In other news

Canada’s jobs numbers are generally improving in 2013. Ontario’s job picture, however, is getting worse. Overall Canada’s economy added 13,200 jobs in October, nudging the jobless percentage below seven per cent for the second straight month.

While Quebec, Saskatchewan and Newfoundland were adding new jobs, Ontario lost 14,700 jobs last month, pushing the unemployment rate to 7.4 per cent. This province’s manufacturing sector continues to get hammered, with employment in this sector down by four per cent.

Against this bleak backdrop, the Ontario government issued two important signals last week—neither was well reported, lost in the much more sensational noise over expelled senators and a crack-smoking mayor.

But both likely pose a far more direct imposition upon on the lives of ordinary Ontarians than the issues dominating the headlines in recent days.

First, Ontario Premier Kathleen Wynne believes Ontario corporations are sitting on too much cash. Prodded by a University of Toronto economist, Wynne is looking for ways to spur growth by encouraging businesses to put its “dead cash” to work—creating jobs, improving competitiveness and investing in innovation.

It sounds good. Surely it is better that the province’s corporate capital be put to work rather than sitting idle? And while a worthy objective—it masks the real question: why is this cash sitting idle in the first place?

In part it is because opportunities to generate an attractive rate of return on capital in Ontario have become scarcer. Worldwide demand for our goods and services has slackened. Regulatory hurdles have become steeper. And consumers are focused more on paying down their mortgage or lowering household debt, than they are in accumulating more goods and services.

Faced with this type of dilemma, government’s can go one of two ways: do the hard work to improve the investment landscape; or take the comparatively easier route of meddling with the tax code to bribe businesses to let loose its cash. Whichever path our leaders choose, tells you both how they think and how close the political horizon looms in their minds.

In fairness, the Wynne government isn’t likely strong enough to make the hard structural changes needed in Ontario’s economy that effect lasting change in the province’s overall competitiveness for capital. So the only option left them, in their weakened state, is to take money out of the pockets of ordinary taxpayers and give it to corporations in the form of tax breaks, and pray they invest it the way Kathleen Wynne would like.

Governments generally aren’t good at this kind of market manipulation; those that have run out of ideas are worse. The queue has already begun to form around the provincial trough, preparing to feast from the Liberal government’s latest bout of generosity.

Businesses that may have been considering spending some of their cash, will now certainly hold off until the spring budget, waiting to learn the details of the fresh set of tax incentives being prepared for them. If the money wasn’t dead before—it is most sincerely dead now.

The other worrying bit arising out the fall economic statement was the announcement the Wynne government had largely abandoned efforts to balance Ontario’s budget. (Although many would have said than signal was sent clearly when it spent more that a billion dollars moving two electricity generating plants to ensure a win in two Toronto-area seats.)

Rather than carry on half-hearted attempts to tame the budget shortfalls that pile onto Ontario’s mountain of debt (currently pegged at an eye-watering $272 billion and rising; Ontario’s debt is now very nearly double what it was when the Liberals came to power in 2003)—Wynne’s government took an about turn last week. It is now embracing deficit spending as a means to drive economic growth.

“We won’t cut or slash services,” Kathleen Wynne said bravely.

So let’s recap: the current plan is to spend more money the Ontario government doesn’t have, fork it over to corporations with too much cash, and pray they spend it to create meaningful, lasting jobs in Ontario. Does this make sense to you?

Oh, and brace yourself—tucked away in the Ontario government’s fall economic statement was the warning that property tax payers should expect to pay more next year. That means there will be far less money for municipalities, including Prince Edward County next year. Shire Hall need prepare itself for fewer dollars for roads, bridges and sewers in 2014.

Please be patient, however, your province has tax breaks to cash-rich corporations it must fund.

rick@wellingtontimes.ca