New spending or tax cuts? If applied appropriately, both strategies could work to assist Ontario as it prepares to ride through some rough economic waters.

Federal Finance Minister Jim Flaherty has advocated a major cut to business taxes to stimulate the economy. His advice was, as expected, rejected by the provincial Liberals in their budget announcement Tuesday.

Instead, Ontario Finance Minister Dwight Duncan unveiled a budget that sprinkles a little help to a variety of areas. The government is hoping its tiny Band-Aids will cover the hemorrhaging long enough for the province to emerge from one of the worst economic periods since the recession in the early 1990s.

On Tuesday, the government committed to spend $96.2 billion in 2008/09. The key planks of new spending will see $1.5 billion invested in the Skills to Jobs Action Plan aimed at retraining unemployed workers, many from Ontario's battered manufacturing sector.

With a corporate income tax rate at 14 per cent and a tax rate of 30.7 per cent on new business investment (the highest in the country), job losses may continue to overshadow retraining efforts.

Another $1 billion will be spent on infrastructure. This is a welcome infusion of capital, but falls well short of needs, as well as calls from municipalities for more permanent and stable funding.

Hamilton will benefit from this budget, with a slice of infrastructure funds, including money for transit upgrades, $12 million in one-time social services funding and money for improvements to social housing.

The $12 million assures Hamilton city council can hold the line on an expected municipal tax increase of around 3.7 per cent. Without the handout, the hike would have been between six and seven per cent. However, once again the city is left without assurances this money will be available next year.

The government pegs economic growth predictions for Ontario in 2008/09 at 1.1 per cent. Other economists believe growth will be much lower and that Ontario will lag behind the rest of the country. That's not good news.

The budget also predicts an expected surplus for 2007-08 (the fiscal year ending March 31) of $600 million. The province has pledged to direct a portion of provincial surpluses over $800 million to municipal infrastructure projects after paying $600 million toward a $162-billion debt.

However, with the yearly interest payments alone at $9 billion, $600 million is chump change. Where is the commitment to lower debt for future generations? Health care will get increased funding in this budget, up six per cent to $40.4 billion (roughly 40 per cent of all provincial spending).

There is also $750 million in tax breaks for the manufacturing sector, but it's not enough to prop up this struggling sector of Ontario's economy.

And there's little to nothing for small-and-medium sized business, which create the bulk of new jobs in Ontario. In fact, they will be adversely affected by the government's commitment to increase minimum wage.

Other spending highlights include:

• money for low income families, including $135 million for dental care and $32 million for nutrition programs.

• money to reduce wait times in emergency departments, for additional general surgeries and to hire 9,000 nurses by 2011-12 and 2,500 personal support workers for long-term care homes.

• a 10-year holiday from any corporate taxes for new corporations that commercialize research from Canadian universities, colleges and research institutes.

• a property tax grant for low-income senior homeowners of $250 in early 2009, rising to $500 in subsequent years.

• $385-million for a textbook and technology grant for full-time post secondary students, worth $150 per student this fall, rising to $300 in 2010.

• $465 million for post-secondary student aid.

While the Ontario economy continues to bleed, this budget applies some fresh bandages on the wounds.

It remains to be seen just how long the recovery period will be and if this government has the courage for more radical surgery.