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.
OMG- I think Catherine should change her last name, cause she sure is anything but that! Lol, what a dough head! I was thinking Homer Simpson would be a great match for her. Catherine Simpson- hmmmm sounds a lot better.
I did actually want to add something, I am doing a bit of research on the study in which the CFIB compared public sector and private sector wages, benefits and pensions. The methodology used in comparing the pensions is just a plain farce. It abuses standard errors to a point that one must conclude, why even have standard errors. Hello people can we strive to at least pretend we are researchers adhering to some principle of reality in our methods. You cannot research numbers that cannot support the level of analysis that those such as the CFIB continually use and abuse. Could we at least publish the methods and if it is not so much of a bother the Standard errors would be helpful.
Much of the data that was used by the CFIB did not publish either, but I know for a fact the Standard errors on there estimates used in all of their research were just plain not acceptable in any space for debate.
You might as well be debating shoe sizes, as the CV’s being used were above 50% in many cases.
Again, and I think most on here know this, the quality of reports that come out of the CFIB are so loudly flawed, and at the most basic of levels they violate almost every known ethical nuance of research ethics, that they must think the entire population are idiots. Of course they don’t actually have an economist that works for them, they are but purveyors of propaganda.
The brown shirts of economic misdirection- both Ted Mallette and Catherine Simpson are experts at marketing such swill into the public discourse. It is a hell of a lot easier when you can get every word you utter into the mainstream media with but a single call.
I just don’t understand how the working people in this country put up with the elitist behavior such as this.
I do know we are all not perfect when it comes to research, facts and figures, but come on people we are trying to have a civilization here and what the CFIB pretends to represent is nothing but pure and simple hegemonic discourse purveying. The facts are made to suit the message. At least once I would like to see them do a report that was not so contorted into such a travesty that any first year economics student could poke a hole in and bring down the house.
The CFIB is concerned about the fact the state is not retrenching enough during a recession? Talk about false consciousness. Small and medium sized businesses are now paying to have their interests mal-represented. I suppose, at least, they are consistently pro-cyclical. Rubes.
As any, the fiscal cost you cite in foregone revenue, it was never the governments revenue but Canadian & international citizens revenue. Now any conservative who argues for a tax cut without a proportionate cut in spending is not a conservative, it defies logic. I come from the camp that if 33 million canadians taxes were each lowered equally, thats better then any targeted stimulus thats just gonna pick winners & looser whos affiliation is determined by whatever brand of socialists are governing as has happened
However any promise of beneficial tax cuts is a lie if spending is not addressed seriously. One must examine interest policy, entitlements etc before a single tax can be responsibly lowered.
Otherwise taxes cannot be lowered because people will save more, just like here in BC. People in areas like the Okanagan or Kootenay are saving more leaving spending decisions unaltered from massive public spending with the olympics. No long lasting benefit comes from useless government spending
Re: Paul T.
I believe that judging a persons character based on a few short quips between Ms. Swift and Mr. Prue is in itself a form of “snapshot propaganda”, and thus highly flawed.
I have long felt that CFIB offers a very effective and needed service for SME’s and I would have but one question for Paul.
If after 40 years as a organization, and with over 108,000 current members, why hasn’t a first year economics student brought down the CFIB “house of cards”?
P.S. Ms. Swift, if I am not mistaken, was a highly respected economist both publicly and privately before taking the helm at CFIB.