On clunkers

Now that the first snarky response to Andrew Steele's latest HST sales pitch is out of the way, let's deal with the more substantive problem with Steele's most recent posts. Steele tries to rely on a report by the University of Calgary's Jack Mintz as demonstrating that the HST (along with a number of other moves by the McGuinty government) will create 591,000 "net new jobs" over the next decade, and argues that the report will fundamentally change the terms of Ontario's debate over the HST.

Let's leave aside for the moment that Steele's first post on the subject falsely tried to attribute that entire amount of theoretical job growth to the HST alone. Even looking solely at what Mintz' report actually says rather than the spin Steele is so eager to place on it, there's simply no basis for taking its numbers seriously: while Mintz' highly specific number speaks of "net new jobs", it doesn't actually take into account any of the costs of the HST or other associated policies to provide a "net" picture.

To start with, Mintz utterly fails to take into account how factors other than theoretical investment through global capital markets might affect Ontario's economy. Even other backers of the HST acknowledge that it'll result in higher costs for consumers, which is bound to create a cost in jobs in the meantime as well as undercutting the supposed gains in incomes. But Mintz cuts that out of the picture in order to focus solely on corporate investment.

And there are problems with that unduly narrow focus as well. Others have pointed out that corporate tax cuts like those included in Mintz' study may simply change the recipient of the same corporate tax amounts, rather than providing even a theoretical increase in economic activity.

But again, Mintz doesn't mention that as a factor, looking solely at the nominal "marginal effective tax rate" payable to Ontario rather than the amount which American companies in particular would actually pay. Which makes for a particularly glaring omission given both Ontario's interdependence with U.S. markets, and Mintz' attempt to paint changes by multijurisdictional businesses as one of the main benefits of reducing marginal tax rates.

In effect, Mintz' job estimate is the equivalent of a clueless would-be businessperson excitedly declaring "Eureka! If we sell 5,000 widgets for $200 apiece, we'll make a million dollars in net profit!". And the fact that it takes such an obviously distorted study to make the HST look good has to seriously call into question whether there's any benefit to be had for anybody but corporations looking to boost their share of public wealth.

Mind you, Steele tries to paint Mintz as the "Cadillac of Canadian public policy and economics" in hopes that nobody will look too closely at what he's actually done. But it may bear pointing out that businesses which actually put reliance on brands like Cadillac over creating quality products haven't exactly fared well for themselves - and indeed have contributed to Ontario's downfall in the first place.

Update: Erin points out a few more problems with Mintz' report.