CFIB on Ontarioâ€™s Budget: A Reality Check
Ontarioâ€™s pre-budget consultations include a session for which each party caucus selects an â€œexpert witness.â€ This year, the Liberals invited Warren Jestin from Scotiabank, the Conservatives invited Catherine Swift from the Canadian Federation of Independent Business (CFIB) and the NDP invited me.
In general, my role was not to engage with the other witnesses. The Conservatives asked me about CFIBâ€™s proposal to restrict public-sector pensions so as to remove the discrepancy between public-sector and private-sector workers. As The Toronto Star reported, I argued that a better solution would be extending pension coverage to more private-sector workers.
However, some other elements of CFIBâ€™s presentation also cry out for a rebuttal. Although the official transcripts are not yet online, The Globe and Mail has posted an unofficial transcript that corresponds with my memory of what was said.
The presentation began with an oft-repeated claim:
. . . during our recent recession we actually saw employment in the small and medium-sized business community stable or increasing. . . . What you see with small and medium-sized businesses is theyâ€™re an amazingly stable part of our economy. So policies that help them tend to help with job creation and stability overall. Virtually all of the job reductions that happened over the recession came from large corporations.
As I have noted previously, the data does not support this claim. Statistics Canada provides figures on provincialÂ employment by enterprise size. We can compare the third quarter of 2008, the last period before the economic crisis hit the labour market, with the third quarter of 2009, the most recent period for which data is available.
In Ontario, employers with more than 500 workers reduced their combined payrolls by 85,277, a 3.2% cut. Meanwhile, employers with fewer than 500 workers reduced their payrolls by 120,905, a 4.1% cut. Taken together, small and medium-sized businesses have hardly been a â€œstable or increasingâ€ source of jobs.
CFIB lukewarmly endorsed the Harmonized Sales Tax, which entails a multi-billion-dollar tax break for business, but advocated cutting the rate by 1%. As is customary with proposed tax cuts, the fiscal cost was not discussed.
The Ministry of Finance projects that the 8% provincial portion of the Harmonized Sales Tax will generate more than $20 billion annually. So, cutting it by 1% would cost at least $2.5 billion per year in lost revenue.
Despite proposing to increase the annual deficit by this amount, CFIB also raised alarm about the provincial debt. However, as the NDP finance critic pointed out through some rather effective questioning,Â Ontario’s provincial debt has increased little more than population and inflation.
Mr. Michael Prue: Yes, a few questions here, just on some of your charts. On page 11, â€œProvincial Debt per Capita,â€ you show it going from $10,000 in 1997, or approximately that, to $13,013 today. Was inflation taken into account in this?
Ms. Catherine Swift: Iâ€™m not sure.
Ms. Catherine Swift: This is budget paper, so this is real money. This would be real, so no.
Mr. Michael Prue: The reason I ask is, if it was $10,000 in 1997 and $13,013 today – I go back to the chart just before that, it shows inflation in that period was 27.3% – it is almost exactly the same as it was in 1997.
Ms. Catherine Swift: Iâ€™ll have to look into that because I didnâ€™t do this particular table, but it’s kind of tough to buy because we havenâ€™t had huge population growth in Ontario.
Mr. Michael Prue: I didnâ€™t do growth because itâ€™s per person –
Ms. Catherine Swift: Itâ€™s per capita.
Mr. Michael Prue: Yes, exactly. Iâ€™ve taken that one out.
Ms. Catherine Swift: But I’m looking at the overall debt levels.
Mr. Michael Prue: Just the inflation, $10,000 and 27% on top of that, would take it a little over $12,800, approximately, in there, and if itâ€™s at $13,000, thatâ€™s only minuscule. Given everything thatâ€™s happened in the last year, thatâ€™s a minuscule increase.
Ms. Catherine Swift: But I donâ€™t believe Ontario ever paid anything down on its debt.
Mr. Michael Prue: Okay.
Ms. Catherine Swift: Did it? It has just added to it. It wasnâ€™t like the federal situation. Ontario never paid anything down.