The forecast for our economy is bleak

According to nearly all bank estimates Ontario’s growth rate in 2007 was the slowest in the country – its first trip to the basement since the 1991 recession. And the forecast for this year doesn’t look much better --  Scotiabank economic growth forecasts for 2008 rank Ontario dead last.

With the U.S. economy flirting with a mortgage -- lending recession, people in Ontario are now uttering about the R-word – my past two weeks on Finance Committee hearings can attest to that.

I get the sense that Haldimand-Norfolk – weighed down by both a decline in our farm economy and barriers to housing construction – is likely in a recession already.

Unemployment is on the rise.

For the first time in 30 years, Ontario’s unemployment rate exceeded the national average, rising to 6.5 per cent in December. All five major banks predict Ontario’s unemployment rate will continue to rise across both 2008 and 2009, some say as high as 6.9 per cent.

Last year, 64,000 high paying manufacturing jobs were lost -- 174,400 since the beginning of 2005. According to the CIBC, a further 200,000 manufacturing jobs remain at risk in Central Canada.

And remember, government jobs themselves do not create wealth. They are simply a redistribution of income by taxing private sector businesses and individuals. They are jobs sustained by tax dollars -- every new public sector job created equals a demand for more tax dollars. The real test of an economy’s performance is private sector job creation.

We also see a trend to replace good-paying factory jobs with service-sector jobs like call centres, hotel and restaurant work that pays considerably less, is usually part-time and is not secure.

As a result, people are on the move.

Ontario reported a net loss of over 30,000 people to other provinces last year.

Since the third quarter of 2003, Ontario has lost people to other provinces, amounting to a net decline of 64,209 people in three and a half years.

While part of the explanation for Ontario’s economic woes stem from external factors such as the rising Canadian dollar and a declining manufacturing sector, it is worth looking inward at the policies implemented by the Ontario government. Instead of mitigating the economic impact of external factors, provincial policies have contributed to Ontario’s plight by degrading its investment climate.

Reluctance to eliminate capital tax on all businesses and to reduce corporate income tax rates, discourage domestic investment which is critical to long-run growth.

According to the Fraser Institute, Ontario’s taxpayers are facing one of the heaviest tax burdens in Canada. As a result, Ontarians are working substantially more for government and less for themselves and their families compared to other Canadians.

In 2007, the average Ontario family (with two or more individuals) earned $90,018 and paid a total of $41,494 in taxes -- for a total tax bill amounting to 46.1 per cent of their income.

Disposable incomes in Ontario are growing among the slowest in the country. They have grown annually by 4 per cent over the previous four years – 1 per cent behind the rest of Canada.

The re-elected McGuinty government must undo much of what it implemented in its first term. An immediate elimination of the corporate capital tax and significant reductions in personal and corporate income taxes would be a good place to start