BUSINESS
06/02/2014 03:32 EDT | Updated 06/03/2014 09:59 EDT

Hudak's ‘Million Jobs Plan' Assumes 10% GDP Growth: Economist

If Ontario PC Leader Tim Hudak’s proposal to create a million new jobs weren’t already thoroughly discredited, this might just do the trick.

The economic analysis underpinning Hudak’s plan is so flawed it assumes Ontario’s economy will grow faster than China’s, according to an analysis by a prominent economist.

Hudak’s plan came in for severe criticism last week when economist Jim Stanford and others uncovered the plan had confused “person years” of employment with actual jobs, and overestimated by a factor of eight the number of jobs the plan would create.

Now Mike Moffatt, an assistant professor of economics at Ivey Business School, has uncovered what appears to be another major error in the math.

Moffatt analyzed a report put out this spring by economist Benjamin Zycher, whose work forms a large part of the basis for Hudak’s plan. That report estimated that the increase in economic activity created by three Hudak proposals would raise GDP instantaneously by $55.4 billion. Those three policies are a corporate tax cut, a reduction in the cost of electricity to businesses, and reduction of red tape.

By Moffatt’s calculations, this means the Zycher model assumes 10.3-per-cent GDP growth for Ontario in 2015, the fastest recorded in modern history. It assumes GDP growth of 9.6 per cent and 9 per cent, respectively, for 2016 and 2017.

Ontario's economy grew about 1.4 per cent in 2013, and has averaged about 2 per cent growth since the end of the last recession. China's economy used to run at a 10-per-cent clip but has slowed to a seven- or eight-per-cent rate in recent years.

It is absolutely laughable to believe that Ontario’s economy will instantaneously grow faster than China’s just by simply enacting three policies,” Moffatt writes. “Of course, the Tories don’t believe it either, as it contradicts claims they make elsewhere.”

Moffatt notes that PC estimates of budget deficits going forward don’t assume the sort of massive increases in tax revenue that would happen if the economy grew at such a rate.

As the Ontario Liberal Party likes to point out, Zycher — the author of the supposedly flawed analysis — is a dyed-in-the-wool conservative economist who served as an economic adviser to President Ronald Reagan back in the day, but more recently has become associated with Tea Party causes.

He serves as a resident scholar at the American Enterprise Institute, which was founded by the billionaire Koch Brothers and campaigns heavily against alternative energy, minimum wage hikes and expansion of public health care, among other things.

In the wake of questions about his “million jobs” plan, Hudak has dug in and insisted that the overall plan is sound.

"We can have a great argument over whether it's going to create 80,000, 100,000, 120,000 or 150,000 jobs, the bottom line is, it's going to create jobs,” he told reporters this week.

"Will lowering taxes on job creators create more jobs? Absolutely. Will more affordable energy for families and industry create more jobs? One hundred per cent sure. Will less red tape help small businesses create more jobs? You're darn right. You add that up, that's over a million jobs, when you add all of that up."

With files from The Canadian Press

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