Is sad sack Ontario ‘dragging down’ the rest of Canada? – by Armina Ligaya (National Post – April 15, 2014)

The National Post is Canada’s second largest national paper.

Ontario’s government is facing growing calls to get its fiscal house in order, with a Fraser Institute study pegging the province as an economic ball and chain “dragging down the country as a whole.” Respected tax policy expert Jack Mintz made a similar claim in a Financial Post opinion piece last week.

“Ontario is sagging under the weight of monstrous public debt, uncompetitive energy prices and rising taxes,” wrote Mr. Mintz, Palmer Chair, School of Public Policy, University of Calgary. “Given Ontario’s size, other regions of Canada are being hurt.”

But economists are split over how much a weak Ontario — with its shrinking per-capita GDP and weak private-sector employment amid other struggles — is being felt across the country, or whether the province is bearing the brunt of its own demise itself.

Livio di Matteo, a senior fellow at the Fraser Institute and lead author of the think-tank’s study released Monday, says Ontario’s economic struggles over the last decade to become a “have-not” province, receiving federal transfers instead of serving as a foundation for the national economy, has implications beyond its borders.

He blames an “incomplete transition to a more competitive world economy,” aggravated by high energy costs, reliance on manufacturing tied to the U.S. market and interventionist government policies.

“Ontario’s failure to come to grips with its economic productivity and growth issues has serious implications for itself as well as the future growth of the Canadian economy… Ontario is a vast pool of human, physical and financial capital that is not living up to its potential,” he wrote.

Ontario is facing a projected $11.7-billion deficit in the current fiscal year, as well as a hobbled manufacturing industry, once the province’s strongest economic engine.

Among the dire metrics Mr. di Matteo, an economics professor at Lakehead University, cites in the Fraser Institute study is the province’s shrinking per-capita GDP. Ontario’s real per capita GDP in 2012 was 5.6% lower than the rest of Canada, compared to 2004 when it was 0.36% higher. What’s more, if Ontario was taken out of the mix, Canada’s 2012 real per capita GDP would rise 2.2%, he wrote.

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