The Harris Government A Mid-term Review by Marc T. Law, Howard I. Markowitz, and Fazil Mihlar Contents 4 About the authors 4 Acknowledgments 5 Summary: Main Policy Recommendations 6Introduction 9Spending Policy 13 Taxation Policy 18 Social Policy 21 Labour Policy 25 Health Policy 30 Education Policy 34 Regulatory Policy 36 Privatization Policy 39 Municipal Affairs 44 Final Thoughts 46 References Critical Issues Bulletin About the authors MARC T. L AW is a student intern with The Fraser Institute. He has a B.A. in Honours Economics from the University of British Columbia and an M.A. in Economics from Queen’s University. His fields of interest include applied macroeconomics and public policy. In 1996, he co-authored with Fazil Mihlar an extensive review of the economic and social policies of the federal Liberal government entitled The Federal Liberal Government in Action: A Report Card Issued to the Chretien Government. HOWARD I. MARKOWITZ is a third-year law student at Osgoode Hall, York University. He has a B.Comm. in Strategic Planning from McGill University. He has won a number of awards and honours for his skills as a debater, is a regular legal panelist on CBC Newsworld, and has written legal commentary for Fraser Forum and the Canadian Student Review. FAZIL MIHLAR joined the Fraser Institute in 1994 and is now a senior policy analyst. He is the author of several reports on the economic performance of provincial governments, and has written reports and ar- ticles on subjects ranging from labour-market policy to regulation policy. His latest publications include, Regulatory Overkill: The Cost of Regulation in Canada (1996) and Unions and Right-to Work Laws: The Global Evidence of their Impact on Employment (1997). He is also the coordinator of the Survey of Senior Investment Managers and the Centre for Economy in Government. His articles have appeared in several newspapers, including The Globe and Mail, The Financial Post, The Calgary Herald and The Vancouver Sun. Before joining the Institute, Mr. Mihlar worked at The Small Business Consulting Group at Simon Fraser University as a Business Consultant. He holds a B.A. in Economics from Simon Fraser University, an M.A. in Public Ad- ministration from Carleton University, and a Marketing Diploma from the Chartered Institute of Market- ing, London, England. Acknowledgments The Fraser Institute wishes to thank the DONNER CANADIAN FOUNDATION for providing the funding for 1997 summer internships for Marc Law and Howard Markowitz. The authors also wish to thank Michael Walker and Filip Palda for detailed comments and suggestions. The authors, of course, take full responsi- bility for any errors and omissions and as they have worked independently, their views do not necessarily represent the views of The Fraser Institute or of its trustees and members. 4 The Harris Government: A Mid-term Review Summary: Main Policy Recommendations For more detailed explanations of the following Education policy policy proposals, please see the relevant sections in • Redirect all education spending directly to par- the main text. ents through a system of school vouchers (edu- cational opportunity scholarships); or Spending policy • Pass charter-school legislation to allow for more • Legislate provincial government spending lim- choice in schools. its. We recommend an indefinite freeze on pro- vincial government spending at the 1997/98 • End closed-shop union privileges currently en- level of $54.3 billion. joyed by the Ontario Teachers Federation (OTF). • Develop a debt elimination strategy. Regulatory policy Taxation policy • Impose a three-year moratorium on all new reg- ulations (with exemptions for natural disasters • Continue to reduce the tax burden in tandem and national emergencies). with the spending freeze. • Introduce more market-driven responses and • Reduce marginal income tax rates and, in partic- non-regulatory alternatives into current regu- ular, eliminate income tax surcharges. lations. • Reduce payroll taxes. • Prioritize all regulations using modern risk- assessment techniques. Social policy • Provide “sunset review” of all regulations. • Continue to trim welfare benefit rates. • Adopt the Sarlo poverty line as the benchmark Privatization policy for welfare benefit rates. • Privatize major public companies and crown • Replace the current welfare system with a Neg- corporations including Ontario Hydro, the Li- ative Income Tax (NIT). quor Control Board of Ontario, the Ontario Film Development Corporation, the Ontario Loan Labour policy Corporation, Ontario Place Corporation, and the Ontario Waste Management Corporation. • Eliminate the minimum wage. • Contract-out public sector services wherever • Repeal the Labour Relations Act; enact Right-to- possible through a process of competitive bids. Work (RTW) legislation. • Reform the Workers Compensation Board Municipal affairs (WCB) to put it on a firmer financial footing. • Replace the current system of two-tiered local government in Toronto and elsewhere with a Health policy single-tier of competing local governments. • Ignore the Canada Health Act and allow more • Encourage municipalities to charge for consump- private market forces to operate in the delivery tion of municipal services on a user-fee basis. of health care services. • Use Unit Assessment (UA) techniques for all • Allot government funds for health care directly property tax assessments. to consumers through a system of Medical Pre- mium Accounts (MPA). 5 Critical Issues Bulletin Introduction The superficiality of current On the irrelevance of intentions policy debates Discussions about public policy, if they are to be It is an unfortunate fact that discussions about fruitful in any operative sense, must be about the public policy are often clouded by politics and ide- actual consequences of particular policy choices. ology. All too often, debate about public policy cen- They must be discussions about how policies affect tres not on the actual impact of policies but on the the well being of individuals and not simply about identities and ideologies of those who support or who is advancing a policy proposal and for what oppose these policies. For example, it is often political reasons. Much of the current debate can heard that Party A supports policy X because Party neither inform nor guide policy choices as the pre- A is a right-wing party that is unconcerned with occupation with intentions and ideology tells us the plight of the working poor. Just as familiar is nothing useful about whether or not particular pol- the claim that Party B, a left-wing party, is opposed icies should or should not be adopted. Indeed, the to policy X because such a policy would advance current obsession with ideology and partisan poli- the interests of the business community. Because tics in the policy debate overlooks the fact that bad the policy debate is framed in such a manner, outcomes are more likely to be the product of bad meaningful discussion about what will actually oc- ideas than bad intentions. This point was made ex- cur if a policy is implemented seldom takes place. plicitly two centuries ago in a remark by Pierre S. Instead, the discussion degenerates into name- du Pont, a Deputy from Nemours, to the French calling and finger pointing, an exercise that is inev- National Assembly: itably futile for there can be no reconciling such di- visive points of view. Gentlemen, it is a disagreeable custom, to which one is too easily led by the harshness of That policy debates are often framed in such terms the discussions, to assume evil intentions. It is should come as no surprise. Oscar Wilde noted necessary to be gracious as to intentions: one long ago that “We live . in an age of surfaces” should only believe them good, and appar- (1899/1986: 304). Too often, we believe that by as- ently they are; but we do not have to be gra- signing blame we can solve our problems. We are cious at all to inconsistent logic or absurd all too willing to buy into the quick and easy fixes reasoning. Bad logicians have committed sold to us by politicians and so-called experts. And more involuntary crimes than bad men have so frequently our quick fixes get us nowhere and done intentionally.1 our witch-hunts leave us polarized. This is the tri- umph of superficiality over depth and of pseudo- Hence, if we are to go beyond the surface and actu- intellectualism over considered rationality. Our ally engage in a meaningful discussion about pub- failure to analyze the real consequences of our pol- lic policy, it is necessary to abandon our prejudices icy choices carefully and our willingness to take the and examine the real effects of various policies in a easy route leaves us in a muddle that could and critical and disinterested manner. And if we are to should have been avoided. examine the effects of policies and offer meaning- ful alternatives, we must have a base of good, solid, ideas that take into account both the seen and un- seen consequences of human action. 1 Cited in Friedman 1977: 77. Apparently du Pont made the remark on September 25, 1790. 6 The Harris Government: A Mid-term Review Economics as a guide to The Ontario government good public policy In the spring of 1995, Premier Mike Harris and the Without doubt, the progress of economics as an Ontario Progressive Conservatives were swept empirical science has an important role to play in into power on a mandate to “take a fresh look at discussions about public policy. This is because government” and to “re-invent the way it works, to economics, as an empirical discipline, is ideally make it work for the people” (Progressive Conser- suited to illuminate the consequences of human ac- vative Party of Ontario [PCPO] 1994: 1). If asked, tions. Because the desirability of any policy propos- most observers would likely agree that govern- al depends upon some prediction about the conse- ment was not working particularly well in Ontario quences of doing one thing rather than another, at that time.