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Hudak Ignores Economics 101

06/10/2014 05:58 EDT | Updated 08/10/2014 05:59 EDT
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Leader of the Ontario PC Party, Tim Hudak gestures Tuesday afternoon just before Ontario Finance Minister Dwight Duncan delivered the 2011 Ontario Budget in the Ontario legislature March 29, 2011. This is the last budget to be released before the October 6th Provincial election. (Photo by Tara Walton/Toronto Star via Getty Images)

When it comes to education and health, Ontario is no California. It's even better. The Ontario Conservatives, though, would have us believe otherwise by invoking false comparisons of California and Ontario. Voters need to know that Ontario invests far more in its citizens than California does.

In a recent op-ed in The Toronto Star, Tim Hudak, leader of the Ontario's Progressive Conservatives, created a false analogy between California and Ontario. "Ontario's debt per person is an astonishing five times as high as California's," wrote Mr. Hudak while remaining inconspicuously silent about underspending in education and health in California. While Ontario's debt per person is higher than that of California, however Ontario invests significantly more in the health and education of its citizens; a fact deliberately ignored by Mr. Hudak and other Conservatives.

The June 12 elections are a vote on the current and future well-being of Ontarians. The smokescreen of budget deficits is an attempt by the Conservatives to promote cuts on education, health and infrastructure; the very investments needed for Ontario's sustainable socio-economic growth. Equally false is comparing household debt with that of the government because unlike households, governments do not have to repay debt.

The Conservative platform is off the economic track as it invokes analogies and comparisons that defy the economic fundamentals. Gwyn Morgan, writing in the Globe and Mail, also invokes the debt doomsday scenario for Ontario. The flawed argument is fuelled by a reductionist analysis by The Fraser Institute, a conservative think-tank, which highlights Ontario's higher per capita debt, while it completely ignores significantly lower per capita spending by California (see the chart below). By focusing on debt, and ignoring investments in education, health, and infrastructure, the Conservatives are creating a false analogy between California and Ontario that masks the sustained and massive investments in human development by Ontario in its citizens.

2014-06-10-CaliforniaOntariocomparison.png

Source: Calculations by the author based on government reports. In 2013, the Canada-US exchange rate stood at C$1.03.

The Fraser Institute and Mr. Morgan fail to raise or answer an equally important question: If California is not spending enough on its citizens, then who is? The answer is the U.S. Federal government. In 2010 alone, California received $333 billion in federal government funding. It is a huge chunk of change ignored entirely by Mr. Hudak and Mr. Morgan. The U.S. Conservatives assault the federal government for raising the debt ceiling, while conveniently ignoring the fact that the Feds are also subsidizing individual States. How can Hudak Conservatives ignore that the U.S. federal government spends more per capita in California than the State government?

Because California does not provide sufficient funds for education, others have to chip in. The success of the Silicon Valley in California therefore is partially due to the investments by the Feds and the taxpayers in India. Eric Schmidt, the executive Chairman of Google, revealed that entrepreneurs from India headed 40% of Silicon Valley start-ups. "Without prejudice, the IITs might be a great hub for startup talent," said Mr. Schmidt. Make no mistake; IITs are not institutes of higher learning in California, but instead are the Indian Institutes of Technology that have mass-produced engineering talent that is now supporting, in part, California's innovation economy.

Ontario has a choice to make. Under Liberals, it can grow the talent in-house by investing in education. The other model is that of cutting investments in education and offering tax breaks to businesses so that engineers and computer scientists may be poached from other places.

What is even more important is not to fall for the false analogy that equates household debt with government debt. "Families understand that it's wrong to pile debt onto our children and grandchildren," wrote Mr. Hudak. This is the same fear-mongering tactic the Tea Party and the political right uses in the U.S. This, however, is an utterly fallacious comparison, which exposes unfamiliarity with the economic fundamentals. Paul Krugman, a Nobel Laureate in Economics, points out two distinct differences between household and government debt. First, unlike families, the governments do not have to repay the debt. The debt from the Second World War was never repaid, he mentions. Instead, the governments have to "ensure that debt grows more slowly than their tax base." Second, while households owe money to others, government debt is the money we owe to ourselves.

Ontarians on June 12 have to vote on their future. They can choose to invest in Ontario's education, health, and infrastructure. Alternatively, they can choose to become the victims of false analogies.

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