Tim Hudak’s economic truth hurts, as it should

The Ontario PC leader’s fears aren’t idle – Ontario’s economy isn’t strong, and its budgets have suffered

Photo by Blair Gable

Photo by Blair Gable

The knock on Tim Hudak is that he’s hard to like, but I had no trouble enjoying our brief talk in a loft in Ottawa’s ByWard Market the other day. The Ontario Progressive Conservative leader locks onto an interviewer’s eyes with a steady gaze, in the manner of a man who has been taught by professionals to lock onto an interviewer’s eyes with a steady gaze. It’s unnerving. Am I allowed to look away? But it seemed to me he believed that what he was saying was true and important. That’s a low bar, but a lot of politicians can’t clear it. Hudak did. If everyone in Ontario could interview him, this election might go better for him.

Hudak is in his second campaign for premier of Canada’s largest province. He managed to blow a big polling lead and lose to Dalton McGuinty’s Liberals in 2011. Through much of the 20th century, Ontario’s Conservatives won most elections with little trouble. Something in this party does not like a loser. Ernie Eves and John Tory, the other two Tories who lost to McGuinty, were dismissed after their first defeats. Hudak’s colleagues permitted him to try again. It was the right decision. Leading a party in a campaign is complex and surreal work. Hudak will have learned from rookie errors, as McGuinty and Mike Harris learned from their first defeats. But if he loses again he will be out.

What went wrong last time? “Talked more about what was wrong with the other guy,” Hudak said. “Didn’t talk enough about my plan.” After he lost, Hudak often quoted one of the Wells’s Rules I sometimes peddle: Voters are ruthless casting directors, so a leader who applies for the job of opposition leader will get it. This time he is applying for premier.

His plan is the Million Jobs Plan, the title of the Progressive Conservatives’ election platform. It calls for sharp cuts to government programs as a spur to private sector job creation. “It’s a pretty basic iron law of economics,” he said. “Lower taxes mean more jobs. Higher taxes mean fewer jobs. More affordable energy is going to mean more jobs. Higher energy costs mean fewer jobs. We’re a party that has laid out an affordable energy plan, less debt, lower taxes. And the other two parties? They’re the opposite. So it’s a very crystal-clear choice.”

It sure is. Hudak would cut 100,000 jobs from the provincial public sector. Since he would protect doctors, nurses and cops—but not teachers—from those cuts, by some estimates he’d need to cut one-sixth of the jobs in unprotected sectors. Some would go through attrition. Not all.

So by putting a number to his cuts, Hudak creates a target. By putting a number to his hopes he creates another. A million jobs? There are only half a million unemployed Ontarians. But his goal is to create those million jobs over eight years. He says that rate of job creation happened once before, in the late 1990s—at the peak of the global tech boom, while Mike Harris was making smaller cuts to the public service than the ones Hudak plans.

Can he do it again, in much less clement weather? “If we don’t do this—if we don’t create at least a million jobs—we’re into Europe-style stagnation.” Ontario has lost 300,000 manufacturing jobs in the past decade, he says. Most of Canada’s job growth lately has been in Alberta. Some of those jobs have gone to former Ontarians who moved west. I mentioned Philippe Couillard, whose Quebec Liberals won the recent election in that province. Hudak said he was happy Couillard beat the Parti Québécois, but now he worries that if Quebec gets its economic act together, Ontario will bleed jobs east as well as west.

It’s not an idle fear. Southern Ontario’s economy isn’t strong. Ontario’s provincial budgets have suffered. In 2012 McGuinty hired Don Drummond, a leading bank economist, to write a report describing the calamity that would ensue if Ontario didn’t get its budget deficits under control. Then McGuinty quit. His successor, Kathleen Wynne, implemented few of Drummond’s recommendations. Deficits keep growing. Wynne promises they’ll reverse and start shrinking. On their own. Without the tough medicine Hudak prescribes.

Hudak’s reward for picking a round number like one million has been to get his math picked apart, credibly I think, by outside observers. Predicting job numbers is a mug’s game anyway. If he had called his platform “Ontario back to work” and left the numbers out, he’d offer his opponents a smaller target.

But the problems Drummond described are real. Including this one: “Ontarians have not yet grasped” the decline of the province’s manufacturing base, its corrosive effect on public services, and the need to reverse the decline, Drummond wrote. He urged the Liberals to inform the electorate. They ignored the request. Why inform an electorate? Wynne, who has all the personal charm Hudak is said to lack, insists she will not cut government services. That way she attracts some voters who fear cuts, and some who know cuts are inevitable and simply trust Wynne to flip-flop after her election. I expect a Wynne government would do most of the cutting a Hudak government would. Only Hudak admits it. We’ll see whether that was a good idea.


Tim Hudak’s economic truth hurts, as it should

  1. Hudak’s assertion that lower taxes create jobs might be right if the tax rate were reduced to zero, but dropping an already very low tax rate (compared to other developed jurisdictions) by a couple of points will create about zero jobs.
    Add to that the destruction of his math “logic” by respected economists and what you get is a man who will doggedly follow his idealistic political beliefs regardless of realities (just like his mentor did) and plunge Ontario into an even worse economic situation.
    Vote for this man and his party at your peril!

    • He absolutely tends to overstate the beneficial effects of right wing change, as many right wingers do. Apparently if we drop our energy prices slightly, everyone would love to refine their oil in Ontario too.

      • No, no, no, you’ve got it all wrong. By cutting corporate taxes, the price of consumer goods will drop because merchants will pass along their greater after-tax profits to consumers. Since consumer prices will be less, Ontarians will be able to work for less to achieve the same standard of living. Therefore, employers can cut wages which will make us competitive with low wage jurisdictions for manufacturing jobs. Also wages will be depressed by flooding the job market with laid off public sector workers.

        • But you can’t make a logical case that the public sector in Ontario doesn’t need trimming. More than 2/3 of the cost of government is payroll. More than 10% of all Ontario public workers are in the top 5% of income earners. How do you rationalize high profit work in a non-profit sector? Their pay and pensions are onerous burdens on people who mostly earn less than they do. I see Hudak advocating a return to a semblance of balance and fairness in public sector compensation.
          Taxes are only a portion of the costs of government that limit private sector investment, job creation, and growth. Fees, regulations, and regulatory fees are simply barriers to wealth creation and nicer words for taxes. Kathleen Wynne advocates an expanded pension system, that will reduce the take-home pay of every Ontarian that works in the private sector. COLA provisions in public contracts will erase the income lost by public workers. Job creators will have to scale back hiring and expansion. Small businesses will have to trim a couple hundred per month per employee from their bottom line, limiting profits even further and along with that the ability to thrive and expand. For their sacrifice, Ontarians will be rewarded with near-zero rates of return and the spectre of their pension monies being used to fund more liberal pie-in-the-sky public schemes.
          The bottom line is a simple one: failing to address, coldly and bluntly, the single biggest cost burden in government- payroll- is wilful blindness to the single greatest threat to our future prosperity.
          One need only look stateside. Every single state and civic government that faces bankruptcy today, has been long governed by those who advocated for higher taxes, higher fees, more regulations, and a highly paid, highly influential, and well protected civil service. Cause, meet effect.

          • Slashing jobs with no regard to effect on the education system isn’t balanced and fair. Ontario is near the bottom of provinces on govt:private worker ratio so job cuts aren’t needed.

            Negotiating a new structure for new employees would be fair, an employee at a job level in Kapuskasing shouldn’t be making the equivalent of a GTA worker. I could get behind that but slashing already low corporate taxes for profitable business while laying off workers ? Sorry, I don’t want to live in MIssissipi

          • Welcome to 30 years of Reganomics, aka voodoo economics, aka trickle down theory, law and order and deregulation. Welcome to the cause of the 2008 global financial meltdown, the amassing of 89% of the wealth in the top 20% of the population, states bankrupted from housing the highest numbers of inmates in the world, environmental disasters due to deregulation and extreme weather events. Welcome to the US where most of the 25 largest corporations pay no corporate taxes and where some of them collect tax rebates, Welcome to food service workers whose minimum wage is $2.13 an hour and who can’t afford to eat at McDonald’s where they work. Welcome to a healthcare system that costs twice as much as Canada’s and where even with Obamacare millions of Americans have will have no insurance and thousands will die every year because they can’t afford to pay for coverage. Welcome to the states where kids of poor families attend schools where even the toilets don’t work and the teachers are paid so poorly they have to rely on charity to survive.

            Government is a service organization and just like hospitals, most of the cost is the payroll. Paying ciVil servants a decent wage provides stability in the work force and continuity in service provision to the public. Civil servants are a favourite whipping boy of conservatives but let’s not forget that past conservative governments introduced new departments, added to the numbers and negotiated the contracts as well. Stephen Harper increased the federal civil service by 14% in 6 years and the cost of the appointed political staff in the PMO and in his top ministers’ offices is 8 times higher than those in the UK which has twice the population of Canada. In my books, paying for services to the public is far more worthwhile than paying for apparatchiks whose only job is to sell snake oil to the public.

            Every Ontarian enjoys services provided by the government, which ones that you or your family use, are you willing to relinquish?

          • “2/3 of the cost of government is payroll”. And another 8% of it is interest payments on the debt. And the year after that it will be 9% of the budget. And the year after that it will be 10% of the budget. And so on, until 100% of budget revenue is going to interest payments. How will social services look then?

  2. Leaving aside his complete fail at economics and basic math in his “Million Jobs Plan” there are several other howlers here

    “It’s a pretty basic iron law of economics,” he said. “Lower taxes mean more jobs. Higher taxes mean fewer jobs.”

    Complete and utter nonsense. Canada and Ontario already have low tax rates and corporations are sitting on record profits. We’ve been cutting taxes for years; where are the jobs ?

    Ontario’s rate of public worker per capita is already on the bottom end of the scale (although they probably make more than they should) so firing 100,000 in a sluggish economy is a dumb.

    I know it’s a rule of thumb that journalists are innumerate but this is ridiculous.

    • Ontario’s costs of doing business are some of the highest in Canada. It’s just a single Corporate Tax rate, it’s also the insane Liberal energy policies and all the other various tax hikes. You can’t possible claim with a straight face that the Liberals have cut taxes.

      As for your question “where are the jobs”, have you considered posing that question to Kathleen Wynne, who’s government has overseen the last decade of businesses fleeing Ontario at a record pace? She has to answer for her record, not the other way around.

  3. Money collected in taxes by governments and redistributed through spending on for example education salaries, social assistance, subsidies for seniors medical care and construction creates jobs. How can he say and Paul agree that if you keep lowering taxes you will create more and more jobs?
    When you keep lowering taxes and reducing the importance of all levels of government a lot of that money gets redistributed around the world on goods and services that are of no benefit to Canada. Where do the increased windfall profits go?
    Meanwhile the grinding hopeless poverty of minimum wages and multiple dead end jobs just to survive, and senior poverty and and nursing home hopelessness continues.

    • “Meanwhile the grinding hopeless poverty of minimum wages and multiple dead end jobs just to survive, and senior poverty and and nursing home hopelessness continues.”

      And how have Liberal tax and energy policies helped those people, who are now also paying more in taxes, have fewer job opportunities and simply heating their home has become more expensive. The Liberals have been abject failures on every single front.

  4. “It’s a pretty basic iron law of economics,” he said. “Lower taxes mean more jobs. Higher taxes mean fewer jobs.
    So today it’s a basic iron law. A year from now still iron law? 5 years? 10?
    So Hudak, when does this cease to an iron law?

    • It never does. You won’t find a credible economist on the planet who’d suggest that higher taxes will create jobs.

  5. Remember when Tim Hudak was supposedly going to appoint his then star candidate Doug Ford as his Minister of Finance? Who is he going to appoint now that he finally realized that DoFo is toxic? The numpty who confused jobs with person years of employment?

    • Remember when the Liberals supposedly weren’t going to raise taxes? Remember when the Liberals engaged in a vast cover-up to destroy documents relating to their billion dollar gas plant scandal? Take a look at Kathleen Wynne’s Health Minister. 100% bat-$hit crazy.

  6. From wiki:

    Hudak attended the University of Western Ontario, receiving a Bachelor of Arts degree in economics in 1990.

    Hmmm, which other economist have I seen name dropping the UWO affiliation every time an affiliated appointment was made to the BofC etc?

  7. laugher curve yo don’t forgot the laugher curve

  8. Was it by luck or deliberate selection that Hudak and the Progressive-in-name-only Conservatives found two economists who haven’t mastered basic mathematics? Then again, perhaps it was a case of tailoring the numbers to fit what was perceived to be a winning campaign slogan. Too bad for Timmy that the devil in the details has been exposed. But he has to keep defending this fakery regardless of how bizarre his statements are because without it, he has no platform on which to run.

    • It’s too bad that Kathleen Wynne’s plan is to either bankrupt Ontario or lie to it’s voters.

  9. Hudak would have more credibility if he were more up front about the 100k jobs, instead of picking a big round number out of thin air. If he said, for example, that he’s going to cancel all-day Junior Kindergarten (a McGuinty initiative and one that Drummond suggested could go), that would eliminate X jobs and save Y dollars. He needs to be upfront about what services are going to be cut and what’s not going to get done. Not that this is a pass for Wynne or Horvath, as they haven’t given any indication of what they’ll cut either.

    Thank you Paul, for noting that Harris’ time in office coincided with the tech boom. Too many people think that Harris came in, cut jobs, cut taxes and boom, continent-wide economic miracle! For the most part, government is along for the economic ride, just like the rest of us.

  10. Wynne effectively cut GM and Ford’s and Cisco’s corporate taxes to zero for an extended period of time by writing them a cheque for their promised investments in Ontario.

    Why is it fair to reduce some companies corporate tax rates to zero to supposed create jobs? Would just a corporate tax cut for everyone be better?

    What about overpaying for electricity from wind and solar operators (again effectively making their tax rate negative), and just increasing electricity prices to every other business in Ontario, way above the rates in neighbouring American jurisidictions? What about selling at a loss to those American jurisdictions the excess wind and solar electricity, subsidizing American industry, while forcing Ontario businesses and citizens to pay sky high rates?

    • During the 2008 global financial crisis. the Ontario and federal governments invested in the auto makers to keep them afloat. Had they gone under it would have had a devastating impact on Canada’s economy and the zero tax break was part of the investment. Governments give grants to businesses all the time for training, research and development, summer job programmes etc. Stephen Harper, while in opposition was a great critic of Liberal targeted tax breaks for businesses but that hasn’t stopped him from giving tax subsidies for as much as $1.4 billion this year to the oil, gas and coal companies. Even municipalities give property tax breaks and other incentives to companies willing to set up businesses in their jurisdictions.

      There are many things we can do without but one has to measure the impact of cutting them. Do working parents now have to quit there jobs to look after their children because there is no JK? Will the children be disadvantaged now or in the future without it? The answers to these questions are not only economic but also reflect our values.

      Your concerns about electricity costs may be valid, but are much more complex than you may assume. For starters trade with foreign countries is often dependent of agreements already in place and trade with US has to comply with NAFTA.

      • Apparently your “values” don’t include actually paying for anything. Sure, spend all the money in the world! Nobody ever has to pay down that debt, right?

  11. Another coservative pushing the Laffer curve. Have we learned nothing?

    And the second quote is a lie: “It’s a pretty basic iron law of economics,” there are no laws of economics, iron or otherwise. There are only theories based on statistics. But no matter, even when they use this pseudo-science this joker and his horde apparatchiks gets it wrong.

    • No economic laws! Budgets balance themselves! Spend freely and endlessly!

  12. Something that seems to have been missed in this “basic arithmetic error” discussion is that, even setting aside that gargantuan mistake, the numbers underlying the PC plan are based on ridiculous assumptions about the value of reduced regulations, reduced government, etc.

    Jim Stanford’s piece is really worth reading. For love of god, the PC plan doesn’t even subtract the 100,000 eliminated jobs from their employment figures. Nor do they include any employment losses despite a huge drop in government spending.

    Wells aside, I’ve seen a few too many journalists who seem downright sad that Hudak’s plan collapsed so completely, even going so far as to award him respect for producing something that just felt so *right*, you know?

  13. “…There are only half a million unemployed…”?

    Try a little higher,
    you must have been referencing our Kijiji-Stas-Can lately again, Paul, no ?, unless of course u’re including TFW’s?

    • oh, my bad, typo, – I meant “Stats”, and not Stasi-Ontario. ;)
      Correct me if I’m wrong.

      BTW, any chance of an inline-editor built into this cheap-azzed macleans-blogeroo?

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