Ontario Progressive Conservative Leader Tim HudakRafal Gerszak
Prior to this week, the politics of the HST were all uphill for the McGuinty and Campbell Liberals and the Harper Tories.
After all, the issue was taxes, and no one likes taxes.
This was a particularly acute problem for the Ontario Liberals. The federal Tories and British Columbia Liberals are the parties furthest to the right still electorally viable in their marketplace. Voters typically trust left-centre parties on issues like social policy, health or education. They prefer centre-right ones on taxes and security. The more the McGuinty Liberals were talking about taxes, the more they were losing. It wasn't that the issue wasn't worth talking about; it was that it wasn't the issue they should be highlighting.
That changed with the report Jack Mintz of the University of Alberta issued Wednesday.
First off, Mintz's credentials are unassailable. He has been modeling the economic impact of budgets since 1980. He is no creature of the McGuinty government, having been scathingly critical in the past. His work at the C.D. Howe institute is seen as the acme of public intellectualism in Canada.
The man is the Cadillac of Canadian public policy and economics.
Mintz changed the game with a single fact… His eye-popping estimate of 591,000 new jobs created over the next ten years because of the HST and other tax reforms Ontario made in the 2009 budget.
Let's put that number into context.
According to Statscan, there are about 7.2 million people in the Ontario labour force. However, only about 6.5 million are currently employed. That leaves around 700,000 people who are out of work.
Over the next ten years, Ontario's tax reform will create almost enough jobs to employ every single one of those people.
The HST won't eliminate unemployment. There will be new people entering the labour force, be they New Canadians, those who stopped looking or young people, who will increase the total pool of potential workers. But the HST will go a long way to undo the ravages of the current recession and stabilize the employment situation in Ontario.
In a stroke, Mintz has changed the debate from taxes to jobs.
Liberals cannot win a tax fight. The Ontario Progressive Conservative Party spent the last twenty years branding itself the "tax-fighters." Those who vote on their dislike of tax long ago migrated to the base of the post-Davis-era, tax-cutting Tories.
Liberals can win a fight on jobs. In fact, the Mintz report shifts the burden to produce a jobs plan from McGuinty to Hudak.
Prior to this week, the opposition in Ontario was able to lean on its horn and toot that the government didn't have a jobs plan.
Today, the McGuinty government can point to:
1) Business tax reform like the HST and lower corporate taxes,
2) Reaching Higher in post-secondary education,
3) Second Career retraining,
4) Massive stimulus investments in road, school and hospital infrastructure, and
5) Long-term investments in emerging technologies, biotech and green jobs.
That may not be everyone's perfect plan, but it's a plan. And one with at least 750,000 jobs attached.
What is more, the jobs issue is a more natural fit with Liberal grassroots values than taxes. Most Ontario Liberals are moderate types who joined or stayed with the party because they opposed Mike Harris's cuts to public services. They aren't class warriors like the NDP, but they do have squishy hearts for the underdog and especially the vulnerable.
A fight on jobs engages Liberals values like fairness, compassion and justice.
Jean Chretien's most powerful moment in the 1993 debate, and probably the election, was when he talked about the " dignity of a job." It was the best line from his best ad in the election.
Bill Clinton's signature in his acceptance speech of the Democratic nomination in 1992 was: "The most important family policy, urban policy, labor policy, minority policy, and foreign policy America can have is an expanding entrepreneurial economy of high-wage, high-skilled jobs." With that sentence, he turned the page on forty years of "liberal Democrat" charges of welfare queens and big government, while offering real hope to average Americans.
This week, I pointed out the crushing challenges that children of the unemployed face, including more trips to hospital, higher likelihood of abuse or neglect, and greater incidence of self-destructive behaviour among adolescents.
Liberals are comfortable fighting on the terrain of jobs, and the HST is quickly shifting to be a jobs issue, not a tax issue.
This places rookie PC Party leader Tim Hudak in a bind.
Hudak's party has long advocated harmonizing the GST and PST. Both former leader John Tory and interim leader Bob Runciman made lots of warm sounds about harmonization. It's for good reason, as the PC Party's business base strongly favours the move and will not support its reversal.
However, Hudak has personally staked his reputation on getting Dalton McGuinty to back down rather than follow through on his commitment to introduce the HST.
Hudak now finds himself with a series of tough choices.
If he pledges to reintroduce a separate provincial sales tax after the next election, he will jeopardize his own business support AND be responsible for the loss of 591,000 jobs.
If he doesn't pledge to reintroduce a separate Provincial Sales Tax after the next election, he's open to charges of politician flip-flopping.
What is worse, either way Hudak will find it tough to cobble together a jobs plan that creates 591,000 jobs.
The Harris recipe of deep income tax reductions will be hard to finance or justify, given the already low personal taxes in Canada's largest province. Under Harris, Ontario moved from one of the higher income taxes in Canada to one of the lower. But today, Ontario's income tax is already the second lowest. Ontario's average income tax rate and marginal tax rate are lower than every single province except British Columbia, and not unfavourable to the Great Lake states. Further reductions will find little bang for the buck.
The Harper recipe of cutting the sales tax is popular politically, but awkward economically. While it can be marketed as a tax cut, it will be a major challenge to find a single economist to endorse such a move as a job creation strategy. Hudak can try to turn the election into a referendum on taxes, but to do so would sacrifice any claim to having a plan for the economy or jobs.
Hudak can attempt a strategy of populism, pointing fingers at scapegoats like teachers, but polling continues to show little appetite for broad cuts to the public sector. While voters believe there is waste and mismanagement to find, two years of McGuinty cuts will likely have trimmed any obvious fat long before the election.
In a phrase, the rebirth of the HST as a jobs issue places Tim Hudak in a box.
He cannot support it. His earlier statements prevent such a reversal.
He cannot repeal it. His base could revolt and he would be running against creating hundreds of thousands of jobs.
He cannot out-flank it. No other series of measures will create more jobs, making any jobs plan he produces a faint echo of McGuinty's.
Make no mistake. The HST still presents the potential of a pure populist backlash against the government.
Hudak can attempt to ride a populist wave of resentment into office.
But equally, don't underestimate the importance of this report. It was a 591,000 point return by McGuinty in a four-quarter gridiron fight against Hudak.
The ball is now the challenger's to return.