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Ontario Nurses challenge Drummond Commision's crisis thinking

Research identifies relatively small deficit and debt to GDP ratios for Ontario.

Ontario Nurses challenge Drummond Commision's crisis thinkingby Salimah Valiani, ONA Economist, Policy Analyst

The Ontario government has appointed a former banker, Don Drummond, to analyze the Ontario fiscal situation and propose 'solutions' to bring Ontario out of deficit in the next four years. As already indicated by Drummond to the major media, the report of the Commission he is leading, officially named 'the Commission on the Reform of Ontario's Public Services', will make no less than 400 recommendations on how and why health care and other public services need to be cut to fix the 'fiscal house.' The McGuinty government has explicitly told the Commission that tackling the question of government revenue is not part of the exercise.

All of this is based on the idea that Ontario is in a fiscal 'crisis.' Major political parties in Ontario, as well as Don Drummond, bankers, credit rating agencies and most of the media assume that there is a 'fiscal crisis' in Ontario. This paper, released by the Ontario Nurses' Association, the union of registered nurses, offers a different reading of the economic and fiscal situation of Ontario.

Using official data on the Ontario fiscal situation and of those of the USA, Greece, and other European countries, it identifies relatively small deficit and debt to GDP ratios for Ontario. It is argued that like the central government of Greece, the Ontario government faces a structural deficit largely due to low taxation of corporations and high income individuals. The principle social consequence of this, in both Greece and Ontario, is relatively low public social spending based on a small and dwindling revenue base.

Using Ontario government data on production and profit rates in Ontario from the late 1990s to present, the paper shows that the link that has long been made by various governments, between low taxation of corporations and increased job creation, is overly simplistic and effectively inaccurate. The paper demonstrates that in the period of reduced taxation, the Ontario economy has undergone falling or stagnant production levels, falling employment, and healthy profit rates. Rather than increased employment and production, the outcomes of reduced taxes on corporations are increasing wealth for the wealthy and work intensification for the majority.

Based on this analysis, the paper argues that reducing public sector spending at this time will merely increase the total number of unemployed workers in Ontario, and in turn, reduce domestic consumption and stave off economic recovery.

Drawing on post-2008 policy measures adopted in China, Brazil, Kenya and Australia, recommendations are made around increasing public sector investment in Ontario health care and public housing in order to increase overall employment, fuel domestic demand, and improve the well-being of all Ontario residents.

To read the specific examples and recommendations on how such an approach will help rebuild the economy by making the entire population more resilient and the working-age population more productive, see the paper by clicking here .

Posted: January 24, 2012

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