Premier Dalton McGuinty promised "prudence" from his government as it attempts to determine how the economic chaos in the United States will affect Ontario.

"I think the first thing we need to do is make sure we're being very prudent in taking on new expenses," he told reporters in Toronto on Tuesday, one day after the Toronto and New York stock exchange had terrible days.

The TSX/S&P composite index fell almost 850 points on Tuesday and the Dow Jones Industrial Average fell almost 778 points.

The markets reacted to the U.S. House of Representatives vote on Monday that rejected a $700-billion bailout plan to buy bad mortgage debt from banks and improve their liquidity so they could start lending again.

As of mid-day Tuesday, the markets appear to be rebounding. U.S. President George Bush has again urged lawmakers to pass the bailout plan.

McGuinty said seniors in particular are worried about their savings eroding, but the premier said he's confident that Canadian banks are more stable than their U.S. counterparts.

The provincial government would maintain core programs, he said.

"We will do everything necessary to be able to maintain programs that they have to be able to count on, like our schools, our health care and job training opportunities," said McGuinty.

He was less optimistic about the fate of Ontario's export-oriented manufacturing sector.

Experts say U.S. consumers are tapped out and carrying almost a trillion dollars in "revolving" debt like personal loans and credit cards. Therefore, they are unlikely to resuming spending again any time soon.

The economy here is tightly linked to the U.S. economy, McGuinty said, adding that some manufacturing jobs are likely gone forever.

McGuinty tried to tie the province's ability to cut corporate taxes to the fiscal deal the province gets from Ottawa. He claimed other provinces have been able to cut corporate taxes "using Ontario money."

The premier has been trying to make fiscal fairness a federal election issue.

Conservative Leader John Tory told reporters he'd like to see a more positive attitude from the provincial government.

"What he's got to do is get off his back side and make this the most attractive place in the world for manufacturers to invest," Tory said of McGuinty.

NDP critic Peter Kormos found McGuinty's passiveness about manufacturing job losses "incredibly regrettable.

"The McGuinty government has done nothing by way of policy development to save, protect or restore industrial manufacturing jobs. Mr. McGuinty appears resigned to Ontario becoming a third-world economy with minimum-wage jobs," he said.

With files from The Canadian Press