provincial and federal governments used stimulus to cushion us from the worst of the recession following the world economic crisis in 2008, pushing public accounts into the red. Now that the economy is again showing signs of slowing down, will there be a coordinated response by both levels of government?

Many blame the lack of coordination between federal and provincial governments for unnecessarily extending the length of the last big recession Ontario endured in the early 1990s.

On Thursday we’ll know what the federal government intends to do. Bank economists have already told Federal Finance Minister Jim Flaherty to ease up on austerity given the weakness in the economy. Private sector economists have projected growth may slow to 1.5 per cent this year. The Royal Bank has been the most optimistic at two per cent.

For most of us it’s as if the recession of 2008-09 never ended.

The CCPA notes we have yet to restore employment levels in the province to what they were prior to the recession. By the height of the recession Ontario’s employment rate had dropped from 63.5 per cent to 61 per cent. With federal and provincial stimulus, it started climbing back, reaching 61.6 per cent in 2011. Then we had two consecutive austerity budgets which reduced employment back to 61.3 per cent – barely above recession levels.

“This means that the jobs created in Ontario’s economy were not even sufficient to keep up with provincial population growth – let alone to repair the damage from the recession,” writes Trish Hennesy and Jim Stanford in the CCPA’s More Harm Than Good: Austerity’s Impact in Ontario. The report was released on Monday.

Despite Toronto’s role as the province’s economic engine, unemployment has risen faster in the metropolis than the rest of the province. Between 2008 and 2009 unemployment in the city rose from 6.9 per cent to 9.4 per cent. Today it has barely improved at 8.6 per cent.

An uneven recovery also means that inequality has been on the rise, threatening not only the stability of the economic recovery, but raising questions about economic justice and quality of life for the majority of citizens in the province. As we have seen in the United States recently, it also threatens the very democratic roots the nation is built upon.

This month OPSEU wrote to Premier Kathleen Wynne asking that the government apply a kind of equality filter to the decision-making process surrounding this year’s provincial budget.

The “Fairness Test” would be applied to the budget process, evaluating the changes according to whether they would widen or narrow income  inequality.

The “Fairness Test” would be developed and applied by the Ministry of Finance and attached as a public document that accompanies the budget.

The idea emerged from last year’s Ontario Commission on Quality Public Services and Tax Fairness conducted the Public Services Foundation of Canada.

While governments have paid lip service to the problems of inequality, little has been done to quantify the problem or set targets to reduce it.

Ontarians should be very worried. According to the CCPA, Ontario is second only to Alberta in the rate of income inequality in Canada, and Canada is fast rising as an unequal nation. According to the Conference Board of Canada, our country has slipped from 14th most equal to 22nd most equal among the 32 countries that make up the Organization of Economic Cooperation and Development (OECD). Since the 1990s levels of inequality in Canada have risen faster than the United States.

The richest 1 per cent of Ontarians now earn, on average, 16 times more than the average of those who belong to the bottom 90 per cent. According to Statistics Canada, 30 years ago the ratio was 10 times more.

The CCPA notes that provincial program spending in Ontario declined by 1 per cent of GDP (the measure of the size of the economy) between 2009 and 2012.

Monday’s report from the CCPA estimates that such fiscal reductions could reduce Ontario’s GDP by three per cent over the next couple of years – almost the same amount the economy contracted by in 2008 (3.1%).

The CCPA says the solution is a full jobs recovery, reducing income inequality and poverty, and investing in public infrastructure.

You don’t do that by slashing thousands of public sector jobs.

If the Wynne government wants to distinguish itself from the McGuinty era, it should be paying attention and rethink the course Dwight Duncan and Dalton McGuinty set us upon.