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Editorial: Bank backs McGuinty
When he was finance minister, Prime Minister Paul Martin was regarded as a miracle worker for the speed with which he transformed Canada's massive budgetary deficit into an endless string of surpluses.
On a regional basis, though, his handiwork is less impressive, and that's why Premier Dalton McGuinty is making a big fuss these days.
And no less than CIBC World Markets, an investment bank owned by CIBC, says McGuinty is on solid ground in raising that fuss.
A recent CIBC World Markets report entitled Killing the Golden Goose? says "the sheer magnitude (of the huge operating surplus Ottawa runs in Ontario) weighs on an already burdened economy, taxing the Ontario government's ability to invest in a strong, vibrant provincial, and hence national, economy."
The CIBC paper rejects Martin's argument that Ontario is just being asked to play the role it has always played — of rich province lending a helping hand to the less prosperous provinces. The debate McGuinty started, it says, "centres on the scale of this burden on Ontario."
To understand all this, you must realize Ottawa's overall budget surplus is really made up of 10 separate components. Because Ottawa spends varying amounts of money in each province and collects varying sums in taxes from each province, in actual fact it runs a separate surplus — or deficit — in each province.
For example, the $30 billion deficit Ottawa reported in 1995 can be broken down into two separate parts. There was a small $2 billion surplus that the federal government ran in Ontario, and a $32 billion deficit for all the other provinces combined.
The way Martin performed his magic was to hike the small federal surplus in Ontario by $21 billion, while shrinking the big deficit in the rest of the country by a considerably more modest $12 billion. Had it not been for the lopsided squeeze on Ontario, Ottawa would have shown a $10 billion deficit last year, instead of its eighth straight surplus.
Or had Ottawa simply increased its per capita spending in Ontario over the past decade at the same 12 per cent rate as in the rest of the country — instead of 3 per cent — federal spending in Ontario would have been $5.3 billion higher last year. And Queen's Park would not have had to run a $6 billion deficit to make up for the shortage of federal funds.
These numbers certainly support McGuinty's demand that Ottawa give Ontario $5 billion more. Yet Martin refuses to talk about the $5 billion the premier is asking for.
You'd think a PM who brags about turning Canada's budgetary deficits into surpluses would be ready to talk about, and rectify, the inordinate load he made one province carry.
And you would think Martin would be eager to address the needs of Canada's most populous province before he is forced to face the voters of that province at the polls.
When he was finance minister, Prime Minister Paul Martin was regarded as a miracle worker for the speed with which he transformed Canada's massive budgetary deficit into an endless string of surpluses.
On a regional basis, though, his handiwork is less impressive, and that's why Premier Dalton McGuinty is making a big fuss these days.
And no less than CIBC World Markets, an investment bank owned by CIBC, says McGuinty is on solid ground in raising that fuss.
A recent CIBC World Markets report entitled Killing the Golden Goose? says "the sheer magnitude (of the huge operating surplus Ottawa runs in Ontario) weighs on an already burdened economy, taxing the Ontario government's ability to invest in a strong, vibrant provincial, and hence national, economy."
The CIBC paper rejects Martin's argument that Ontario is just being asked to play the role it has always played — of rich province lending a helping hand to the less prosperous provinces. The debate McGuinty started, it says, "centres on the scale of this burden on Ontario."
To understand all this, you must realize Ottawa's overall budget surplus is really made up of 10 separate components. Because Ottawa spends varying amounts of money in each province and collects varying sums in taxes from each province, in actual fact it runs a separate surplus — or deficit — in each province.
For example, the $30 billion deficit Ottawa reported in 1995 can be broken down into two separate parts. There was a small $2 billion surplus that the federal government ran in Ontario, and a $32 billion deficit for all the other provinces combined.
The way Martin performed his magic was to hike the small federal surplus in Ontario by $21 billion, while shrinking the big deficit in the rest of the country by a considerably more modest $12 billion. Had it not been for the lopsided squeeze on Ontario, Ottawa would have shown a $10 billion deficit last year, instead of its eighth straight surplus.
Or had Ottawa simply increased its per capita spending in Ontario over the past decade at the same 12 per cent rate as in the rest of the country — instead of 3 per cent — federal spending in Ontario would have been $5.3 billion higher last year. And Queen's Park would not have had to run a $6 billion deficit to make up for the shortage of federal funds.
These numbers certainly support McGuinty's demand that Ottawa give Ontario $5 billion more. Yet Martin refuses to talk about the $5 billion the premier is asking for.
You'd think a PM who brags about turning Canada's budgetary deficits into surpluses would be ready to talk about, and rectify, the inordinate load he made one province carry.
And you would think Martin would be eager to address the needs of Canada's most populous province before he is forced to face the voters of that province at the polls.