The Drummond Report: economic disaster or salvation?



“It’s not all doom and gloom,” quips Rick Mercer in this video. “Drummond predicts the province could still turn things around, if it acts now, and no one gets sick, needs a job, or educates their children, for the next… ever.”

The Drummond Report – from the Commission on the Reform of Ontario’s Public Services headed by economist Don Drummond – was released last week. It’s a sweeping, 529-page, brick-thick study of Ontario’s fiscal policies and structures, with 362 recommendations about how the province should run its public service. It reads like the findings of an inquest after a particularly gruesome series of industrial accidents. Perhaps it is.

If followed, those recommendations will have a huge impact on municipalities and taxpayers (Drummond says government spending must decrease 16.2% every year for every man, woman and child in this province). Adopting them is the only way, says the report’s author, to get the province out of its $16 billion deficit before we become North America’s Greece with a $30 billion deficit.

Drummond says we must accept all of his recommendations or face financial meltdown. All, not just some. We can’t pick from them like a smorgasbord, he says. But that’s just what Premier Dalton McGuinty has already done, with his recent announcements about what he won’t implement or cut.

I’m not sure if that’s McGuinty’s way of telling us he doesn’t have the backbone to implement unpopular recommendations, or he’s just dancing one last song with political popularity while the ship sinks, or that we should buckle up because the light at the end of the tunnel is an oncoming train called The Deficit. But maybe, he’s actually wiser than we normally give him credit for being.

In a few short weeks, the report has spawned a small, but intense industry of commentators who have weighed in on the pros and cons of Drummond’s recommendations. Rex Murphy, for example, penned this scathing comment in the National Post:

With the exception of the writings of the prophets Jeremiah and Isaiah at their bleakest, flavoured with a touch of H.P. Lovecraft on the days when that lightless mind was wrestling with a migraine, the recent meditations of Don Drummond on Ontario’s fiscal situation set the standard for prose that vibrates with gloom and foreboding.

To be fair, the chances of any National Post writer making even the most remotely backhanded compliment about anything even vaguely Liberal is akin to my chances of winning the lottery, so we have to take his comments in the conservative spirit in which they were written: a self-righteous, anti-Liberal, “I told you so.”

And as expected, the Toronto Star weighed in against it, albeit from another side. Thomas Walkom wrote:

That the rich will fare best under Drummond is true by definition.
The well-to-do depend less on government programs than the poor and middle class. That is a fact. Drummond’s call for government to roll back the Ontario Child Benefit will hurt poor families who receive the subsidy. It will not affect the rich who do not.
Nor are the wealthy being asked to chip in through higher progressive taxes. Drummond did advocate that some taxes, including those on property and gasoline, be hiked. He even wants a special tax (he calls it a user fee) levied on rural parents who bus their children to school.
But these kinds of regressive taxes hit the poor and middle class proportionally harder than the rich. A surtax on high-income earners could correct that bias. But Premier Dalton McGuinty specifically told Drummond to stay away from such remedies.
Add to this the real world of politics, a world in which some groups have clout and others do not.

AMO – the Association of Municipalities of Ontario – has weighed in with an early comment, noting:

AMO is anxious about the potential for altering the upload agreement and the Ontario Municipal Partnership Fund. The Commission is recommending to delay planned uploads of provincial costs from the municipal property tax base by two years.

Translation: Dalton McGuinty’s Liberals promised to reverse the downloading of services and expenses onto municipalities perpetuated by Premier Mike Harris. McGuinty has been undoing it, albeit slowly. He reiterated his promise to continue the uploading at the annual AMO convention, in 2011, and again at the ROMA/OGRA convention in 2012. He promised to have it all reversed by 2018. Drummond suggests pushing that to 2021, which means additional years of expenses to Ontario’s municipalities (you, the taxpayers will pay either way).

AMO credited Drummond with several worthwhile recommendations in the areas of social programs and housing, health care, infrastructure, real estate, electricity, full-cost pricing for water and wastewater treatment services, the justice system, and improving the arbitration system. However, why these recommendations are worthy and others are not is not explained

AMO executives may not want to stray too far into critical commentary because it could alienate the organization from the government, and that would backfire on municipalities. Still, even if it is preliminary, the response noted above is annoyingly vague. I hope to see a much more comprehensive analysis from AMO in the near future, one that looks more closely at what the recommendations mean to municipalities.

Exhaustive as it may appear to some, the report has gaping holes in it. One area, for example, is in the labour arbitration process. Municipalities are frequently burdened with high salary agreements through arbitration. But the executive summary in the report says, “The interest arbitration system has come under increasing scrutiny and attack. We do not find the system to be broken, though it can be improved.” To any municipality trying to wrestle with the escalating costs of, say, their fire service, that statement is a mere nod and a wink to a seriously broken and very expensive process. School boards face the same issue with local teachers’ unions.

Like Walkom pointed out, the provincial tax structure was overlooked and most of the recommendations will have the greatest effect on those with the lowest incomes. One example is full-day kindergarten (which the right-wing QMI media’s writer, Christina Blizzard, caustically calls “free baby sitting”). Working parents who struggle to make ends meet depend on all-day kindergarten to enable them both to stay in the workforce. It’s not a handout.

Drummond’s recommended cuts could slash another 250,000 jobs from the provincial workforce and reduce the provincial economy by billions of dollars. McGuinty may be right by not leaping into these waters without carefully looking at what’s lurking in their depths first.

To the right who view every government program with suspicion, Drummond didn’t go far enough and the cuts should be made regardless of their impact on lower-income and working-class families. To the left, Drummond’s recommendations are a recipe for disaster that will decimate our workforce, our economy and cripple our already struggling labour force with additional costs. These are simplistic views. We’re in a mess and we need to fix it, but Drummond’s report is not the sole answer. It’s a start and some of what he recommends will be necessary, but not all. So Dalton may be right to proceed with caution and not simply dive in without some serious thought to what has to be done.

Here’s an idea Drummond didn’t offer, but I put forward for your consideration. Once upon a time, the province used to charge licencing fees for vehicles based on their number of cylinders. That was dropped, inexplicably. Why not return to that system and put the extra revenue directly into infrastructure spending? Or perhaps base the license fee on the vehicle’s gas mileage ratio? It would serve the double duty of discouraging sales of gas guzzlers, which will only help our environment.

One thought on “The Drummond Report: economic disaster or salvation?

  1. Pingback: Grim outlook for Canadian manufacturing | Chadwick's Blog & Commentary

Comments are closed.