When he launched his plan, Tim Hudak claimed that he had three different economists sign off .There’s one problem: None of them did
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Has Anyone Read the PC Plan? 2 When he launched his plan, Tim
Hudak claimed that he had three different economists sign off
Theres one problem: None of them did If you read my letter I state
that the methodology they use to create their fiscal plan is
reasonable, not the plan. I do not comment on any partys plans only
their methodology. (Ernie Stokes, iPolitics.ca, May 22, 2014) Pedro
Antunes, deputy chief economist at the Conference Board, told me in
an interview that the Conference Board is not endorsing the Million
Jobs plan nor did it even see the plan. (iPolitics.ca, May 14,
2014) Zycher didnt study (the PC plan). His work was done months
before the current election campaign and its not based on the
specifics of what Hudak says he would do as premier. (Ottawa
Citizen, May 12, 2014)
Tim Hudaks Plan Source of job creation Average Yearly
Cumulative Total Baseline growth (yearly average of previous
10-years) 65,400 523,200 Lower tax rate on employers from 11.5% to
8% 14,976 119,808 Ending wind and solar subsidies 5,048 40,384
Reduce the regulatory burden 10,600 84,800 Develop the Ring of Fire
550 4,400 Participate in New West Partnership Trade Agreement 199
1,592 Apprenticeship reform (calculation shows net baseline) 21,280
170,240 Breaking traffic gridlock in Toronto and the GTA 12,000
96,000 Reduce personal income tax burden following a balanced
budget (over second 4 years) 5,885 47,080 100,000 fewer positions
in government workforce (over first 4 years) -12,500 -100,000
Restrain public sector in line with population growth and a focus
on frontline professionals (over second 4 years) 5,398 43,184 TOTAL
128,836 1,030,688 3
Baseline Growth 4 523,200 jobs more than half of the plan are
from what the PCs call baseline growth These are jobs that would be
created anyway if the province maintained the status quo of the
last decade, the Tories acknowledged. (Canadian Press, May 13,
2014) Hudaks plan will drive Ontario into a recession, ensuring
these jobs wont be created under his leadership
Corporate Income Taxes Hudak relies on a Conference Board
Analysis for support for his claims about job creation arising from
reduced corporate taxes Using the same document, there are three
major issues with the PC plan 5
Corporate Income Taxes Issue # 1 6
Corporate Income Taxes Issue # 2 The PCs start with the
Conference Board analysis of an immediate 1% reduction in the
Corporate Income Tax rate Then they multiply the effects by 3.5, to
reflect their 3.5% proposed reduction in CIT rates However, their
cuts will be phased in, rather than brought in immediately, so the
job impacts predicted by the Conference Board, cant just be
multiplied 7
Corporate Income Taxes Issue # 3 The single biggest issue with
the PC plan is that theyve confused person-years of employment with
new jobs The Conference Boards analysis of a 1% cut: The Conference
Board defines a person year of employment as one full-time job for
one year In other words, over 10 years, those 42,800 person-years
of employment does not mean that 42,800 jobs will be created It
means that 4,280 permanent jobs will be created. If you multiply
the impact of a 1% corporate tax reduction by 3.5, that represents
14,976 jobs To get to their claim that their Corporate Income Tax
cuts would create 119,808 jobs, the PCs multiplied the total number
of jobs created by 8 for each year of their plan In other words,
this isnt double counting, its octuple counting 8
Wind and Solar subsidies 9 Hudaks plan assumes that ending
subsidies for clean energy sources will add $20B to GDP and create
40,384 jobs This is based on Benjamin Zychers work What Zycher
actually says is that removing the subsidies will create 5,048 jobs
in total: Once again, the PCs have taken the total number as an
annual number, and multiplied by eight
Reducing the Regulatory Burden The PC plan assumes 84,800 jobs
created from a reduction in red tape Again, they look to Benjamin
Zychers work for justification They take a total number of 10,600
and treat it like an annual number, again counting each job eight
times: m 10
Personal Income Taxes Hudak has said that if he gets a second
mandate, hell cut personal income taxes by 10% on average (CJBK
Radio, May 15, 2014) Benjamin Zycher, the US economist that Hudak
used to validate his numbers tells us that a 10% reduction is the
equivalent of about two percentage points (Zycher paper, page 16)
The Conference Board of Canada tells us that a one point reduction
in PIT will support 1,975 jobs in the 4th year after implementation
So a two point reduction will support 3,950 jobs. Again, the PCs
confuse person-years of employment with new, permanent jobs,
overcounting by a multiple of eight 11
12
Tim Hudaks Plan Source of job creation Average Yearly
Cumulative Total Baseline growth (yearly average of previous
10-years) 65,400 523,200 Lower tax rate on employers from 11.5% to
8% 14,976 119,808 Ending wind and solar subsidies 5,048 40,384
Reduce the regulatory burden 10,600 84,800 Reduce personal income
tax burden following a balanced budget (over second 4 years) 5,885
47,080 TOTAL 101,909 815,272 13 If they did their math right 0
14,976 5,048 10,600 3,950 34,574 Hudaks jobs numbers on these
components of his plan are off by 780,698 jobs or 95.76%
Tim Hudaks Recession
Ontarios Economy Ontarios nominal GDP is estimated to be $685.5
billion in 2015-2016 Government program spending of $120 billion is
17.5% of GDP, or more than $1 out of every $6
Hudaks Cuts In Hudaks balanced budget plan, he plans to reduce
spending by $6.457B in 2015/16 But hes also accounted for $2.15B in
savings, because of a public sector wage freeze The problem is that
the 2014 budget does not build in any additional funding for wage
increases As a result of this error, Hudaks 2015/16 cuts will
actually be $8.697B
Quantifiable Impact on GDP As a share of provincial GDP, the
$8.697B cut is 1.27% That is spending that will be taken directly
out of the economy Theres also an indirect, spin-off impact The
Federal government estimates the multiplier for government
austerity to be 1.5 So the total impact of Hudaks cuts will be 1.9%
Projected real GDP growth in 2015/16 is 2.5% That leaves you with
just 0.6% real growth
Unquantifiable Impact on GDP 1 Real GDP growth would be further
threatened by the disproportionate jobs impact that public sector
spending cuts have Jim Stanford: In fact, since government programs
are relatively more labour-intensive than other sectors, the
decline in employment could be more than proportional.1 Theres a
further impact on GDP that will be felt as some of the PC cuts work
through the economy, including: cuts to business support programs
reduced consumer spending as public sector employees await
decisions to be made on lay-offs 1
http://www.progressive-economics.ca/2014/05/06/how-not-to-create-a-million-jobs/)
Unquantifiable Impact on GDP 2 As GDP growth falls, the revenue
coming in to government falls as well This requires further cuts to
keep the balanced budget plan on track These impacts are difficult
to quantify, but will reduce GDP growth further