One of the unfailing tendencies of government is its skill in engaging new problems with old solutions. Case in point is the Ontario government’s response to the economic recession.

The government can barely contain itself when it talks about the need to provide government-sponsored economic stimulus.

We know that provincial government expenditures have ballooned at an average 8% per year since 2003, well above inflation. To put that into perspective, it took from Confederation to 2002 for the Ontario government to take the provincial budget to $68 billion. Dalton McGuinty will vault us past $100 billion this year. If rapid increases in government spending were the solution, Dalton McGuinty would have taken us to nirvana by now.

Instead, for the first time in history, Ontario has become a “have not” province. We have lost more than 200,000 well paying manufacturing jobs and we routinely trail the pack of provinces in economic growth.

The same tax and spend policies that got us into this mess sure won’t get us out of it.

The reality is that, especially in times of declared government spending, almost everyone requests a piece of the pie. Not even the vitality of newly elected President Barack Obama could overcome these forces—pledging as he did an $825 billion stimulus plan that includes $21 million to sod the National Mall in Washington DC and a surprising $200 million for birth control education. Same story here in Canada: the City of Ottawa, save for the media coverage that ensued, would have committed in March 2008 to use provincial infrastructure money to eliminate a deficit in its snow-clearing budget. Talk about a slush fund.

Many of Canada’s business leaders have expressed reservations about economic stimulus. One CEO put it this way: “It is not wise or possible to try to drink yourself sober.”

A more sensible path would involve pursuing tax reform and eliminating the countless regulatory burdens on businesses, which cost Ontarians an estimated $13 billion per year.

I have previously written that the simple act of canning, drying, and packing tender fruit is classified by the Ontario Ministry of Finance as an “industrial activity,” resulting in a tax rate for local farmers that is 15 times higher than the agricultural rate.

Similarly, government regulations prevent craft wineries from opening up retail stores such as VQA Wine Stores beyond one at the winery itself.

It is a fact of economics that tax reductions have the ability to change behaviour by creating incentives for consumer spending and attracting long-term investment; and that regulatory reforms have the effect of unleashing the creativity and innovation of our entrepreneurs.

Can we expect the government to approach the recession on these terms, permitting Ontario to emerge from this recession stronger than we went into it? Not when we continue to confront the financial challenges of the twenty-first century with outdated policy responses.