Ontario Nurses' Association Releases an Alternate Macroeconomic Solution to Fixing the Fiscal House

TORONTO, Jan. 10, 2012 /CNW/ - The Ontario Nurses' Association (ONA) is today releasing a new research paper that provides an alternate reading of Ontario's macroeconomic situation and people-oriented solutions.

ONA staff economist Salimah Valiani's analysis makes calculations based on government data demonstrating that Ontario's finances are not as tight as is currently being discussed. Compared to several countries, Ontario has relatively small deficit-to-GDP and debt-to-GDP ratios - true markers of economic health.

"Our economist's findings are quite striking and call into question exactly what actions should be taken to eliminate the province's deficit," says ONA President Linda Haslam-Stroud, RN. "The research paper also examines what other countries are doing to ensure they emerge from the worldwide economic downturn stronger and ready for the future, and how the drastic measures taken in Greece have further worsened that country's economy while devastating public services."

The paper, entitled Fixing the Fiscal House: Alternative macroeconomic solutions for Ontario, shows that Ontario is suffering from a structural deficit largely due to low taxation of corporations and high-income individuals. Government data on production and profit rates in Ontario from the late-1990s on show that the link between low corporate tax rates and increased job creation is simplistic and effectively inaccurate.

"During a period of reduced taxation, our economy has experienced falling or stagnant production levels, falling employment and healthy profits for corporations," says Haslam-Stroud. "Tax cuts have created more wealth for the wealthy and intensified work for the majority of Ontarians - and registered nurses are a prime example of work intensification and its effects. Further reducing public-sector spending will simply add public-sector workers to the growing numbers of unemployed private-sector workers. This in turn will reduce domestic consumption and delay economic recovery - hardly the ideal future for this province."

The paper elaborates on stimulus measures adopted in China and Brazil - including public health care expansion - aimed at increasing domestic consumption, employment and improving the well being of residents during trying world economic times.

ONA will provide the paper and its economic analysis to the provincial government and is also presenting its findings at the Commission on Quality Public Services and Tax Fairness town hall meetings across the province. The paper is available on ONA's website.

"Ontario's registered nurses and allied health professionals have seen the effects of budget constraints on patient care, and they've experienced the intensification of work and the health effects on their colleagues," notes Haslam-Stroud. "Ontario must ensure that it addresses its structural deficit at the root, rather than further cutting health care quality and the prospects of full economic recovery for the province."

ONA is the union representing 57,000 front-line RNs and allied health professionals and more than 13,000 nursing student affiliates providing care in Ontario hospitals, long-term care facilities, public health, the community, industry and clinics.

Ontario Nurses' Association

Highlights from
Fixing the Fiscal House:
Alternative macroeconomic solutions for Ontario

About Today's Ontario Economy:

On debt-to-GDP ratios - the real test of fiscal health:

• In Ontario, the debt-to-GDP ratio in fiscal year 2010 was 35.4 per cent. (2011 Ontario Budget Papers, p. 292) This compares with debt-to-GDP ratios for fiscal 2010 of 32.2 per cent for Canada, 41.1 per cent for the USA, 58.7 per cent for Germany, and 109.5 per cent for Greece.
  
  
• In the Maastricht Treaty - the agreement aiming to bring European countries into an integrated political-economic union - the debt-to-GDP ratio member countries are required to meet is 60 per cent (assuming there is growth in the economy). Using this figure as a basis to determine whether there is order in the various fiscal houses listed above, two points stand out: 1) More than half of these fiscal houses are in order, but are undergoing public spending cuts of a "pound of flesh" nature… This has been justified by governments and parties of all political shades on the basis that governments must protect credit ratings as determined by Moody's and other credit rating agencies and that GDP growth has been either low or negative….

On the Greek government's revenue base:

• Between 1996 and 2006, total revenues of the Greek state amounted to an average of 37.9 per cent of GDP. This compares with state revenues of 54 per cent of total GDP in Sweden and an average state revenue of 45.3 per cent of GDP in the 15 countries of the Euro zone (known as the EU-15). As a result, public social spending in Greece - for example on pensions, health care, home care, education, social services - amounts to a smaller percentage of Gross National Product (GNP) than in the EU-15. Whereas in the EU-15, average public social expenditures amount to 27 per cent of GNP, in Greece they account for 25.9 per cent. (Navarro: 2011)
  
  
• The principal reason why Greek state revenues and, in turn, public social spending are relatively low is that taxation of the wealthy in Greece is minimal to non-existent. More specifically, a range of business activities are tax exempt including profits earned on the sale of stocks, income earned in the shipping industry and capital gains made on family business sales.
  
  
• Additionally, while the nominal tax rate for corporations in Greece is 25 per cent (in line with the OECD average of 25.7 per cent), the real corporate tax rate is far below the EU average due to rampant corporate tax evasion as well as inconsistent value-added tax collection by the state.

On the Ontario government's revenue base:

• Between fiscal year 1998 and fiscal year 2003, through a combination of corporate and other income tax cuts, the Ontario government eliminated 61.9 billion CAD from its revenue base. The upcoming proposed corporate tax cut (following from a reduction of 2.5 per cent between 2009 and 2010) will reduce the Ontario corporate tax rate from 11.5 to 10 per cent. This is estimated to amount to a further loss of fiscal capacity of 2.5 billion CAD by the end of fiscal year 2012.
  
  
• Even a successful, two-year public sector compensation freeze, as called for by the Ontario government in July 2010 - contrary to the collective bargaining rights sanctified in the Canadian Charter of Rights and Freedoms -  would not make up for this 2.5 billion CAD loss of fiscal capacity.
  
  
• As estimated by economist Hugh Mackenzie, a two-year public sector wage freeze would amount to 1.7 billion, assuming a four per cent rate of inflation. (Mackenzie: 2011, 7) As estimated by MPP Hudak, a two-year wage freeze would amount to a "savings" of 2 billion CAD.

On reduced corporate taxes and job creation in Ontario:

• …in the period of reduced taxation, the Ontario economy has undergone falling or stagnant production levels, falling employment, and healthy profit rates. Rather than increased employment and production, the outcomes of reduced taxes on corporations and the wealthy are increasing wealth for the wealthy and work intensification for the majority.

On Ontario's deficit-to-GDP ratio:

• Currently Ontario's deficit stands at three per cent of real GDP. In other words, using government projections of a deficit of 16 billion CAD and real GDP of 533 billion CAD for 2011-12, the amount of shortfall in the current budget will be worth three per cent of total goods and services produced within Ontario by the end of March, 2012. This is not a large shortfall.

On Ontario's public sector:

• …the risk facing Ontario is not that the deficit will persist at its current level, but rather that cost-cutting measures will be adopted causing the "choking off" of economic recovery and long-term damage to Ontario's public services.
  
  
• … through public infrastructure investment in the past seven years…the Liberal government has made a mere beginning in reversing the damage caused by the policies of the Harris government in the 1990s…Only in 2008 did the average real wage of public-sector workers return to the level of value of average public sector wages in 1992.

On alternative macroeconomic solutions:

• Given the weak employment figures in Ontario's private sector presented in Section B, and the importance of building domestic demand within a context of decreasing exports (particularly to the USA), it would be beneficial to all residents of Ontario for the Ontario government to invest in public service expansion to increase overall employment and fuel domestic consumption.

Public investment in new social programs to increase the well-being of residents of Ontario will help rebuild the economy by making the entire population more resilient and the working-age population more productive within a trying global economic context.

• Though little discussed in Canada and other rich countries, such an approach is being undertaken in certain countries. Partly as a result, countries like China and Brazil are doing far better in weathering the global economic downturn. In 2009, at the onset of the global economic crisis, China invested 21.7 billion yuan renmimbi (RMB), or 3.4 billion USD in "grassroots" public health care - part of its 4,000 billion RMB (632.5 billion USD) economic stimulus plan aimed to subvert decreasing demand for exports by building domestic demand.

Health Care and Registered Nurses in Ontario

On public social spending:

• While the average ratio of public social spending to GDP is 27 per cent in the EU-15, it is 22.1 per cent in Spain and Ireland, 24.3 per cent in Portugal, and 25.6 per cent in Greece. Similarly Ontario, on the path of decreasing tax rates for corporations and the wealthy - a path initiated by the Conservative government but continued by the Liberal government - has seen a significant decrease in the state revenue base and this has fed into positioning Ontario as the third province from the bottom in terms of public social spending.

On the consequences for health care:

• Taking the sphere of health care, an area of public spending of vital importance to most residents of Ontario, this relatively low level of social spending is experienced in various ways. To mention a few examples: the shortage of long-term care beds and adequate home care services for the elderly, the lack of hospitals in rural areas and the North, and inadequate maternal and infant health care throughout the province. In terms of hospital care on the whole, Ontario government expenditure per capita is lower than that of all provincial governments other than Québec.

On the consequences for front line RNs:

• In Ontario, the ratio of direct-care RNs to population in 2009 was 644 to 100,000 population. In the rest of Canada in 2009, the average ratio of direct care RNs to population was 785 to 100,000. The significantly lower RN to population ratio in Ontario is a direct result of inadequate financing for front-line RN positions in hospitals and inadequate hiring and retention of RNs in non-hospital health care operations such as long-term care homes.
  
  
• … Inadequate financing of RN positions in Ontario hospitals and government refusal to mandate RN care hours in non-hospital health care operations continue despite numerous studies demonstrating that patient outcomes improve when the proportion of care hours provided by RNs is raised.
  
  
• …One consequence of the shortage of full-time RN positions and inadequate retention of RNs is the high number of overtime hours worked by nurses in Ontario...In 2008, RN absenteeism due to illness and disability in Ontario was 8.8 per cent, up from 4.2 per cent in 1987.
  
  
• …tendency to search for cost saving methods in health care delivery which often lead to harmful effects on those delivering or/and receiving the care. One instance from the Hemodialysis Unit of the Peterborough Regional Health Centre… from the summer of 2010, RNs were replaced by lesser trained, registered practical nurses… for the purpose of achieving a cost saving of 200,000 CAD. The recommendation was implemented by the Health Centre despite the fact that ONA RNs of the Hemodialysis Unit had formally identified a problem of short staffing to the Health Centre in 2009, citing that in addition to the shortage of RNs, the Unit was treating an increasing number of patients, an increasing proportion of which were of higher acuity levels.
  
  
• …Since the onset of the global economic crisis, the situation of RNs has become yet more grave in Ontario. Between April 2009 and August 2011, 2,550 RN positions were eliminated throughout the province…The current round of health worker layoffs translates into further intensification of work for those workers not laid-off… for those RNs still employed, it means more patients per RN, less RN time per patient, more paid and unpaid overtime, more stress for workers, and likely, more illness and work-related injury.