Nine out of 10 economists...

Mr. Flaherty believes Ontario is failing to adapt to a changing world because its business taxes are the highest in Canada. In a speech in Toronto yesterday, he offered as evidence Ontario's declining share of national GDP; its weaker than average economic growth; and, an unemployment rate higher than the national average. He said the federal government has cut corporate income tax rates from to 15% from 22.1%, while Ontario's rate is only half a percentage point lower than in 2000, "with no plans in place for further reductions."

Mr. McGuinty's response is that tax cuts are not enough on their own and that governments have to make targeted investments in troubled industries to stimulate growth.

Let's see:The manufacturing sector is not doing too well in Ontario, although the rest of the country seems to be doing okay.But isn't the auto sector the problem? Well, if we strip out transportation equipment, which includes autos....

Hey, look at that: Ontario still lags.

Doug Porter, deputy chief economist at BMO Capital Markets, says, nine out of 10 economists would side with Mr. Flaherty and advocate creating as favourable an economic environment as possible and then allowing the market to pick the winners and losers.

What does he know? Ontario's "targeted investments" are working out so well.


Update: Flaherty takes another kick at McGuinty in a speech yesterday:

In fact, a combination of the strong Canadian dollar, a slowing U.S. economy, higher energy prices and increased competition from emerging markets has left several sectors struggling. Here in the manufacturing heartland of Canada the impact has been acute. But the economic impact is in direct contrast to national economic trends generally.

For instance, we are experiencing the second-longest period of economic expansion in Canadian history. Yet Ontario's share of the national nominal GDP has gone from 41.4% in 2002 to 38.6% in 2006.

Ontarians are seeing a lack of leadership, a lack of vision and a lack of economic stewardship.

Ontario manufacturing underperforms

Ontario's economy has been lagging the rest of the country for some time. The "economic engine" of Canada is clearly sputtering.

The easy explanation is that the Ontario economy is weak because of the province's greater dependence on the manufacturing sector. This weakness reflects the struggle by Ontario manufacturers to adapt to the sharp run up in the Canadian dollar, higher energy prices and intense competition from China.

However, manufacturers elsewhere in the country also face these pressures. And they seem to be doing a better job of coping. While manufacturing shipments from Ontario dropped 1.2% in 2007, shipments rose 1.7% elsewhere in the country. Moreover, out of a total of 21 subsectors, the rest of Canada outperformed Ontario in 15.

Click on chart for larger image.

Maybe Dalton McGuinty needs to consider what his government is doing wrong before asking the feds for help. Any suggestions?

No need to make winter tires mandatory in Ontario

Anyone who has ever driven in the snow knows that winter tires are a good idea. All-season radials just don't cut it in the snowy regions of the country, particularly if they have some mileage on them.

When I lived in Montreal, I had snow tires. Montreal gets a lot of snow. It was stupid not to put winter tires on your car. Hence, Quebec's recent move to make winter tires mandatory is largely redundant. Most people use them. Those that don't get into more accidents.

In published reports, the head of a Quebec task force on road safety, Jean-Marie de Koninck, pointed to statistics showing snow tires help save lives.

"There's about 10% of the people right now that don't have winter tires on and they're involved in 38% of the accidents on the road in the winter," de Koninck said before Christmas.

The simple solution is for insurers to charge lower premiums to drivers who put snow tires on their cars than to drivers who do not. Quebec's system of no-fault insurance is probably behind its move to preempt a market solution to the problem since the driver who is responsible for an accident does not bear the full cost of the damage he causes. As a result, his future insurance premiums will reflect only the damage done to his own car.

Which brings us to Dalton McGuinty.

Ontario may follow the lead of its provincial neighbour and make winter snow tires madatory for winter driving.

[...]

Premier Dalton McGuinty has said he will consider making it a law in Ontario and OPP Commissioner Julian Fantino has already said he is behind the idea.

Have you seen car insurance premiums in this province? Get into one at-fault accident and your premiums will skyrocket. What better incentive is there to put snow tires on your car than that? That is, if you really need them at all.

Here in Toronto, we don't get a lot of snow. What we do get tends to melt quickly, aided by prodigious amounts of salt.

Do the math. If you only drive in southern Ontario and avoid driving the two or three times a season when we might get a meaningful amount of snow, it makes little economic sense to spend hundreds of dollars on snow tires. Moreover, cars with snow tires are considerably less fuel efficient. If you drive on snow-free roads the rest of the time, you will be burning extra gas.

That doesn't sound like the environmentally correct thing to do. And if the climate change lobby is to be believed, it will only hasten the rise in average temperatures in Ontario.

With winter in Ontario supposedly on the endangered list, why would McGuinty even consider making winter tires mandatory in Ontario? One can only conclude that if Dalton does go ahead with this, he doesn't believe his own hype about global warming.

Robin Sears got it right

Sorry Warren, but Robin Sears got it right.

For months in advance of the campaign they fed reporters with anonymous quotes about "unhappy Conservatives" and supplied YouTube with nasty videos and their canvassers with slippery doorstep lines. As the damage to Tory began to show up in public polls, they raised the pressure with egregious performances by Dalton McGuinty fretting about creating a "segregationist" Ontario, and suggesting that Ontario would suffer the same fate as "London and Paris" if the policy were adopted. In a clear appeal to Islamophobia they successfully ground the Conservative numbers down by nearly ten points in less than three weeks. At Toronto dinner parties one heard “progressive” downtown Liberals muttering quietly that Tory’s policy would fund "some crazy imam’s Mississauga madrassa."

Update: Warren responds in the comments:

Steve, with respect, a question:

Do you think that the hundreds of thousands of Onatrians who voted for McGuinty are also bigots? Or that they are dummies, and so easily manipulated?

I look forward to your answer, as always, with interest.
Warren K

And my rather long-winded response:

Warren,

One of the things I have always admired about your work is your courage in drawing attention to the real bigots in our midst. I commend you for writing about the seamy underside of white supremacists and skinhead thugs. These guys are scum whose ideas need to be exposed and discredited.

But that is what makes your willingness to tap into such prejudice for political ends so incomprehensible. Here we have a party that exults in its inclusiveness, yet is willing to jettison such principle for electoral advantage. It is a dangerous game that will have repercussions for years to come.

You know as well as I do that we are all bigots in some way. The key is to recognize one’s prejudice. One of the things that makes Canadian society great is that despite our inherent prejudices, we tend to treat each other reasonably well and don't usually don't let our prejudices rule us.

What I found so reprehensible about Liberal tactics in the last election is that the party had no inhibitions about tapping into such underlying prejudice. The intent to tap into prejudice was clear. And it worked.

Did people consciously vote Liberal because they don’t like Muslims? I am sure that some did, and at the margin that is what wins elections. But I suspect the preferences of many more were shifted subconsciously by an underlying, mostly unfounded, discomfort about Muslims.

If anyone should know about manipulation, it is you. For the most part, elections are not won or lost on policy. If they were, then the Liberals would have lost since, beyond bland generalities, they did their best to avoid talking about policy. For election strategists, policy is simply another hook on which to ply their trade.

The past Ontario election was not about policy. Concern about faith-based schools was not even on the map for the vast majority of Ontarians before the election commenced. Yet somehow it became the central issue to the exclusion of all else. Other important issues – poverty, productivity, competitiveness, energy security, the environment, etc. – were largely ignored. But your tactics helped secure another Liberal majority government. I hope it was worth it.
Steve