Flaherty's 'attacks' on Ontario undermine economy

[afransen]

I do agree about unsubstantiated hikes in interest rates based on inflation that stems mainly from Alberta. Raising interest rates does nothing to slow the oilsands development, as it's driven internationally. It does help to cool off the rest of the country, which certainly doesn't need it. We should let Alberta go through the inflationary cycle and eventual economic collapse--interest rates can't stop it. The Alberta government, however, can. They just need to slam the brakes on oilsands development.

 

[unimaginative2]

I completely agree, afransen.

 

[AlvinofDiaspar]

From the Star, by Travers:

Ottawa's destructive tendencies

Mar 04, 2008 04:30 AM
James Travers

OTTAWA

Two relationships top every federal government's priority short list and this one now urgently requires counselling on both. Recklessly and for narrow purpose, Conservatives are letting squabbles with Ontario Liberals and U.S. Democrats put Canada's interests at risk.

Telling the world that this country's industrial heartland is a lousy place to do business is roughly as irresponsible as meddling in America's presidential primaries. Yet this government is loudly doing the first while claiming less than persuasively that Stephen Harper's inner circle didn't do the other by leaking a story suggesting Barack Obama was blowing political smoke about renegotiating free trade.

Not once but too many times now Finance Minister Jim Flaherty has blamed this province's manufacturing pain on Premier Dalton McGuinty and Queen's Park taxes. Policy and political differences are inevitable when the economy is slowing and an election advancing. But letting them get out of control makes no sense when Canada's economic engine is already running roughly. And it's downright self-destructive when that engine is located in the province that decides federal elections and is undecided about these Conservatives.

Bizarre behaviour spawns tortured theories and there's no shortage here about Flaherty's motives. It ricochets from settling scores from his time in Mike Harris's cabinet to pre-emptive positioning in case John Tory steps down as Ontario Conservative leader and Flaherty wants to step up. More convincing than either is that Ottawa is wary of what's ahead for the economy and wants to establish blame in voters' minds now.

Still, mind games are tricky at home and dangerous abroad. Ontario workers waiting for pink slips understand the word "recession" and are more interested in federal and provincial responses than finger pointing. U.S. voters rightly reject any interference in their electoral process from the north as vigorously as Canadians resist it from the south.

What makes Flaherty's attack on Ontario so unsettling is what connects it to the Harper government's alleged attempt to help Republicans by bringing the Democrat rising star back to earth in Ohio. In both cases Conservatives seem to be trying to gain something for themselves at Canada's expense.

National parties, as their leaders invariably remind on election night, have a duty to govern for all Canadians. Those that come roaring out of the West and in power tilt their policies back in that direction fall far short of that commitment when they needlessly pummel a cornerstone Eastern province and sector. And no matter how aligned Conservatives are to Republicans, the cross-border ties that sustain as well as bind are too vital to be strained by ideology.

Losing sight of such obvious concerns is a symptom of a government losing its equilibrium. While aggressive pursuit of partisan advantage is central to seeking, gaining and holding power, it should stop long before the nation's fiscal and diplomatic health is jeopardized.

It's more understandable than excusable that Conservatives have now passed that point. Governments that credibly or not take credit for good times are fairly or not held accountable for bad. And one that links itself so closely to the Bush administration has plenty to fear from the Obama phenomenon and its impact on North American politics.

Even so, it's unconscionable to let those worries damage Ontario's relationship with the world and Canada's to the U.S.

http://www.thestar.com/columnists/article/308938

AoD

 

[dowlingm]

I think if Ontario's business taxes are higher than other provinces, businesses won't need Jimmy Flah to tell them - large organisations planning expansion do a bit more research than scanning the Red Star. Therefore McGuinty's whining is pants.

unimaginative - the automotive investments attracted were in large part for SUVs and muscle cars, sectors in decline. If the investments brought a Prius factory, we'd be in great shape.

What Ireland showed is by cutting taxes across the board you attract investment in all sectors of the economy, not just favoured ones. That's not to say you have zero taxes but enough to hit the sweet spot where you are still growing the tax base. The minimum wage in Ireland is Eur8.65 - that's C$13, not the $8.75 the Liberals will raise it to this year. That's what social partnership can achieve - it says to employers, we'll cut your business taxes and the quid pro quo is that you pass on some of the savings to your workers in higher wages and more employment.

 

[Prometheus The Supremo]

Indeed unimaginative - Canada and Ontario is suffering from classic Dutch Disease.

AoD

didn't we spray for that?

 

[Hydrogen]

The stuff was banned. The problem's back.

 

[Brandon716]

The fact that a Finance Minister would say something so brash, so divisive, so unnecessary about an entire Province shows the narrowmindedness of this minority government. You don't start solving problems by saying the Province, Canada's largest and economically strongest, isn't a place to invest in. Total disgrace. Canada deserves better than this. What happens in Ontario affects all of Canada, and the nation as a whole doesn't have time for unnecessary nonsense from an ego-based Alberta centric minority Conservative government. For Canada to be well off, it needs a government that respects Ontario and Alberta and doesn't make such brash public comments about such public issues.

Paul Martin knows his Liberal government didn't get a lot of support from Alberta, but he didn't go around prancing and dancing that Alberta wasn't a place to do business in. When he was finance minister he didn't go around saying Alberta isn't where people shouldn't invest in.

 

[dowlingm]

http://www.thestar.com/article/308811

Toronto Dominion Bank chief economist Don Drummond told the Toronto Star last week Ontario's business tax rates "stick out like a sore thumb" compared with the rest of Canada. If current trends continue, Drummond warned, Ontario's overall tax rate on new businesses will be 30.17 per cent by 2012 versus 18.8 per cent for Quebec.

 

[billonlogan]

To throw some more fuel on the fire....

Harper fires volley on Ontario corporate tax rate
GLORIA GALLOWAY
Globe and Mail Update
March 7, 2008 at 2:07 PM EST

TORONTO — The federal government has returned a volley in the war of words over Ontario's corporate tax rate.
Prime Minister Stephen Harper went to Bay Street Friday to urge provinces to cut the corporate rate to 10 per cent by 2012.
Ontario's rate of 14 per cent is one of the highest in the country and Finance Minister Jim Flaherty has outraged Premier Dalton McGuinty by saying that makes the province unpalatable to foreign investors. [read more]

 

[Hydrogen]

Seriously, the Conservatives are a pack of f*cking morons. They preach for a business tax break in a jurisdiction beyond their own, but when it comes to a tax break for parents saving for their kids education, that can't happen.
-------------------------------------------------------------------------------------

Tories implore Senate to quash RESP bill
BRIAN LAGHI AND OMAR EL AKKAD
From Saturday's Globe and Mail
March 7, 2008 at 9:37 PM EST

OTTAWA — Federal Tories who threatened to force an election over the Senate's protracted study of a crime bill now want the upper chamber to play ball with them in killing an opposition bill that would provide tax relief for parents saving for their children's education.

The turn-about was suggested yesterday as a way for the Conservative government to block a bill that it says will cost the treasury upward of $1-billion a year.

“There's some reasonably minded senators that will look at this and say ‘this is not good news for taxpayers,' ” said MP Ted Menzies, the parliamentary secretary to Finance Minister Jim Flaherty.

“I'm hoping to talk to the senators and that they will use common sense, as they're quite capable of doing.”

The three opposition parties used their superior numbers in the House of Commons on Wednesday to pass a measure that would allow parents who contribute up to $5,000 a year to an education fund to deduct the payment from their income tax. The government is opposed to the idea, saying it would be too expensive to implement.

The bill now goes to the Liberal-dominated Senate.

“I'm going to suggest to the senators that this is an uncosted $900-million proposal that the Liberals have put forward,” Mr. Menzies said.

The paradox of the Tories approaching the Senate wasn't lost on the bill's sponsor, Liberal MP Dan McTeague, who said he was “disappointed but not surprised” that the Conservatives were thinking of stalling the bill in the upper house.

“This really lays bare for all to see what kind of government we're dealing with,” he said. “Can you imagine if they had a majority?”

Mr. McTeague said that if the Conservatives want to turn against an issue of vital importance to middle-class Canadians, they do so at their own peril. “I believe they really ought to rethink this,” Mr. McTeague said. “It's a direct slap in the face to the middle class.”

Only weeks ago, Prime Minister Stephen Harper gave the Senate an ultimatum of March 1 for the passage of a crime bill that he said had been undemocratically held up. The government forced a vote of confidence in the House of Commons on the matter, which, if it lost, would have meant an election. The government won the vote and the Senate passed the bill in time.

Mr. Menzies said the bill was an abuse of Mr. McTeague's parliamentary privilege in putting forward private members' bills. Mr. McTeague's bill would treat registered education savings plans the same as registered retirement savings plans.

“That could push us into a deficit position,” he said.

The government could, if it wanted, try to void the bill by adding an amendment to technical legislation to implement last week's budget. As a money bill, that would put the Liberals in the position of having to kill the government to support Mr. McTeague's bill.

Asked whether the Liberal Party would risk going to an election over the bill after backing off a possible election in recent weeks, Mr. McTeague said that's still a hypothetical issue.

The Liberals believe the measure is as popular as anything included in Mr. Flaherty's budget last week, including a move to shelter earned interest from being taxed.

Others believe the idea is far too expensive.

Don Drummond, chief economist at Toronto-Dominion Bank, said the McTeague plan would be far more dear than original Finance Department estimates suggest.

Mr. Drummond said tax deductible RESP contributions would eventually cost the treasury $2-billion a year because Canadians would flock to the program to get the tax break. With a report from Kevin Carmichael

 

[unimaginative2]

“We will do everything in our power to stop this bill from progressing further as it represents a flagrant abuse by the Liberals of the use of private members business in order to spend taxpayers' money,†said Chisholm Pothier, spokesman for Finance Minister Jim Flaherty.

I'd say it's a flagrant abuse by the Liberals of the use of private members business in order to save taxpayers money!

For a man who was so gleeful about using parliamentary tactics to achieve short-term partisan ends (The Quebec as nation declaration, the Afghanistan war vote, etc.), this is a wonderful comeuppance! I'd love to see the government get defeated trying to eliminate a tax break for parents investing in their children's education.

 

[ShonTron]

While the optics and politics of this are fun to watch, I'm not a big fan of RESPs and tax breaks to support them.

RESPs give a "way out" for governments to ignore tuition fees. Bob Rae (when he left the NDP, he left everything behind, including his social-liberal principles) wanted to deregulate tution fees, with income-contingent loans and RESPs and grants to the poorest students to pick up the slack. It would have left out lower middle income families like mine that were too rich for grants (in fact, above the OSAP eligibilty level), but not a lot of spare cash lying around for RESP contributions.

Or if your parents don't feel like helping you, you're at the mercy of the big banks and income-contigent loans.

I'd rather see the money used to lower or freeze tuition fees over tax cuts.

 

[unimaginative2]

Seriously, Sean, I agree with you. The biggest problem? Provinces refuse to allow the Federal government to spend in areas of provincial jurisdiction like universities. They would never accept a grant conditional on something like reducing tuition fees. Like they would just use it to displace their own spending in that sector. That's why the feds (at least the previous Liberal feds), flush with cash and eager to spend on education, found all kinds of different ways do get around the jurisdiction issue, like the Millennium Scholarships and RESPs.

The current system's a total mess. OSAP cuts out at way too low an income level, and if you can't live at home, you wind up with a fortune in debt. As well, if your parents don't feel like helping you, you're pretty much completely screwed. A friend who tried to get a loan from the bank for tuition was still forced to get their parent to co-sign. If you're going into engineering or some similar field with a pretty clear employment opportunity at the end, you're in decent shape: even with a fairly high debt load, starting salaries are high enough that you should be able to pay it off with not too much trouble. Even if you're a bright arts graduate, it can take years to network your way into a high-paying career. In the meantime, you're starving trying to pay your student loans.

 

[299 bloor call control.]

The economy just won't give.

Economy grew 0.6% in January
Mar 31, 2008 09:28 AM
THE CANADIAN PRESS
OTTAWA – The economy grew by 0.6 per cent in January, rebounding from a 0.7 per cent decline in December.
It was a broad recovery, Statistics Canada said Monday, with wholesale trade and manufacturing leading the pack.
Manufacturing increased 1.7 per cent in January after a 3.4 per cent decline in December.
Durable goods manufacturing rose 2.6 per cent, far outpacing the modest 0.4 per cent increase in non-durable goods. Of the 21 major manufacturing groups, 16 recorded increases, but almost one-third of the overall gain came from auto manufacturing.
After tumbling 27 per cent in December, motor vehicle manufacturing rose 12 per cent in January. Production of vehicle parts also rose.
The agency said preliminary data for February suggest continued auto-industry strength.
The financial sector, retail trade, oil and gas, accommodation, food services and agriculture also rose.
However, utilities, mining and forestry declined.
The energy sector advanced 1.1 per cent, returning to its October-November level. Oil and natural gas production rose 1.4 per cent, but electricity production slipped 0.6 per cent.
The mining sector fell 5.4 per cent. Metal mines were down 2.9 per cent, while non-metallic mineral mines, including diamonds, fell 10 per cent.
Value added in the retail sector rose 1.2 per cent, with significant increases in sales of clothing, furniture, home furnishings and electronics.
The construction sector crept up 0.1 per cent.

 

[billonlogan]

The economy just won't give.

There will be short term pain, but things will get better...

RBC says Ontario economy on the cusp of a recession

TORONTO - According to the latest provincial forecast released today by RBC, the heavy drag from Ontario's trade sector will see the province teeter on the brink of recession, delivering sub-1 per cent growth for 2008, followed by a modest improvement of 1.9 per cent for 2009.

"The nationwide hit to Canada's exports will disproportionately affect Ontario because of both its heavy reliance on U.S. demand for its products as well as the unfavourable composition of those exports that are largely focused on automotive and forestry sector goods," said Craig Wright, senior vice-president and chief economist, RBC. "Ontario's exports to the U.S. account for roughly 84 per cent of total exports and about 40 per cent of provincial GDP."

The Ontario government tabled a balanced budget last month but highlighted a number of growing risks to key revenue drivers. Significant year-end expenditures prevented any meaningful and much-needed tax relief. The budget is expected to remain balanced through to 2011 with $3 billion in cumulative reserves to provide a buffer against downside risks to the province's economic growth.

The province's labour markets are also showing signs of a slowdown and are perhaps not as resilient as previously thought. The public sector has been holding up the labour market, while the private sector continues to cut back with declines in key sectors including forestry, agriculture, manufacturing, finance, insurance and real estate. Some slack emerging in the labour market confirms that the province is gearing down as companies trim their operations.

However, according to the report, any economic slowdown should be short-lived as there are enough positive drivers to help push Ontario's economy through these tough times.

"Real estate markets are healthy, real wages are continuing to rise and a big dose of interest rate stimulus should provide a boost to the economy through 2008," noted Wright.

The growth gap between the commodity-rich Western provinces and manufacturing-heavy Central Canada is expected to persist in 2008. Across Canada, Saskatchewan is expected to be the top growth performer this year as its economy benefits from strength in energy, mining, and agriculture sectors. Conversely, Newfoundland and Labrador should be the laggard as waning oil production weighs on its growth. The strong Canadian dollar and softer U.S. demand for exports continue to weaken manufacturing sectors across the country. Ontario's weak trade sector will see the province teeter on the brink of recession through 2008, but it should pick-up in 2009 to coincide with a recovering U.S. economy.

Provincial Outlook Long-Term Economic Forecast: 2008
Published: March 2008
Source: The Conference Board of Canada

This annual economic forecast presents the long-term provincial outlook.

Highlights:

This long-term outlook extends to the year 2030, a time at which baby boomers will have predominantly exited the labour market. A consistent slowing in labour force growth means that Canada's economic growth will ease steadily, slowing to an annual pace of just 2 per cent in the last few years of the forecast.
Ontario and Alberta will occupy the two top spots over the long term. While Ontario will be challenged in the near term, the long-term prospects are robust. Alberta's economy will continue to shine thanks to the development of the oil sands.
Over the long term, real GDP growth will average 2.1 per cent in British Columbia and 1.4 per cent in Prince Edward Island, as the two provinces become preferred retirement havens for baby boomers. A declining population and the depletion of oil reserves will weigh heavily on Newfoundland and Labrador.
New Brunswick's population will start shrinking in 2014 following the completion of megaprojects as will Nova Scotia's starting in 2023, impeding real economic growth significantly.
Quebec will weather the U.S slowdown as it benefits from strong demand for aerospace products in the near term.
More favourable immigration will help population growth hold steady in Manitoba and Saskatchewan.