News Analysis
With an October federal election now all but official, comments by leaders of Canada’s main political parties suggest the economy—and fears of a coming slowdown—will be key to the coming campaign.
Though Prime Minister Stephen Harper denies claims by opposition critics that he is calling the vote now to avoid going to the polls in an economic downturn, he has tried to frame the upcoming campaign in terms of the economy.
“The country must have a government that can function during a time of economic uncertainty,” he told reporters last week as election talk began to brew.
Meanwhile, Liberal Leader Stéphane Dion has taken aim at the economic record of the Tories, and on Wednesday he announced revisions to his Green Shift plan meant to allay the economic concerns of some Canadians.
In all, economic worries are emerging as a key election issue, and one that Mr. Harper hopes will play to his advantage, as campaign ads portray him as an adept leader.
Growing Uncertainty
Evidence of a downturn is everywhere, especially in the economy of Canada’s most important trading partner. The United States has taken a hammering in recent months with some of the country's largest banks needing bailouts to avoid a financial disaster.
That turbulence was sparked by the sub-prime mortgage crisis where U.S. lenders gave risky loans that started failing en masse. The resulting meltdown made nearly 1.3 million U.S. housing properties subject to foreclosure in 2007, up 79 per cent from the year before. The impacts are now being felt around the world.
“Banks have recognized most of the losses and write-downs related to the sub-prime mortgage market but the eventual extent of the financial disruption is still uncertain,” says a recent statement from the Organization for Economic Cooperation and Development (OECD).
In other words, the trouble isn’t over yet.
The organization says the economies of the U.S., Japan, Germany, Britain, France, Italy and Canada continue to look "very weak."
Meanwhile, China, which accounted for 30 per cent of global economic growth last year and is a major purchaser of Canadian commodities, is facing its own financial crisis.
A slowdown in its export markets has hurt its manufacturing industries. Bankruptcies are up and stock prices have dropped about 60 per cent since last October.
Canada is already feeling the impacts of the global downturn. A recent CIBC World Markets report says that Canadians' debts are rising faster than their assets.
“Canadians are seeing their net wealth position shrinking,” said the report.
And while disposable income is falling, bankruptcies are up almost four per cent since a year before and are expected to rise further, said the report.
Enter the Politics
All of which helps explain why the Conservatives have worked so hard to position Stephen Harper as a steady hand for the country's economy. The faltering economy might also be why Dion has announced some significant revisions to his hard-to-sell Green Shift carbon tax and poverty reduction plan.
Pressure from inside the party has reportedly inspired the Liberal leader to adjust the plan to accommodate agriculture, trucking, forestry and fishing interests.
Those industries will be able to access a reported $1 billion aid fund to help them invest in fuel-saving technologies.
But one critic said those changes only confirm what many already feared about the plan: that it would be a hard blow to Canadian businesses already struggling with a rise in fuel prices and a downturn in the global economy.
“Without specifically stating so, the Liberals have admitted that there is going to be a cost to having a carbon tax,” said John Williamson of the Canadian Taxpayers Federation.
Williamson said the CTF doesn’t reject a carbon tax in principle and endorses the carbon tax proposed in New Brunswick which is revenue negative, meaning the extra taxes raised by the carbon tax will be more than offset by reductions in other taxes.
While Dion has described the carbon tax as revenue neutral, Williamson said that is not entirely truthful because, of the projected $15 billion to be collected by the plan, $6 billion will be given to low income earners in the form of tax refunds—even if they didn’t pay taxes.
“A tax cut is not when you give money to someone who is not paying taxes—that is called a social program.”
The plan also puts Canadian businesses at a competitive disadvantage when they can least afford it, he said, adding that foreign competitors, especially those with lax environmental laws, would have an advantage.
Williamson said Canada’s numerous trade agreements, including NAFTA and agreements within the WTO, make introducing tariffs to level the playing field on goods from countries that don't have a carbon tax impossible.
“Choose your treaty … none of them permit Ottawa to slap on tariffs.”
Dion has argued that businesses will adapt, and that adaptation will better position Canada for tomorrow’s greener economy by spurring investment in green technologies.
Economy on Voters’ Minds
The taxpayers’ federation hasn't given Harper a glowing endorsement either, despite praising the government's tax cuts.
Williamson said Ottawa’s 8.4 per cent increase in spending in the first three months of the fiscal year has been a “disaster.”
Rand Dyck, one of Canada's foremost political experts also objects to Harper's fierce partisanship and “brutal style.”
But Dyck doesn't think Dion has much chance of winning an election given his difficulty in English and the complexity of the Green Shift.
“He does not have the image of a strong leader, especially in English,” said Dyck.
That might explain why it seems Canadians have more faith in the Conservatives to navigate the troubled economic times ahead. In a recent Angus Reid poll 45 per cent of respondents chose Harper as a “strong and decisive leader” compared to only 10 per cent for Mr. Dion.
Meanwhile, a recent Globe and Mail/CTV News poll found 37 per cent of Canadians would vote for the Conservatives, compared to 29 per cent for the Liberals and 17 per cent for the New Democratic Party.
The poll also found the economy was the top issue on voters’ minds.
Seeing how the economy has taken stage in the debate, Dion this week went on the offensive, claiming Harper had left Canada ill prepared for leaner economic times.
“There is a pattern here. Every time Canada is governed by a Conservative government, the economy stalls, jobs disappear and deficits appear on the horizon,” he said Wednesday. “Tory times are tough times.”
