One of my all-time favourite comments by an economist goes like this:
"If two people claim to have seen a UFO, with one person claiming that it was large and the other person claiming that it was small, should we assume that the UFO was medium-sized?"
This great comment -- actually by two economists, Brian MacLean and Mark Setterfield -- reminds us of a basic, often-neglected law of economics: The fact that people assert something to be true doesn't mean that it is.
Indeed, Ontario Progressive Conservative Leader Tim Hudak claims he has a plan that will create One Million Jobs. Everywhere he goes in the current election campaign, he stands in front of a backdrop that proclaims One Million Jobs.
Nowhere does he mention that those jobs are imaginary.
His job creation strategy is based heavily on the notion that cutting corporate taxes causes businesses to create jobs -- a theory that relies, according to Nobel-Prize-winning economist Paul Krugman, on the "confidence fairy."
It's a striking comment on how far to the right the mainstream media has drifted that Hudak's 'plan' is being treated somewhat seriously.
While media commentators have expressed skepticism, they still refer to the plan as "bold" -- an adjective that gives it more credence than, for instance, "nutty" would.
Well, yes, bold it is -- in the same way that it would be bold for Hudak to say he'll create one million jobs by cutting Ontarians' consumption of French fries.
But what makes Hudak's plan veer beyond nutty to insidious is the fact that it's coupled with a plan to cut 100,000 public sector jobs. (That's how he plans to pay for the tax cuts that, allegedly, would create the jobs.)
Unlike the imaginary ones, these public sector jobs -- mostly in education, health care and social services -- are real jobs held by real workers providing real services to real people. This will all go, Hudak pledges boldly.
So Hudak's job creation plan begins by eliminating 100,000 jobs, leaving him obliged to create even more new jobs -- 1.1 million. Since they're imaginary, this turns out to be easy.
The first 500,000 are the easiest -- that's how many jobs Hudak assumes would be created if he simply continued the policies put in place by Liberal governments in Ontario over the past decade.
He goes on to give a detailed breakdown of exactly how many jobs would be created by various policies he's proposing, starting with cutting the corporate tax rate from 11.5 per cent to 8 per cent. This would generate 119,808 jobs, he contends.
The very precision of this -- not a ballpark figure like 120,000 jobs but exactly 119,808 jobs -- makes the plan sound almost scientific.
And while Hudak himself may have no more credibility than a frequent observer of the Loch Ness monster, he backs up his job numbers by referring to an analysis done for his party by the respected Conference Board of Canada.
But let's look at how truly dishonest this is.
Yes, the PCs did pay the Conference Board to do an analysis. But 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.
Antunes also acknowledged that data produced by the federal Finance department shows that far more jobs are created by government spending than by corporate tax reductions.
For instance, a 2009 Finance department chart estimates that if Ottawa spent $1 billion on support for unemployed and low-income individuals, it would generate 18,755 jobs. The same chart shows that if Ottawa gave up $1 billion in revenue in corporate income tax reductions, this would create only 3,310 jobs.
In other words, the federal Finance department -- not known for progressive economics, particularly in the Harper era -- concluded that government spending on the poor and unemployed creates substantially more jobs than cutting corporate taxes.
When I asked Antunes if the same pattern would be true in Ontario, he replied: "You're absolutely right. There are economic levers that could be bigger than corporate tax cuts."
But Antunes noted that, in its analysis for the PCs, the Conference Board only looked at one policy lever -- tax cuts -- and only looked at it in isolation. The 13-page analysis points out that the positive impacts associated with tax cuts are based on a big assumption -- that the government doesn't counter the tax cuts by reducing spending.
But Hudak is planning to do just that -- to make up for the revenue lost from the tax cuts by removing 100,000 public sector jobs from the payroll. Antunes acknowledged that the Conference Board didn't take the loss of the 100,000 jobs into consideration in its analysis. "We didn't look into that," he said.
He also agreed that big spending cuts -- such as slashing 100,000 public sector jobs -- could more than offset the economic benefits of lowering taxes.
In other words, we could well end up with fewer jobs.
If 100,000 jobs are created every time Tim Hudak sees a UFO, should we assume that we'll soon reach full employment -- or that we can all just relax and enjoy French fries?
Winner of a National Newspaper Award, Linda McQuaig has been a reporter for the Globe and Mail, a columnist for the National Post and the Toronto Star. She was the New Democrat candidate in Toronto Centre in 2013. She is the author of seven controversial best-sellers, including Shooting the Hippo: Death by Deficit and other Canadian Myths and It's the Crude, Dude: War, Big Oil and the Fight for the Planet. Her most recent book (co-written with Neil Brooks) is The Trouble with Billionaires: How the Super-Rich Hijacked the World, and How We Can Take It Back.
This article is reprinted with permission from iPolitics
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