Ontario has voted for more of what it doesn’t need – economic uncertainty.
The province is taking a risky bet with populist Doug Ford’s Progressive Conservatives, who are offering a bit of Donald Trump to counter, well, Donald Trump.
Mr. Ford is promising U.S.-style tax cuts as an answer to the U.S. President’s protectionism.
“Make no mistake about it, we’re going to go after them full tilt – on reducing our taxes, making ourselves more competitive,” Mr. Ford vowed in the waning days of the campaign.
“We will go down to the street at the border and put up that big sign I’ve been talking about and tell our neighbour: ‘Ontario is open for business.’ ”
As with Mr. Trump, Mr. Ford hasn’t fretted too much about policy details or where the money will come from to pay for more than $7-billion in promised relief on corporate and personal income taxes, carbon pricing and hydro rates.
Mr. Ford’s For the People election platform is remarkably thin on economics for a business-friendly party that has been itching to take back Queen’s Park for 15 years.
Beyond simplistic slogans, Mr. Ford has offered no indication that he has a comprehensive plan to deal with the big threats hanging over the province’s economy, including chronic fiscal deficits, sluggish growth, uncompetitive electricity rates and an escalating tariff war with the U.S. that threatens its vital auto and steel industries.
That lack of detail will compound the economic uncertainty as the province ushers in a Ford government.
His platform is filled with tax breaks and spending priorities, but his only nod to fiscal responsibility is a vague plan to find $5.6-billion a year in spending “efficiencies.” That’s small comfort for a province that is facing rising interest rates and deficits totalling $32-billion over the next six years, based on the Liberal government’s last budget.
Mr. Ford’s promise of corporate tax breaks may temper fears in the business community about Ontario falling too far behind the U.S., which last year brought in a sweeping tax overhaul designed to get companies to invest at home and repatriate manufacturing.
At best, the proposed reduction in the corporate tax rate to 10.5 per cent from 11.5 per cent is a partial response to the growing competitive challenge facing businesses in the province. Mr. Trump’s recently imposed tariffs on steel and aluminum (plus more threatened on cars) take direct aim at Canada’s manufacturing heartland, concentrated in Ontario. The tariffs will hit harder in the province than elsewhere, disrupting integrated cross-border supply chains and putting future investments at risk.
More damaging is the longer-term uncertainty created by Mr. Trump’s aggressive trade posture. The failure so far of Canadian and Mexican negotiators to reach a deal with the U.S. on reworking the North American free-trade agreement casts a long shadow over Ontario, which accounts for half of Canadian exports. Particularly vulnerable are manufacturers, including automakers and their vast network of parts suppliers who depend on an open Canada-U.S. border.
Mr. Ford can put up as many rhetorical open-for-business signs as he likes, but it may not be enough to lift the investment cloud created by the U.S. assault on the rules-based global trading system.
His plan to “clean up the hydro mess” is similarly heavy on slogans and symbols, but short on workable solutions. Mr. Ford says he’ll fire the chief executive of partly privatized Hydro One, even though he doesn’t have the direct power to do that. He’s promising to cut hydro bills by 12 per cent by shifting energy conservation programs onto the province’s balance sheet, but makes no mention of rolling back the Liberal’s earlier taxpayer-funded hydro rebates.
Even without the trade challenges, Ontario was already facing a slower-growth future that will limit the province’s ability to respond to future economic shocks, such as another recession.
Ontarians may not have been thrilled with their choices in this election. They may like the economic aftershock even less.