THE PROSPECTS LOOK VERY DIM INDEED: A FUTURE OF RISING DEBT AND SLOWING GROWTH.

exports, almost entirely to the U.S., count for half of GDP. But investors aren’t nearly as interested in capitalizing on U.S. growth from Ontario, given the potential of NAFTA disappearing and the White House thickening its borders with tariffs and duties, when they would much rather invest in the U.S. instead. Ontario investment performance has already been weak over the past three years: investment in machinery has risen little more than one per cent year and non-residential construction has actually declined.

Ontario faces surging debt liabilities, despite having constrained program expenditures.

Program spending in Ontario has fallen from 17.6 per cent of GDP in 2011 to 16.6 per cent in 2017, as the province moved closer to a balanced budget (even considering the accounting hankypanky government will need to do:

First, start getting serious again about economic growth. More growth means rising incomes for households, more tax revenues and fewer expenditures on social assistance. Deficits and debt become more manageable in growing economy. That doesn’t mean just more spending on education and infrastructure, which can arguably help growth in the long run. Ultimately it is the private sector that pays the bills. In recent years, the Ontario Liberals have shifted to the left and has sharply raised barriers to growth: Taxes have been rising on incomes, property and products; energy costs have soared from mismanaged climate policies; labour, housing and other regulatory costs have undermined business performance.

Ontario businesses have to compete against U.S. companies that are suddenly far, far more competitive. The province needs to start reversing its anti-growth policies now. Like the recently adopted American policy, any new regulation should only be adopted if it is yields positive economic gains and results in the removal of at least two other regulations. Ontario will need to bring in strategic tax cuts, like temporary accelerated write offs to encourage the adoption of new technologies. And it should un-reverse the legislated corporate tax rate cut from 2009 that it unwisely reversed. And there are currently tax and income-tested programs that result in marginal tax rates above 50 per cent. They have to go.

But none of these growth policies will matter if the province cannot control its deficits and debt. It is inevitable that someday there will be another recession: given the province’s current fiscal situation it would be a calamity. Spending needs to be reviewed to eliminate waste (primarily poorly designed procurement policies and ineffective subsidy programs). Any surpluses can then be used to reduce debt and provide room for productivityenhancing program spending and tax reductions.

Maybe that all seems like a tall order. In fact, federal and provincial governments of all political stripes got themselves out of two decades of similar runaway tax, spending and deficit problems back in the mid1990s and made it back to fiscal health (after which most began repeating the cycle again). Quebec’s Couillard government has lately been using better fiscal policies to reverse the trajectory of growing debt and slow growth.

Ontario voters should be demanding the same. That means being cautious of any party insisting there’s plenty of room to spend taxpayer dollars and running up deficits. If the denial and fiscal irresponsibility doesn’t stop very soon, the results for Ontario will be devastating.