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Political Paralysis and Disaster Budgeting: Lessons from Toronto

November 30, 2011

2-minute read

As Canadian governments at all jurisdictional levels engage in what can only be called Disaster Budgeting, it’s time to inject a voice of reason into the debate.

The world economy isn’t looking good, and the political penchant in Canada to return to business as usual – dutifully following an extreme right ideological script that was set for us ages ago, when the world was very different -- is a dangerous stance to get too attached to.

What Canada needs now is a break from the toxic austerity talk that is taking over, and a close look at what worked (and what didn’t) in the last recession.

One aspect of the stalled recovery in the United States that no one is talking about much is the pivotal role that deficit-driven budgets at the state and local level have played.

They worked at cross purposes against Obama's first stimulus package, making it less effective than it would have been, and then dragged their local economies down as the stimulus expired and private sector job growth failed to materialize.

In Canada, thanks to coordinated federal-provincial funding that required local government cooperation, we largely avoided that problem in the 2009-10 stimulus package.

Now, as Canada does another recession-avoidance dance, the local players are not so nimble. Hard ideology has overtaken the voices of reason.

Canary in the coal mine: Just this week, Toronto’s Mayor Rob Ford presented a budget to his city council that will only make things worse for that city if Ontario plunges back into recession.

Ford proudly declared he's going to eliminate 2,300 public sector jobs. In one year.

To put that into perspective: Between October 2010 and October 2011 – post-recession -- the entire Toronto Census Metropolitan Area (from just west of Oshawa to Hamilton; from the lake to just south of Barrie) lost 8,500 jobs.

If we're in another recession, Ford is going to make it dramatically worse.

But perhaps you’re an optimist. If so, take a look at the three-month moving average of employment: Between October 2010 and October 2011, Toronto CMA gained 6,900 jobs. Ford’s cuts will wipe out fully one-third of that job creation.

At a time when there is a widespread consensus -- including The Economist -- that another round of stimulus is needed and that budget cuts will deepen the recession and lengthen the recovery, governments at all three levels in Canada are failing to heed some very wise advice.

It is as if having stumbled into a script that worked in 2009, they've discarded it and instead are working from the script that got us into this mess in the first place – a script that is painfully oh so yesterday.

We see similar signs of political paralysis clearly in the deficit panic that is being peddled at Queens Park and in Ottawa.

But as always, it is so much more obvious and so much more concrete at the local level. Budget cutting isn't any more destructive in Toronto than it is a Queen's Park or on Parliament Hill – it hurts people no matter which jurisdiction is doing the hacking.

It's just that, at the local level, the effects are easier to see. And in Toronto, the hacking is being done with a very blunt instrument, and without due regard for the consequences.

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