Canada needs a strong Ontario now more than ever
Historically, Alberta and Ontario have been engines fuelling the Canadian economy and significant net contributors to federal finances. In other words, residents of both provinces have generally sent more money to Ottawa in tax payments and other forms of revenue than they receive in federal programs and transfer payments to their provincial governments.
For example, in 2007 Alberta's net contribution to federal finances was approximately $22 billion. That same year, Ontario's net contribution was $18 billion. Back then, both provinces were substantial contributors to the federal bottom line.
In fact, it's fair to say that in 2007, Alberta and Ontario were keeping federal finances afloat. At the time, British Columbia was the only other net contributor and without the big contributions of Ontario and Alberta the federal government would have run a massive deficit instead of a balanced budget.
However, the 2008/09 recession and a tepid recovery vaporized Ontario's ability to substantially contribute to Ottawa's bottom line. And in 2008, Ontario's net contribution was cut in half, to $9 billion.
The following year, things got worse. Ontario’s net contribution actually became negative, to the tune of -$2.5 billion, before falling even further to -$10.8 billion the following year.
From 2009 to 2010, Alberta, with just four million residents, was the only province in Canada that paid more into the federal government than it got back in programs, transfers and services. Not surprisingly, the federal government ran big deficits during this time.
Since then, and especially over the past two years as economic growth has ticked back up, Ontario’s net contribution to federal finances has improved—but it's still far below what it was in 2007.
In fact, if you add up all the years subsequent to 2007 up until the last year we have data (2015), you find that Ontario's net contribution to federal finances cumulatively comes to $16.6 billion—that's less than the province's contribution in 2007 alone.
So who's been picking up the slack?
For the most part, it's been Alberta. In total, between 2007 and 2015, Alberta's net contribution to confederation averaged $21 billion per year. But an oil-price downturn and a deep recession have begun to put a dent in Alberta's ability to contribute. For example, while it remains a big net contributor, Alberta's net contribution fell by about $3 billion between 2014 and 2015.
Subsequently, with the Alberta economy still on the ropes, the Canadian economy needs strong and sustained growth in Ontario. The problem is that there are good reasons to be concerned about Ontario's ability to grow under the policy status quo.
Business investment, key to any jurisdiction's long-run growth prospects, continues to languish below pre-recession levels. With sky-high electricity prices and a rapidly growing minimum wage, the policy environment in Ontario is not generally conducive to renewed economic growth.
To turn things around, Premier Wynne's government must recognize the province's ongoing difficulty attracting investment and consider policy change to help make Ontario a more attractive place to grow and expand a business. Given the importance of a strong Ontario to a strong Canada, Canadians from coast to coast should be rooting for sustained, robust growth in the country's most populous province.
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