Ontario Libertarian Party Newsletter
Volume 17, Number 2, Summer 1995

A Common Sense Look at the "Common Sense Revolution"

The big surprise of the election was the comeback of the Progressive Conservative Party. Under Mike Harris (PC leader since 1990), the party increased its vote share to 43% (from 23% in 1990), and its seats to 82 (from 20), to win a majority government.

Even more surprising, the PCs won on a quasi-Libertarian economic program, "The Common-Sense Revolution." Key points included: (1) spending cuts, including a civil service freeze, to reduce the deficit; (2) a review of privatizing government assets, such as TVOntario and the Liquor Control Board; (3) abolishing the Employer Health Tax (EHT); (4) "workfare," requiring welfare recipients to work for their benefits; and (5) a 30% income tax cut.

That a major party can adopt Libertarian views is promising; that it can win with them, even better. But can the PCs follow through? Indications are that they will not. Consider:

  1. The spending cuts are designed to downsize government to its size during the last PC administration in the early 1980's. But a lot has changed since then. The debt is up from $12 billion in 1981 to $115 billion this year. Ontario is squeezed between growing debt interest charges, and revenue cuts caused by Ottawa's own debt interest crisis. So the PC cuts may not cut the deficit at all. Harris has already announced $2 billion in spending cuts; but all of this is cancelled out by 1995's drop in federal transfer payments.
  2. Privatization can provide better service, at lower costs; but only if it is done right. Witness Alberta's privatization of retail liquor stores; by keeping a government wholesale monopoly, the Alberta PCs have created worse service at a higher cost.
  3. Cutting payroll taxes may stimulate business activity; but not if the higher consumer taxes that replace them kill spending. Harris's EHT replacement, an income surtax called the "Fair Share", takes effect this year, while his cuts do not, meaning an income tax hike.
  4. While welfare is a convenient scapegoat for taxpayers, workfare will not lower the tax burden. (Where it has been tried in the U.S., welfare costs have gone up.) Some may be deterred from applying for welfare; but welfare rolls will increase as civil servants are laid off. Main benefits will go to the provincial and municipal governments, who can cut their budgets by replacing $20.00/hour unionized employees with $5.00/hour workfare labour.
  5. The income tax cuts will not even begin this year; the full cut will not occur before 1999. Under supply-side economic theory, tax cuts stimulate the economy, producing more revenue. However, when Ronald Reagan tried them, he produced a recession. Arthur Laffer, the supply-side guru, pointed out then that a phase-in is all wrong; announcing a 10% tax cut for next year depresses the economy as much as a 10% tax increase this year. If Laffer is right (and it's his theory), the resulting depression may cause Harris to postpone the tax cuts further, with even worse results.

So, what will the "Common Sense Revolution" achieve? More government spending, on debt interest & the workfare boondoggle; higher prices, due to botched privatization; increased debt, meaning a higher deficit and tax burden. Common sense? Nonsense!

Choose one of the following:

For more information write or phone:

George Dance, Editor
Libertarian Bulletin
Ontario Libertarian Party,
1 St. John's Road, Suite 301
Toronto, ON, M6P 1T7
(416) 763-3688 Fax (416) 763-5306