Harris Government on the Right Track

Ontario government earns overall grade of C+, according to Fraser Institute report card

Release Date: 8 October 1997

VANCOUVER, BC>>>  The Fraser Institute today released an extensive review of the economic and social policies of the Ontario government. Entitled The Harris Government: A Mid-term Review, authors Marc Law, Howard Markowitz, and Fazil Mihlar argue that the overall performance of the Harris government has been "satisfactory", and award the Ontario government an overall letter grade of C+.

"The Harris government is certainly moving in the right direction with respect to its economic and social policies," said Mr. Mihlar, a senior policy analyst at the Fraser Institute and report co-author. "Much work, however, remains to be done before Ontario can truly become an engine for job creation and economic growth."

The reports makes 25 recommendations for reforming the role of government that would help promote greater economic growth and employment for all Ontarians.

The report is divided into nine sections based on nine different policy areas. Each section begins with a detailed discussion about recent economic research in the particular policy area. The various policy initiatives pursued by the Harris government are then critically reviewed in light of what is known from recent economic research, and a letter grade is assigned for each policy area. Below is a list of policy areas examined and grades assigned. (For a more detailed explanation, please refer to the main document).

In some policy areas, the results are very positive. Cuts to government spending will free up resources for more productive uses in the private sector while reductions in income tax rates will improve efficiency. Changes to the welfare system should end the regime of welfare dependence by encouraging able-bodied individuals to return to the labor market.

Restructuring health care and education will redirect dollars away from bureaucrats and back to where they are needed most. Finally, reforms to the labor regime will reduce job-killing labor market rigidities and foster an environment more conducive to employment growth.

In other areas, however, much work still must be done. If the efficiencies arising from smaller government and lower taxes are to be fully realized, marginal tax rates must come down even further and income tax surcharges should be eliminated. If the effectiveness and affordability of the education system is to be enhanced, school choice -- either through a voucher system or through the introduction of charter schools -- is essential.

Furthermore, if the Ontario government is to follow through completely with its promise to redirect resources away from government and back to the private sector, a more vigorous privatization strategy should be pursued. "The Ontario government's current privatization strategy is perhaps best described as a non-strategy," said Mr. Mihlar.

The health policies being pursued by the Ontario government are also a cause for concern. "Hospital closures, tight controls, and Restructuring Commissions symptoms of, rather than a cure for, a more fundamental problem: the lack of prices, competition and market forces in the health care sector," Mihlar emphasized. "If the Harris government is really interested in improving the health care system, it should allow private market forces to play a greater role in the health care sector."

Furthermore, according to the authors of the report, the Ontario government's approach to the municipal affairs portfolio is flawed. Municipal amalgamation will probably result in higher costs as intergovernmental competition at the local level is stifled. The empirical evidence from the U.S. suggests that municipal costs per household rise significantly as cities get larger. "The Ontario government would do well to note the significant scale diseconomies associated with large amalgamated local governments in the U.S.," added Mihlar.

While cautioning that much work remains to be done, the authors credit the Harris government with moving in the right direction and for having the courage to initiate the first steps towards improving Ontario's economic condition.

Established in 1974, The Fraser Institute is an independent public policy organization based in Vancouver.

For further information contact:

Suzanne Walters, Director of Communications,
The Fraser Institute, (604) 714-4582,
Email suzannew@fraserinstitute.ca

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