Deficit Mania in Perspective

Determined to benefit from the shock of a global recession, conservatives are whipping up unnecessary hysteria over the fiscal deficits governments have incurred in the past year’s efforts to protect their citizens.

The hysteria is particularly unwarranted in Ontario, where the provincial deficit is manageable: even if the government does nothing, with a normal recovery from recession, the provincial deficit will disappear by 2014 or 2015. No need to panic
and sell off valuable crown assets. No need to panic and start slashing public services. No need for a single Dalton Day. In fact, the analysis in this paper indicates deficit-motivated spending cuts would jeopardize Ontario’s recovery from the recession.

A reflection on history shows that we have had recessions before; budgets have fallen deeply into deficit before; our economy has recovered from recessions before; and fiscal balances have recovered after recessions before.