Scattergun tax breaks are not the solution to our economic woes. Here’s where we should start

But mostly, we see conventional responses to unconventional problems. Even in the face of major economic shocks, the instinct of political leaders and their allies is, as usual, often to spray tax cuts at just about everything — and hope that it sticks.

Take last week’s Ontario budget, for example.

Premier Doug Ford’s goal has been to make Ontario “the most competitive economy in the G7,” and in his budget, he unveiled a “tax action plan” to that end. A smattering of measures — no more HST on new homes, accelerated capital cost writeoffs, a lower small business tax rate — was framed as the first step toward a larger plan.

In the same vein, the House of Commons industry committee stated last fall that Canada’s long-term potential was in trouble given all the turmoil, and they decided to take on the perennial problem of productivity.

Their 40 recommendations cover the traditional waterfront, urging the government to invest in skills and training, support innovation and technology, and cut taxes in many, many areas in the hopes of sparking private-sector dynamism.

It’s time to be more strategic than that.

For one, simply cutting taxes doesn’t really guarantee any outcome except some foregone revenue for the tax-cutting government. If it’s resilience we are seeking, a government with a cash flow problem is a shaky foundation.

Rather, if the body politic can agree on what it’s aiming for, we can design economic policy more precisely.

Here’s a place to start.

Last week, the Coalition for a Better Future released its annual scorecard on the Canadian economy. The coalition is a broad association of associations co-chaired by former Liberal cabinet minister Anne McLellan and former Conservative cabinet minister Lisa Raitt. Their scorecard measures progress in quality of life and economic growth.

This year, as in previous years, they lamented Canada’s persistently low productivity and poor showing in business investment. They tied the poor macroeconomic performance to stagnant living standards, expanding poverty and widening inequality.

And they noted last year’s federal budget that legislated tax cuts on income, capital gains and business investment. (There’s that spraying of tax cuts thing again).

But they also pointed out that “ultimately, the heaviest responsibility rests with the private sector,” to invest, de-risk supply chains and seek out new opportunities. “It is up to corporate boards and management to move beyond hesitation and embrace the risks required for genuine innovation.”

The scorecard report doesn’t venture much into solutions, but it does pinpoint the Canadian economy’s most vulnerable spots — which is useful in figuring out how to be strategic in targeting investment and building resilience.

On the list are: weak links in supply chains, slow incorporation of artificial intelligence, a need for more electricity, labour shortages in some sectors even as there’s high unemployment among young people, trouble in turning startups into companies with deep roots, data sovereignty.

The list could go on, but the point here is that it is specific. And policy solutions should be too.

If we want companies to strengthen their supply chains within Canada, produce more in Canada, hire and train more Canadians, and expand Canada’s reach in the global economy, leaders need to be looking at the microeconomic dynamics that lie beneath our collective productivity issue rather than hoping a general round of tax cuts will do the job.

Indeed, Royal Bank of Canada chief economist Frances Donald gave the House of Commons committee a similar message.

She, like most economists, has spent a lifetime making copious recommendations on how to improve Canada’s economic performance. And even with today’s new, and alarming, context, no one has a “a revolutionary perspective or a transformative solution.”

Instead, Donald turned to her mother’s advice.

“My mother once told me that when my whole house is messy, I should pick any corner and start cleaning from there,” Donald explained.

“In other words, you’re probably getting a lot of ideas about what can be done. However, we’re past the point where we can say which one would be best. In short, we’re just going to have to pick a corner and get going.”

You should always listen to your mother.