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Austerity Shouldn’t Crush the Poor

January 12, 2012 Poverty Reduction

by Tom Cooper

(An opinion piece originally published on January 12th at http://www.thespec.com/)

Just prior to Christmas, I received an invitation from the Ontario Ministry of Finance to “participate in a discussion about the 2012 provincial budget.” It was billed as an opportunity to share views and speak directly with the minister, Dwight Duncan

On arrival in Toronto, I discovered that the finance ministry’s definitions of “participate” and “share views” could be a bit open to interpretation. Interviewees were given exactly three minutes to state their position.

I sat waiting for my turn at the microphone with representatives from the Ontario grape growers, the insurance industry lobby and a property taxpayer coalition. As the representative from the Hamilton Roundtable for Poverty Reduction, I felt a little lonely.

When it was my turn, I spoke about the need for real social assistance reform in Ontario. In Hamilton, 75 per cent of families on provincial income-support programs use food banks. Monthly allowances do not provide enough money for food. The number of kids needing emergency food in Hamilton has risen to 8,500 every month — equivalent to 370 full classrooms. The impact of food insecurity on a child’s ability to learn and thrive is so devastating that many will fall behind and never catch up to their peers.

I spoke about Dr. Atif Kubursi’s research at McMaster University — that investing in people in receipt of social assistance generates a substantial return on investment. In fact, investment in social assistance creates a far greater impact on the local economy than building roads or bridges. On behalf of the Poverty Roundtable, I asked the government to set social assistance rates on the actual costs of living, to help lift Ontarians out of deep poverty, and to invest in people — giving our children a future worth inheriting.

With presentations completed, Minister Duncan stood up to say a few words. He reminded us of the current economic conditions in Ontario; referenced the fiscal review being undertaken by former TD-Canada Trust chief economist Don Drummond; and then Duncan bluntly said there would be no “new money” in the 2012 budget.

With that less-than-uplifting pronouncement I walked out into the blustery wind of Toronto’s Bay Street, considering what Drummond’s report — due later this month — might hold in store for individuals living in poverty.

Several months ago, the Ontario government retained Drummond to deliver a report with recommendations on how to rein in spending and put Ontario’s fiscal house in order. Drummond’s mandate was to review not just how much is spent on government services, but examine how those services are delivered — figure out how to get more bang for the buck.

The anticipated report has been taking on a doomsday cultlike following. “Austerity,” “fiscal prudence,” and “restraint” have been the catch words most associated with its release. Most observers are expecting some very grim recommendations to slash spending and possibly cut essential programs. There have even been rumours about reversing the uploading of social services from the municipal tax base.

But what will Drummond really have to say about poverty reduction and the need for social investments in Ontario? Contrary to the buzz, I’m hoping his past comments will serve as a guide.

Drummond has recognized the importance of investing in poverty reduction. As chief economist for TD-Canada Trust, he was an outspoken advocate of investing in people. In 2008, Drummond said “Poverty is a personal tragedy for everybody it inflicts. That alone justifies action.” In 2010, Drummond called for “a much needed modernization of the province’s income security policies because of the widespread recognition that something must be done about poverty.”

A couple of years ago he coedited a groundbreaking report from the Ontario Association of Food Banks called The Cost of Poverty. That report revealed that allowing poverty to fester has a significant cost for society and is a big expenditure for governments. The federal and Ontario governments are losing $13 billion a year due to inaction on poverty — a loss equal to 15 per cent of the provincial budget. One of the key findings was that “targeted early intervention initiatives focusing on low-income populations have a high rate of return.” In other words, by spending a little today, a society can save a lot tomorrow.

Drummond’s mandate from the provincial government did not include any licence to recommend tax increases — corporate or personal. But with Canada and Ontario now bestowing the lowest corporate tax rate in the G-7 group of industrialized nations, it has become clear that corporations must also start sharing the load.

Hamilton community activist and Cable 14 Opinionator Alex Johnstone recently reminded me that the arguments in favour of corporate tax breaks are based on “the whimsical hope that we’ll one day get a return on our investment with job growth. In reality Statistics Canada figures reveal that since the 2008 recession businesses have invested in cash reserves in lockstep with corporate tax breaks to the tune of $83 billion.”

So there are alternatives to across-the-board funding cuts — if the government has the courage and vision to make it happen.

If Drummond heeds his own past advice and is serious about fixing the system, he should be encouraging investments to reduce poverty in Ontario. And if our governments are serious about spending wisely and getting the biggest bang for their buck they will heed the evidence and invest more in social programming and less in corporate tax breaks — investing a little today to pave the way for a prosperous tomorrow.

Tom Cooper is director of the Hamilton Roundtable for Poverty Reduction.

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