The key to deficit reduction is not austerity - reducing government spending by cutting programs and personnel - but good old-fashioned employment. Stanford’s argument is in the Krugman reformist, Keynesian tradition. He doesn't seek a transformation, merely a technical economic readjustment, but, given our failure to transform capitalism so far - which can be brought about, in any case, only with a political strategy, not mere economic tinkering - it has value within the framework of a capitalist reality - a stopgap of sorts.
As I've said many times in that context:
Without employment, no income; without income, no spending; without spending, no demand; without demand, no production; without production, no economy.
And thus no tax revenue to pay down the deficit. Frighteningly simple, especially when one realizes that government itself instead of firing people could be employing them and establishing employment programs in an effort to stimulate the economy when the private sector is failing to do so during these stagnating times.
Still, the question remains: why is it that so many governments continue to drink the austerity koolaid when it is so evident from countless global examples that it simply doesn't work? Because of course, as the main partner in corporatocracies, they serve their corporate brethren and their plutocratic masters. Austerity always privileges this investor class, and, while it may seem counter-intuitive, recessions, as Robert Pollin has suggested, actually benefit this class*. Ontario is no exception in its allegiance to the financial sector - after all Bay Street isn't in Boise - especially since it necessarily controls so much of Ontario’s industrial economy too. As long as industrial economic activity is fulled by debt/credit, the financial sector and its capital will be in control.
We should nevertheless be grateful, I suppose, that the Ontario Liberals chose to ignore Don Drummond’s highly dubious classic neoliberal recommendations. Who knows the horrors they might have wrought.
* In the eyes of the investor class, austerity presumably generates confidence by working to maintain government solvency and asset value, especially long-term government bonds, by way of keeping inflation in check through reduced spending. Thus Canada’s neoliberal fiscal policy complements the Bank of Canada’s monetary policy of low interest rates, which also keep inflation in check. This is important to the investor class because government is of course the final guarantor of the plutocrats’ investments and their banking institutions. The outsourcing of government services if they happen at all under austerity is only an incidental benefit as is increased neoliberal freedom in the “marketplace,” for spending, whether intended by the policy or not, is also seriously inhibited in the general economy..