8/14/14

Ontario's answer to the deficit: 35 years of revenue cuts

In a recent long-term report on the economy, the Ontario government recognized that own-source Ontario government revenue as a percentage of gross domestic product (GDP) has declined over the last fifteen years.  

The decline is equal to 2 percentage points of the province's GDP. That means the Ontario government is currently losing $14 billion annually.  With that revenue, the deficit (which was $11.3 billion last year) would be gone and we would have cash to spare.


But the government also forecasts that own-source revenue  as a percentage of GDP will continue to decline over the next twenty years as well.   


Declining Ontario government revenue is driving up the deficit















The plan is to cut Ontario government revenue by another 1.2% of GDP.  In today's economy that would add $8.6 billion to the deficit, increasing the deficit by about 70%.    


In total, over 35 years, the plan is to cut government revenue by 3.2% of GDP.  That is equal to an annual cut in government revenue of $22.6 billion in today's economy.

As noted in a previous post, Ontario government revenue and spending are already the lowest of all the provinces.   


So Ontario government revenue as a percentage of the economy has been falling over the last fifteen years, it is now the lowest of all the provinces, and the plan is to lower it further over the next twenty years, costing billions of dollars every year.  


With low revenue, spending is also lower than any other province.  


The immediate plan of the government is to deal with the deficit by real dollar cuts to public programs -- despite low public spending and low revenue.  

The longer term plan is to reduce revenue further. 

These plans will immediately cut public services and in the longer term make public service less viable.   Meanwhile the cuts to government revenue have mostly benefited corporations and the very well to do.

We need a politically compelling plan to increase government revenue from those same forces to allow working people to create effective public services that enrich their lives. 


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