Raise the Hammer

As you can see from the numbers I presented, high levels of government spending does not create private sector economic activity, it crowds it out.

Your numbers do not prove your hypothesis. They are a couple snapshots of a provincial economic average (the GDP) which is just one measure of a very complex environment. Flaws I see in your analysis:

1) You've compared a period of continued growth (1996-2000) with a period with global economic collapses at both its start and finish. You would be much more credible if you compared 1996-2003 and 2003-2010, which are periods of equal duration both of which happen to contain a significant economic collapse.

2) Only considering GDP growth and government spending in a single provincial economy neglects the effects of the global economy. To make a credible argument you need to compare several jurisdictions with varying changes in the level of government spending and compare those to the case in Ontario you've outlined.

3) Public spending is still high, but the conference board of Canada predicts Ontario will lead GDP growth for 2010 @ 3.8% http://www.calgaryherald.com/business/On...

4) Do you honestly believe that making cuts to the already broken Ontario Healthcare system and inevitably increasing the highest tuition fees for postsecondary education in the country would have no long term economic effect 10-20 years down the road? Some types of spending (e.g. infrastructure, education) take a significant amount of time to yield improvements for the economy, but not investing in infrastructure also doesn't work. As an extreme case consider this: would Western Canada even really exist today if a government subsidized transcontinental railway hadn't been built?

5) Say I propose an alternative hypothesis: the reduction in government spending in 1996-2000 resulted in lowered GDP growth in 2000-2009 as Ontario was unprepared for the physical infrastructure and knowledge infrastructure needed to succeed in the rapidly modernizing global economy. Can you refute this hypothesis with your data?

All of this being said, there does have to be a careful analysis of the appropriate levels of public sector spending to yield positive results for all those in our society. Having moved here from out West, it does seem like provincial governments in Ontario(of all stripes) go through periods of spending like drunken sailors with seemingly little direction or vision.

I don't believe that your "evidence" proves that the best thing for Hamilton to do is to reduce taxes and not spend a penny on infrastructure. Its possible that your plan could work, but you haven't proved it.