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Tim Hudak's Jobs Fail

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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 There’s 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 party’s 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 didn’t study (the PC plan). His work was done months before the current election campaign and it’s not based on the specifics of what Hudak says he would do as premier.” (Ottawa Citizen, May 12, 2014)


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Tim Hudak’s Plan 3


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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) Hudak’s plan will drive Ontario into a recession, ensuring these jobs won’t be created under his leadership


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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


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Corporate Income Taxes – Issue # 1 6


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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, can’t just be multiplied 7


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Corporate Income Taxes – Issue # 3 The single biggest issue with the PC plan is that they’ve confused person-years of employment with new jobs The Conference Board’s 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 PC’s multiplied the total number of jobs created by 8 – for each year of their plan In other words, this isn’t double counting, it’s octuple counting 8


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Wind and Solar subsidies 9 Hudak’s plan assumes that ending subsidies for clean energy sources will add $20B to GDP and create 40,384 jobs This is based on Benjamin Zycher’s 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


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Reducing the Regulatory Burden The PC plan assumes 84,800 jobs created from a reduction in red tape Again, they look to Benjamin Zycher’s 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


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Personal Income Taxes Hudak has said that if he gets a second mandate, he’ll 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


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Tim Hudak’s Plan 13 Hudak’s jobs numbers on these components of his plan are off by 780,698 jobs or 95.76%


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Tim Hudak’s Recession


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Ontario’s Economy Ontario’s 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


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Hudak’s Cuts In Hudak’s balanced budget plan, he plans to reduce spending by $6.457B in 2015/16 But he’s 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, Hudak’s 2015/16 cuts will actually be $8.697B


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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 There’s also an indirect, spin-off impact The Federal government estimates the multiplier for government austerity to be 1.5 So the total impact of Hudak’s cuts will be 1.9% Projected real GDP growth in 2015/16 is 2.5% That leaves you with just 0.6% real growth


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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 There’s 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/)


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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


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