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Is Ontario in a “V” shape recovery? Analyzing the 2020 Ontario Budget

Economists have been interested to determine what kind of recovery jurisdictions like Ontario might face by using letters to paint a graphical image for people to understand.  In essence, a “V” shaped recovery signifies a steep halting of the economy with an immediate very quick rebound.

The 2020 Ontario budget seems to be telling us that we are indeed in a “V” shaped recovery.  The first sense we get of this is employment. Between June 2018 (the last election) and February 2020 (the month before lockdown), the Ontario economy was humming, with over 300,000 net new jobs created in that period.

Of course, by May 2020, employment went off a cliff, having dropped more than 1.1 million jobs in Ontario alone, due to the economic shut down.  Last week’s budget numbers suggests that by October 2020,  almost 75% of the lost employment had been recovered.

Looking at the chart below, we can see the 2020 recession line displaying that “V” shape we have been hoping to see.

The GDP numbers appear to have a similar bounce.  While there is considerable variation in private sector GDP forecasting, Real GDP is expected to drop 6.5% in 2020 and bounce back by a very strong 4.9% in 2021.  Again, that signals a “V” shape recovery too.

What does this all mean?  There were a couple of items we were looking for in the 2020 Ontario budget regarding economic development beyond the data. One of them was whether the Ford government would use the pandemic to abandon its previous objection to “corporate welfare”.  There had been some degree of thinking that the government could engage in programs like the ones that emerged federally and provincially after the 2008 financial crisis – including, for example, possibly taking a public stake in large enterprises, other negotiated instruments to financially backstop large companies, or targeted government spending to give them a sharp revenue infusion.

This budget does offer support for businesses, but not in the way “corporate welfare” has historically been viewed.  Rather than offer a specific program to fund economic development to specific recipients, the government instead has taken a broad-based approach from a tax perspective.  The big-ticket items on this front consists of relief from the Employer Health Tax and reductions in property taxes for businesses. Rather than taking a very narrow focus with grants, the government has instead used tax policy to provide relief for all qualifying businesses. As a result, tens of thousands of businesses stand to benefit.

The other interest on the economic development front pertains to Invest Ontario – the government’s new economic development agency. The intent of the agency is to help market Ontario as a destination to invest and create jobs. It will compete with economic development agencies in Ohio and Michigan that were set up there to do much the same thing.

Making Ontario more tax competitive may be a key competitive differentiator.  Invest Ontario is likely to base its pitch to prospective businesses based on currency valuation vs. the US dollar, red tape reduction, health cost savings, new tax measures, and a skilled workforce. Budget 2020 expands training and apprenticeship programs to help meet the needs of skilled trades jobs that are in demand. While the big grant programs are not available to Invest Ontario, some other aspects in Budget 2020 will be helpful as Invest Ontario seeks to attract foreign investment.

This is the first major government to provide a glimpse into how to manage the economic recovery.  With a projected “V” shape, the government has chosen not to add additional spending in the form of grants to prop up job creation, as recovery seems to be occurring with the money currently circulating.  With the election of Joe Biden as president of the United States, and his promise to significantly raise corporate tax rates, holding off on big grants at this time might just be the best policy choice.  Ontario may become an even more attractive place to invest as a result.

The school reopen plan meets the science/politics nexus

Ontario’s school reopen plan is in trouble, and it’s not because the plan itself is terrible. I actually think the plan makes sense, but I am not a scientist. However, we once again find ourselves stuck on this science/politics nexus, and it’s eating away at the plan and its roll out.

During the pandemic, we have had this habit of listening to the science. We even celebrated the fact that politicians put their partisanship aside because they were following the advice of their top scientists and public health minds instead of political expediency. This school reopen plan followed that same idea with an even higher degree of vigilance.

As I wrote before, there are a few problems with elevating scientists to decision-maker, which is normally the politician’s job.  The first is that the science is often in a state of flux. Toronto Sick Kids came out with a report. It had a fair hearing. The government followed with its plan that closely followed the science – they claimed anyway. But, after that, it was a cascade of people denouncing the government action. Some of it based on science. Some of it based on what people thought the science said. All sorts of ideas, realistic and otherwise, started popping up all over the place by people we hadn’t heard before, but no matter who they were, it only mattered what they said. And, damn it, what they said better have conformed to how we felt or else they weren’t experts at all. Suddenly, the average person on the street became public health expert – champion of their own domain.

You see, it’s not just the scientists’ expertise that matter here. Teachers are expert at teaching, and parents are expert at parenting, and you can’t tell a teacher or a parent that they don’t know what’s best for their students or children, right? And, let’s not forget that other scientists might say something else entirely.

This is exactly where we’ve ended up – some scientists on one side, and the other experts and scientists on the other. The science says one thing, the other ‘experts’ say something else, and what you have left are political decisions. Our politicians pick which experts to listen to and we judge them on those choices.

If you’ve been following this, Minister Lecce first said students should be learning hybrid. Then, parents lost their gaskets at the thought that they’d have to miss weeks of work to be home with their kids. So, the government signaled full day reopen, and parents and teachers lost their gasket. However, the government’s big mistake is that they never presented it as a binary choice. Parents could have small classes if the classes were divided by 2 and students came every other day. Or, kids could come every day and class sizes would remain unchanged. The political decision remains at that point of convergence, but the science defence was used rather than the trade off.

Now we have teachers, their federations and some parents say that it is unsafe to have classes of more than 15, which is not, of course, verified by science. There isn’t a number. Classroom space is variable and the whole bit. Teachers also don’t want hybrid teaching. The only option, in their view, is full day every day class capped at 15 students. It’s eating cake and having it too. It’s also not very realistic.

So, the next time you wonder why government is not following the science, remember this school reopen debacle. Scientists are good at science. Social scientists ought to be good at how people perceive public policy.

So you want kids in schools this fall?

I want kids in schools this fall. Before we get there, let’s agree on the conditions that need to be met. First, community transmission needs to remain near zero. Confidence to have children in school, and teachers teaching them, without rampant fear of infection is necessary. This means “we” can’t screw up progress. It means that we may have to do without some of the things we enjoy. It means that we need to put up with PPE when we’re out in public. It means that international borders must remain closed. Yes, these are inconveniences, but they get our kids back in schools.

Our kids need school not just for content, but for everything else – social development, physical development, routine and the like. Parents need this too. That means students need to be at school everyday (here’s a good blog post to highlight these: Start with a plan in September that we can live with for the entire year (unless public health worsens and we need to lock down again).

Kids need to be socialized to wear masks, shields, gloves and/or other PPE. Parents, that’s our job right now. Find ones that your kids like. Make them wear it. Normalize it. Teach them not to fidget with them on.

Kids need to also become used to the new routines at school. Staggered entry for the first two weeks of school can help take small numbers of students and get them used to the new routines and such.

There will definitely need to be new rules established. Places where students congregate with other students (gyms, libraries, play grounds, washrooms etc.) all need to have plans. How these places are cleaned, how to ensure only a small fraction of students are allowed in at one time, and so on, require monitoring. Decisions need to be made on who does this monitoring.

Teachers that pedagogically enjoy team teaching may have restrictions in doing so. Students will be confined to their classmates, and not classmates in other classrooms. That’s easy in some instances, but more difficult in others.

Students need to be active. They can’t stay in their classroom all day. There would need to schedules developed for that activity. There will need to be plans to cover teachers lunch and prep time. Here too, you’ve got some problems, because the French teacher that comes in to teach French, and thus covers the home teacher’s prep time, is potentially a source of transmission between classes. As child care facilities will say, you need one dedicated cover staff/volunteer per class and they only do one class. Is that feasible? These things are part of the normal day, but normal isn’t close to us yet.

Breakfast/lunch programs will need to adapt to a single-serve mindset. This makes these programs more difficult to administer and more costly, but we know the benefits that they bring to students that need them.

Importantly, what happens if somebody falls ill? Do we close schools? How rapidly can pop up testing sites get to these schools to test everyone in them? Test, trace, isolate plans need to be devised. Do we do the temperature checks? Can we trust that parents will keep their kids at home if they have the sniffles? Flu season will be upon us by mid-Fall, and the symptoms associated with the common flu are similar to the corona virus. There will be mass panic. What are the communications plans? What contingencies are in place?

For students that can’t or won’t come to school, what is the online plan? There should be singular and uniform direction. While the education sector should be applauded for moving massive amounts of students online last winter, the truth of the matter is that it was unevenly applied. Some teachers had synchronous instruction time for students. Some teachers had asynchronous instruction for students which required far more parental oversight than I care to even admit. I have 3 kids, and I would say one of them had sufficient instruction. That’s not a great ratio. If schools shut down again, we need to mandate synchronous instruction. We should have studied what worked and what didn’t. Boards that surveyed parents should make those results public.

And to our amazing teachers, can the system account for their health and safety? Will their sick plans be modified to cover them if they contract the illness? Many boards of education are reporting shortages of qualified supply teachers. The surplus that everyone thinks we have doesn’t exist. What happens is that teachers in some boards have to double cover, but we can’t do that anymore in pandemic response. We could have a massive HR problem with qualified teachers on our hands.

This isn’t a complete list, but to those who think that sending to kids to school is simple, it is not so. It’s possible to get students back in the fall. We all have things we need to do to make it happen. Let’s start by getting our kids used to their masks, and let’s give our decision-makers some room to make difficult decisions.

The limits of science and political decision-making

Our political leaders are being lauded for deferring political decisions to scientists. Listen to the scientists, the common argument went, because they study this stuff and they can help us through these turbulent times.  The politicians that did listen are being heralded by citizens for handling the coronavirus with a measured response. 

There are a few problems with elevating scientists to decision-maker, which is normally the politician’s job.  The first is that the science is often in a state of flux. Those that created the early doomsday models were wrong.  Do you remember January, February, and March of this year? All sorts of models started popping up all over the place by people we hadn’t heard before.  They predicted mass death and overcrowding in our hospitals.  The bad examples from the global response validated their predictions.  The doomsday-ers who were doing media couldn’t find a camera that didn’t like them.  Then, when their models proved to be wrong, scientists raced to dispel the myths.  How can you make a decision when the facts, as they say, were shifting?

Not only were the models wrong, but it took us an eternity to figure out how the virus is transmitted.  Is it respiratory? Droplets? Human contact?  There is a lot we understand, but a whole lot that we do not.  People’s lives and livelihoods have been at stake.  What is a ‘lesser’ knowledgeable decision-maker supposed to do in this minefield of uncertainty?  Well, they are supposed to follow the science, right?

But there is another problem.  Good scientists are good at one thing: Their science.  There are other aspects of public policy that we are required to also understand.  Think about the economy, people’s jobs, etc.  A scientist will make decisions based on the science and ignore the other things, because the other things are not in domains in which they are expert.

Even if we stick to the science, what of the other health ailments did this pandemic bamboozle? Delayed cancer treatments.  Mental health and anxiety prone people having to deal with what seemed like the end of the world.  OCD people worried about the germs around them even more than usual.  Kids lost milestones in their social development.  Grad ceremonies became the new cancel culture.  The scientists’ science did not likely cover those things.

Speaking of the science, didn’t everyone become an epidemiologist over night?  We all watched like hawks what the latest numbers were like, and then we all made inferences about what they meant.  Government moves us into stage 2 (I’ll get to that quackery in a second) and we have people saying stuff like ‘I don’t know, the numbers are still too high.’  Based on what exactly? It doesn’t matter.  Perceptions mattered though.

That’s the funny thing about science.  It is so much a matter of fact that it becomes a matter of debate.  People started to have feelings about what the numbers meant.  Suddenly, their perceptions mattered a whole lot more than the science.  How does a scientist work in such a moody behavioural environment?  Those control groups are a different beast in the social world.

This brings us to the stages.  What should be in stage 1 and 2 and 3?  How is what we are allowed to do in each phase determined?  Science? Jobs? The economy? Lobbying? Suddenly, the government that told us that it is OK on Monday to do what wasn’t OK on Sunday is starting to look a little funny.  Suddenly, people’s skin started to see the sunshine outside of their homes. Their masks came off in stores. They flocked to the beach and to the park.  Suddenly, the science itself mattered little at all.  People did what they perceived to be just fine based upon whatever fragment of evidence they choose.

This is the tale of how science meets policy in the age of Covid-19.  This is why we have politics – a government and an opposition – to flesh these things out.  This is why we need public policy generalists to weigh not only the evidence but also the perceptions of how people are feeling.  Policy-makers need to consider all aspects of decisions, and when the balance is skewed in one direction, policy-makers need to be drawn back into balance.  It is not just the science, but the social science.

We need that vigorous debate to sort out our course of action.  This is not up to scientists.  Yes, they produce evidence that we need to consider.  At the end of the day, it is up to politicians who are informed by all the evidence in front of them – science, jobs and otherwise – to make a decision.  It is one of the many reasons we should not have shuttered parliament.  These are important times.  We need to broaden our considerations and not be ashamed of doing so.

Solutions without problems

With the Conservative Party of Canada’s leadership debates complete, it’s time to talk about one of the major challenges the party faces.

A student of public policy will probably tell you that one of the foundations of good policy is defining a problem that ought to be fixed. There are lots of policy wonks out there that actually miss this step. What happens when said people miss this step is that you tend to spew ideas about changes that should be made without telling people why the change is needed in the first place.

Have you ever been in a meeting where your boss or coach or parent decrees a new rule or procedure upon you? In many cases, you can see that the rule or procedure or protocol fixes a defined problem and you can accept it (sometimes begrudgingly). In other circumstances, you may be thinking ‘what problem is this supposed to solve?’ Maybe its a new expense policy or attendance policy or dress code. Often you can connect A to B, and life carries on. But, when you can’t connect A to B, you’re left asking yourself more questions than you have answers for and it leaves you puzzled. Think about a time that this has actually happened to you. I’m sure it has… it happens more than we think!

So, Rob, what does this have to do with policy? Well, the same principle applies. The next time you hear a politician say something like ‘let’s pull out of the Paris Accord,’ your response might be bewildered as to why. What problem is it trying to solve? See how this works?

The second part of defining a problem is that in order for there to be wide acceptance of the policy solution, a lot of people need to define the problem in the same way. If I were the boss of my neighborhood, and I wanted to propose that every lawn needs to be cut on Friday, the average homeowner might ask me why. I would answer by saying that having uneven grass across the neighborhood over the weekend depresses property values. I may have a why answer by identifying a problem, but if nobody else defines the problem like that, there would be no support for the policy to advance.

This is relevant when we talk about policy debates and ideas of yesteryear and revive them. So, if somebody comes in and proposes to defund the CBC, for example, how many among us really think that’s the problem we need to fix right now? (N.B., I am not saying we should keep it – I’m just saying not enough people think its a problem to talk about it).

The last thing to watch out for are instances where policy problem is defined but the proposed solution doesn’t fix the problem. As a parent, I might complain that the kids don’t pick their clothes off the floor. I might surmise that it must mean that the hamper in their room must be too small to fit all of their clothes, so I buy a bigger hamper and put it in their room. Bewildered, a week later, I walk into their room and the problem just hasn’t gone away. This is an example of the solution not fixing the problem.

Think about tax cuts. As a conservative, I’m prone to believe that tax cuts create jobs, and over the long run, this means that we’ll collect more in tax revenue. However, if people define the problem of budgetary balance, cutting revenue won’t get you there unless you slash spending even more. In other words, deficit financing tax cuts does not fix your balance budget problem.

To sum up the Conservatives’ problem: They’ve got solutions without problems to fix and/or solutions to things people don’t see as problems and/or solutions that don’t fix the defined problem.

Conservatives won’t get anywhere unless we fix this, and the person best able to match problems with solutions gets my vote.

Covid-19: Back to Blog Edition

I probably should get back to blogging. I’m already tired of Zoom, Teams, Google Meets, and whatever else is out there. I find myself starring at my computer all day. So, I’m firing this baby back up. Hope you keep coming back!

Conservatives need a new script on climate change

One of the most frustrating things to watch is how political mistakes keep repeating. The Scheer Conservatives badly lost an election (my hot take), and certainly there are a lot of disappointed people running about in conservative circles. Before I comment on the Scheer leadership question, I believe it is important for Conservatives to do a bit of introspection on policies and messages that need to change. I’ll be spending some time on this blog explaining where I see some of the need for major changes. There are more than just a few things to say on the environment, but I’m going to stick with climate change.

The Conservative response to climate in the last election was basically to come up with a loosely linked set of policies driven to regulate polluters. It was also to oppose the carbon tax. What did people hear? They heard that Conservatives didn’t have a climate change policy because they wouldn’t put a price on carbon. Those dinosaurs, they said, want to become extinct like the dinosaurs! What’s worse is the fact that Scheer’s social media ads are doubling down on this losing crusade.

Now, I get that the rational conservative voter can link a tax to their pocket book, but the rational voting public have identified a public policy problem and the Conservatives have failed to identify a solution to that problem to satisfy them. In effect, we abdicated our responsibility to develop practical public policy solutions to society’s challenges. This is most definitely an indictment on leadership. The lack of sincerity and attention to this area of public policy means that people think the party isn’t taking the problem seriously, if at all.

This isn’t an issue motivated by pocket book concerns at this point in time. The far greater societal concern is that a collective effort is needed to solve this particular challenge. Conservatives that challenge the idea about whether human activity caused this particular problem and/or whether modifying human activity will fix this particular problem are fighting yesterday’s policy debates. They aren’t talking about the challenges today, no less about what Canada might look like in 2030 or 2040.

Here’s the thing: to fix this problem, things are going to become more expensive. Conservatives continue to rail against a carbon tax. Environmentalists continue to say that there isn’t a reasonable climate change plan that doesn’t put a price on carbon. People are believing the environmentalists, and its about time conservatives embrace it.

Here’s the dirty little secret: regulating polluters also makes the price of everything go up. Ssshhhhhhhh!

How long have conservatives been saying that red tape and regulations cost money? It’s because they do. So it’s about time that smart people in the conservative movement crunch some numbers and create a price on carbon that effectively makes polluting more expensive than not polluting.

No, you don’t need a carbon tax to fight climate change. What has worked in the past is the ‘legislate and regulate’ path. Creating a more robust and rebranded law and order environmental plan is precisely the counter argument to the carbon tax hysteria. Talk about how even with a carbon tax, a government still needs to put limits on emissions and regulate anyway. We can’t really tell if it is the carbon tax modifying behaviour or whether it is the imposed regulations that do . If you look at Ontario’s history over the past couple of decades, it has made enormous strides in reducing carbon emissions. Almost all of Ontario’s emission reductions came as a result of government policies that helped make it happen prior to a carbon tax, especially the policy of eliminating coal-fired electricity generation.

There is ample evidence to show that it works because it’s the only real proven thing to have worked. Governments are famous for guiding human behaviour by legislating right and wrong. Create that set of policies that precisely matches society’s expectations. Run some models to show its cost. Say it will make things more expensive, because this much is obvious (denying the obvious is trouble), and join the rest of the world in wanting to fix the problem.

Here’s the funny thing. Businesses everywhere are already catching on. Big oil has massive investments in green energy. Plastics companies are latching on to concepts like extended producer responsibility and creating more environmentally sustainable products. Businesses everywhere are doing this. Consumers are demanding it. Yet, conservatives aren’t getting the message. It’s frustratingly odd.

Running anti-carbon tax ads at this juncture, as the Scheer team are now doing, is incredibly tone deaf. It shows a lack of care and concern for what people and businesses are thinking, and how they are acting. A thoughtful response to the environment is exactly the kind of thing Scheer needs to do if he hopes to offer Conservatives a glimpse of how he might win in 2021 and beyond.

Rob Leone is an Associate Professor of Leadership and Public Policy at Niagara University.