PM Stephen Harper and Mark Carney: Were they simply lucky?

Stephen Gordon on what really accounts for Canada’s performance through and after the crisis

by Stephen Gordon

(Chris Wattie/Reuters)

The financial crisis of 2008-09 and the recession it caused didn’t do much for the reputations of many policy makers around the world, but they’ve been quite good for the careers of Stephen Harper and Mark Carney:

  • Harper finally won a majority in 2011, and continues to enjoy high ratings in the polls for perceived competence. There are many dimensions where he scores much less well, but my understanding of the Conventional Wisdom is that if Harper can retain that reputation for competence when it comes to managing the economy, he will be tough to beat in 2015.
  • Carney earned the reputation of being the best central banker in the world, at least in the estimation of the U.K. chancellor of the exchequer, who finally managed to persuade Carney to accept the appointment as governor of the Bank of England this week.

It is now commonplace to note that Canada’s recession was shorter and milder than those in the U.S. and Europe (Australia’s connections to the U.S. and Europe are weaker than Canada’s and it did even better) and these two men have either taken or been given credit for Canada’s performance. But are these reputations the product of making good choices or just sheer luck? As always, a bit of both.

I’m going to start with a short summary of what happened in Canada during the crisis, if for no other reason that I’ve never tried writing one before.

Canada entered the recession on much more solid footing than most other countries. The Liberal government had put the country’s financial house in order in the mid-1990s, and the Bank of Canada’s inflation targeting policy had delivered low and stable inflation for a generation. When the crisis hit, the government didn’t have to worry about its debt (at least in the short run), and the Bank of Canada didn’t have to worry about its credibility.

And as we all know by now, while the heavily-regulated Canadian banking system can fairly be described as a cozy oligopoly, it turns out that it is also almost indestructible. As Washington University economics professor (and native Canadian) Stephen Williamson once put it,

“[T]he Canadians have somehow solved the too-big-to-fail problem. The banks are too-big-to-fail, but they never fail, so problem solved.”

No Canadian banks failed in the Great Depression, nor would any seriously risk failure in 2008-09.

These elements were in place before Harper and Carney arrived on the scene—and in the case of the banking system, before they were born. Other countries were less fortunate.

And it was lucky for us that the financial crisis occurred when it did. Canadian financial institutions’ holdings of what turned out to be very dodgy asset-based commercial paper were not devastatingly large in September 2008, but they were growing. Similarly, although Canadian mortgage underwriting standards never degenerated to U.S.-style practices, there was a steady trend to making it easier to obtain mortgages: by the time the crisis hit, 40-year mortgages were on offer. If the world’s banking system had managed to stagger on for a few more years, Canada might have found itself in much deeper trouble when the crisis finally came.

When the crisis did hit, the Bank of Canada and the government dealt with it as well as could be expected. Holdings of problematic asset-backed commercial paper were restructured, and investors we obliged to accept their losses: no public funds were involved. The Bank of Canada applied all its available levers to supply short-term liquidity to financial markets: interest rates were reduced to zero, and the Bank expanded its balance sheet by means of purchase and resale agreements. For its part, the government provided liquidity via the CMHC and the Insured Mortgage Purchase Program (IMPP), which allowed chartered banks to trade mortgage assets for more liquid CMHC paper. Of all the measures implemented during the crisis, the IMPP is almost certainly the most clever. It was a classic application of Bagehot’s Rule for dealing with financial crises: “lend freely on good collateral at penalty rates.” Since the mortgages were already insured, the government took on no extra risk. And since CMHC paper trades at a discount from T-Bills, banks lost money in the transaction. The banks stopped using the IMPP as soon as markets started functioning normally.

In the area of monetary policy, the Bank of Canada reduced its policy rate as far as it could go on April 21, 2009, thus hitting the “Zero Lower Bound” (ZLB) for conventional monetary policy. Other central banks also hit the ZLB, but the Bank of Canada was the first to implement unconventional instruments, in the form of a “conditional commitment” to hold interest rates at the ZLB for another year. The Bank had also prepared for quantitative easing—this required the passage of special legislation enabling it to purchase a broader range of assets—but it wasn’t required. The conditional commitment was abandoned in April 2010 and the Bank raised interest rates above the ZLB in the following June.

As for fiscal policy, perhaps the biggest “what if?” of the crisis was: “what if the Conservatives had not cut the per-vote political party subsidy in the November 28 2008 fiscal update?” This cut was not part of the Conservative platform, and it led to the prorogation crisis. But what if the CPC had left the vote subsidy alone? The Conservatives’ initial reaction to the crisis was to impose austerity in order to avoid running a deficit—see Table 2.2 here. Not running a deficit under any circumstances was the position that the Conservatives had run on in the 2008 election, and the other parties had made similar promises. If it weren’t for the vote-subsidy measure, it seems to me that the opposition would have most likely let these measures pass.

If the government had imposed austerity, it may still be the case that the Bank of Canada could have and would have implemented measures that offset a contractionary fiscal policy during a recession and when interest rates are at zero — the debate over whether that would have worked is ongoing and lively. And it would have been risky to entrust policy to what is still an untested conjecture.

Happily, that conjecture was never put to the test. The March 2009 budget went the other way, applying the textbook treatment: an explicitly temporary increase in spending, one that was phased out when output and employment had recovered their pre-recession levels. The jury is still out as to the effectiveness of the stimulus program (the recession ended before the spending actually got underway), but it was definitely a good idea at the time. It’s extremely unlikely that the stimulus program actually made the recession worse.

There was more to the government’s handling of the recession than the stimulus package, of course. As noted earlier, the Department of Finance played a key role in providing liquidity to financial markets and worked closely with the Bank of Canada during the crisis. The bailout of the auto sector was also a good decision. A long-term decline of a large sector is one thing; a catastrophic collapse in the middle of a recession is quite another.

The Canadian recovery was due to three main factors:

  1. A sharp depreciation of the Canadian dollar, which helped boost exports.
  2. A quick recovery in commodity prices, driven by continuing demand from Asia.
  3. A housing sector that still had room to grow and consumers whose personal finances allowed them to take on debt. 

These were things that countries like the U.S. and the U.K. didn’t have.

Looking back on all this, you see a lot of things that had nothing to do with who was actually in charge. Neither Harper nor Carney can take credit for Canada’s strengths going into the crisis, and they can’t be blamed for the financial meltdown that caused the crisis. So upon what basis can we allot credit for their performances?

Mark Carney first. It’s very hard—impossible for anyone who is not a Bank insider—to work through the relevant counterfactual exercise of re-running the crisis with someone else as Governor. But I think we can safely assume that the Bank would almost certainly have done much the same thing: central banking is not a one-man show, and Mark Carney can’t do everything for himself. That said, my impression is that Carney was generally an advocate of acting quickly and forcefully. (Much of this impression comes from his very first interest rate decision as Governor in March 2008: a surprise cut of 50 basis points in the overnight rate on the basis of the U.S. outlook.) And it is perhaps this reputation—plus his willingness to lock horns with financiers who opposed his calls for stronger banking regulations—that made his candidacy so attractive to the Bank of England. But it is too much to go on to conclude that we owe our recovery to Mark Carney.

It’s important to remember that Stephen Harper’s first instinct—austerity—was likely to have accentuated the severity of the recession. But it’s also important to remember that he ended up doing what the textbooks recommend. Doing the right thing only reluctantly and as part of a strategy to win a confidence vote may not sound like much of an achievement except for the fact that he did it. I suppose I might give extra credit to Stephen Harper if he had wanted to do the right thing from the start, but what really matters is the final decisions he made and implemented. (I’m certainly not inclined to give the U.K. Conservatives extra credit because they followed their instincts and imposed austerity in the middle of a recession.)

What I take away from this is that we could have done much worse, but I don’t think we could have done much better. Stephen Harper and Mark Carney were dealt good hands and they played them well.




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PM Stephen Harper and Mark Carney: Were they simply lucky?

  1. No, Mr. Harper didn’t play his hand well at all. He was forced to play his hand well against his own wishes. It’s not just that he didn’t want to do the right thing, he wanted to do *the wrong thing* and was prevented from doing so.

    It’s like giving praise to a guy who didn’t pour gasoline on a fire simply because the firemen pulled him away first. What matters is what he wanted to do.. because we can’t always be sure the firemen will be able to pull him away next time.

    • The odd thing in SG’s post is the assertion that the opposition also wanted to run no deficits. They may have said something during the election [ would anyone SAY they were going to run a deficit] i can’t recall. But they saw the storm coming much earlier than Harper, that’s for sure.

      • Yes, you’re absolutely right. The Liberals and NDP were trashing the Canadian economy since 2006. In their eyes, the economy can only do well when Liberals are in power. You can see it quite clearly in the comments here where the Libtards are trying to give the Liberals credit for stimulus spending, even though they were nowhere near the levers of power.

        • Go back to sleep.

          • Go back to hell.

          • Tut tut.

        • The Liberals had enough leverage to force Harper to put a stimulus package in the 2009 Spring budget after he was peddling austerity measures in his Fall 2008 economic update… So it looks like they were pretty close to the levers of power. But in hindsight they should’ve let Harper trash the economy (like he is doing now) and saved Canada from a fake, destructive Harper majority.

    • I think Harper played his hand great. He ended up implementing policies that were distasteful to his own base while credibly being able to blame it on the opposition at the time, and then equally credibly being able to take credit for it when everything ended up all right because he was the one who ultimately made the decision. Brilliant politics!
      Of course, he was helped by a ridiculous opposition who tries to take credit for the success of the stimulus while simultaneously blaming him for the size of the deficit. In fact, many Harper opponents are still doing it and they still look ridiculous.

      • You do realize you’re saying that people who support Harper are so stupid that he needs to risk losing his government in order to get some decent policies put through without them blaming him?

        I mean.. if you wanna go there, I’m not going to stop you, but perhaps you don’t want to be the example that justifies your theory.

  2. The entire notion that Harper had anything to do with how well Canada weathered the crisis of 2008-09 is a joke. Had he been in power earlier in the decade, or heaven forbid, during the 90s, he would have gutted all of the regulations that ended up sparing Canada from the worst of the global meltdown. In the same vein, had the Conservatives been in power while George Bush was planning his misadventure in Iraq, young Canadian men and women would have died in the desert, thousands of miles from home while searching for imaginary “Weapons of Mass Destruction”. “Lucky” doesn’t even begin to describe it…

    • Harper to this day rails against the liberal cuts of the 90s, when he is on record as having complained they didn’t go far enough at the time.

      • He doesn’t rail against them, exactly; he does love bringing them up, though.

        • Which makes him a bald faced hypocrite, even for a politician,no!

    • Harper is also responsible for Canada’s housing bubble and record levels of personal debt. In 2006, he began importing American banking deregulation with 40-year no-money-down mortgages which fueled the speculative bubble.

      He also deregulated the CMHC, allowing banks to buy up $243B in “bulk portfolio” mortgage insurance offloading risk onto taxpayers. This policy promoted risky mortgage lending from banks creating a “moral hazard”: heads, banks win on risky loans; tails, taxpayers lose.

      The REAL Canadian bank bailout
      “I can’t imagine that Canadians would be pleased to learn that while the banks were publicly expressing concerns about certain markets, they were quietly allowed to reduce their own exposure to these very markets by offloading the risk to Canadian taxpayers.”
      http://www2.macleans.ca/2012/05/24/the-real-canadian-bank-bailout/

  3. you forgot to mention that Harpers first 2 years he put a major amount of dolllars onto our total debt – then fired back to the provinces more monies than they have had in a long time and then reduced federal income tax – then reduced GST and Corporate Taxes – add all these up and this helped our economy keep our unemployment numbers lower than the yankees – never before in our history have we had an economic meltdown and actually do better than the yanks unemployment wise = quite unheard of BUT so far our business are purchasing more foreitn assets than ever – right now we are in a net position PS folks want a good investment check out rail (rooling stock) down in the states as we own major amounts of it !!! and soon might be way more heading to Valdez :)

    • Actually the US had housing and financial market meltdowns, while Canada had neither. Harper’s boutique tax cuts had nothing to do with anything. In fact, economists hated Harper’s GST tax cut. Most would’ve said cutting income taxes is better. The corporate tax cuts were a waste. Corporations have been hoarding “dead money” (Carney,) not investing it and creating jobs. Productivity growth is at record lows.

      • Some have argued the CITs had merit because it allowed business to repair its tattered balance sheets after the recession even if they didn’t hire anyone.
        I find that quite odd.I mean If anyone had suggested we just give businesses money to fix their balance sheets “someone” would be screaming…It’s Socialism i tell you!!

        • Cutting CIT rates is playing the long game. People who expect drastic results in the short run don’t understand this.

          • Corporate income tax cuts are just more flaky Reaganomics — aka “voodoo economics.” It’s just another means of killing centrist government or “starving the beast”: 1) recklessly cut taxes; 2) create a budget crisis; 3) justify deep spending cuts; 4) goto 1.

            If one wants to see the results of this “long game” just look to America and Ireland — countries that have gone bankrupt on the foolish premise that “tax cuts pay for themselves.”

            In fact, of all six bankrupt developed countries (over 100% debt/GDP,) five are low tax countries (top-ten lowest tax revenues among 31 High Income OECD countries): Japan #4, Greece #8, Portugal #10, Ireland #4, the US #1.

          • You’re confusing two things: cutting CIT is not starve the beast. CIT is an inefficient tax, in that they do economic harm (deadweight losses). It taxes investment, which is something we want. On the other hand, value added taxes like GST or Pigou taxes like a carbon tax are relatively efficient, in that they do less ‘harm’ (deadweight losses).

            I have no problem with taxation–I just want it to be efficient, fair and in accordance with the desired level of public spending.

            Sweden, Norway and a host of other countries have low CIT rates and are doing relatively well. The US and some others have relatively high statutory CIT rates. Their problems are orthogonal to CIT rates. Greece’s problem is more a matter of tax avoidance than low rates. Ireland allowed private banks to use the sovereign credit and they rank amok.

          • According to KPMG Competitive Alternatives Report (2012,) Canada the lowest *effective* corporate tax rate among all countries listed in its study.

            According to Milton Friedman, a tax on corporations is a tax on shareholders. (The US CBO considers CIT a personal income tax.) Considering the top 20% own about 80% of the stocks, a CIT cut is nothing more than another tax cut for the wealthy.

            It’s interesting how all this ideology about “efficient” taxes ends up being entirely self-serving to businessmen and the rich. Canada and Ireland cut corporate taxes. The US cuts taxes on dividends and capital gains. Next they will switch roles. But the end result is the same: a “starve the beast” campaign set on destroying centrist government and winding back the clock on progress.

            In the post-war era, when we had “inefficient” taxes and trade policies, we had rising living standards for all segments of society and much stronger GDP and productivity growth and paid down most of our government debt. Clearly these inefficiencies were negligible in their overall effect on the economy; but the cost of removing them has proved enormous. The net result? Colossal failure.

          • CITs can be incident on more than just shareholders. Reduced investment can lead to less wages, or less competition, driving up prices for consumers.
            CIT in Canada is integrated with personal income taxes. When CIT rates were cut, the effective tax rate on dividends rose for high income earners automatically. The system is designed so that someone in a given tax bracket is indifferent between earning income in a corporation and receiving a dividend vs. earning the income personally. The difference with a high CIT rate is that it discourages investment by reducing the after tax rate of return of investment.

            You can argue for a higher marginal tax rate for the wealthy. Why do it through the backdoor by taxing investment? It seems to me that the problem is that the wealthy get to consume a lot more relative to the rest of society than they used to (they take a bigger piece of the consumption pie), not that they have higher incomes. In that case, use progressive income taxation + consumption taxes with progressive transfers to the lower and middle class. Keep in mind that a large % of the income of the top 1% does not come from investment returns, but rather wages/employment income.

          • Poor people consume all their income. The rich consume far less of it. So although a consumption tax has its uses, it is ultimately a flat or regressive tax. The wealthy also receive most of their income from investments (especially their savings.) Some corporate executives decline wages because they are taxed higher than dividends and capital gains.

            When it comes to investing money, the expected return is the greatest motivator. Businesses and investors are hoarding money now despite big tax cuts because they have zero faith in the economy.

            Why is that? Clearly it’s a demand problem. After 30 years of corporate downsizing, people have much less disposable income. So because of their unfettered greed, businessmen have killed the markets they need to make their riches from. The only way the global economy will get back on its feet is when we restore Keynesian demand-side economics. Until then, expect a lost decade or two…

          • Also, harking back to the postwar era is odd. Are you arguing that jacking up taxes to postwar levels is the path to prosperity?

            Postwar prosperity was a result of the ‘demographic dividend’. A temporary period of exceptionally low dependency ratios. This occurs when countries transition from a high birth rate regime to a low birth rate.

          • Harking back to when the economy was stable and functioning as it’s supposed to is odd? Conservatives sure make a lot of excuses for all their failed policies over the last 30 years that culminated in a global economic meltdown we have yet to recover from. In fact, free-market ideology led to the first meltdown in 1929 that produced the Great Depression.

            “Are you arguing that jacking up taxes to postwar levels is the path to prosperity?”

            Yes. Macroeconomics is about allocating economic resources in the most efficient manner so they’re put to good use. Allowing the super-rich to hog up all the resources is the reason the economy is failing: declining living standards, skyrocketing debt (public and private), anemic GDP growth, lackluster productivity growth. The economy and society work best when people have the opportunity to maximize their human and economic potential. That doesn’t happen in a plutocracy with towering levels of inequality.

            BTW, the post-war Keynesian era was centrist. From Pearson to Nixon, the economy was managed from the center of the political spectrum. And it got results. Like the laws of physics, the laws of economics don’t change over time (that we don’t know them to a scientific certainty doesn’t change that fact.)

  4. I agree with Thwim….Harp was stopped from doing what he actually wanted to, so I’d say WE got lucky. The country dodged a bullet …….a hail of them in fact.

    Carney is getting out while he can.

  5. I disagree with Mr Gordon’s conclusion that the opposition parties would have let Economic Statement measures pass if the Statement had not included a cut in the per-vote-subsidy. The per-vote-subsidy measure was only one of two major concerns the opposition parties had. The other, and most important one, was the lack of a credible plan to deal with the impending recession. Even when the Harper government started to backtrack on the per-vote-subsidy issue, all opposition parties said they would vote against the ways and means motion to implement the measures in the November 27, 2008 Economic Statement. Even if they had voted for the ways and means motion, they were all still going to vote for a liberal motion that the opposition had lost confidence in the government for its lack of action to deal with the recession.

    • Yes, Gordon appears to be a partisan Conservative. He gives credit to Harper for the stimulus package that was forced on him and takes away credit from the Liberals and NDP who insisted on stimulus spending claiming they had an ulterior motive. The reality is Ignatieff backed off the coalition idea when Harper agreed to stimulus spending in the Spring budget.

      This is one of the reasons why macroeconomics is still stuck in the Middle Ages: it is influenced by politics and corrupt agendas. Economists are so used to fudging the evidence to support their positions they have no problem claiming black is white and white is black.

      I wouldn’t say all economists are corrupt. The Keynesians are not ideological or agenda driven. They have pointed out all along that austerity measures in a slump are self-defeating, for example.

      • Which paragraph or sentence or statement strikes you as being the most partisan?

    • yes, it’s pretty clear mr. gordon flubbed that one.

  6. “It’s important to remember that Stephen Harper’s first
    instinct—austerity—was likely to have accentuated the severity of the
    recession.”

    “likely” as in how Stephen Gordon likes to put it. The fact is that we will never know what would have happened ‘otherwise” and so liking or disliking something hypothetical is easy.

    • He is an economist [SG] and there is precedent for that informed point you know.

      • I know. There are many economists who would disagree with Gordon’s point of view. Not that you would find that here on Wherry’s blog. That’s why I read a variety of economic reporting.

        How’s my English? Worth responding to?

        • Are you Bill? That would be an interesting turn of events.

          Just read your other comment. Why the question about English??

          • Why the question “Are you Bill?”

          • I queried Bill on his English comprehension today. Your question is merely coincidental. But it still doesn’t make sense.

        • This isn’t Wherry’s blog.

    • Yup. It’a shame we don’t have real world examples of “otherwise” where
      the political/financial class took a bad situation and made it worse.

    • Likely, liking, disliking….what are you trying to get at there?

      • I dislike the fact that Gordon uses the word “likely” as in “was likely to have accentuated the severity of the recession” if there is absolutely no ground for stating such likelihood thereof. The ‘likely’ aspect inserted is just an opinion, namely the opinion of Gordon. It is misleading to make such insertions of ‘likely’ when unsubstantiated. The word ‘likely’ misleads the readers in that Gordon can slant the statement made without being substantial about it.

        • Your contention is that there is absolutely no grounds for Gordon’s opinion, yes?

          But that doesn’t mean that austerity measures or stimulus measures or no measures at all are all equally likely to have similar outcomes, does it?

    • Maybe Canada would have experienced a boom had Harper never cut the GST. We’ll never know!

  7. “It’s important to remember that Stephen Harper’s first instinct—austerity—was likely to have accentuated the severity of the recession. But it’s also important to remember that he ended up doing what the textbooks recommend. Doing the right thing only reluctantly and as part of a strategy to win a confidence vote may not sound like much of an achievement except for the fact that he did it.”

    That’s a crock. A politician cannot be given credit for implementing policy that was forced on him.

    In the fall of 2008, Harper issued an economic update that would implement austerity measures instead of a stimulus package to cushion the blow from the “Great Recession.” The Liberals and NDP threatened to replace the Harper Government with a coalition. Harper avoided his downfall by agreeing to a stimulus package. (Then he spent $100M/yr of taxpayer money promoting it — which he is still doing years after the spending ended…)

    So clearly the credit for Canada’s recovery was due to the Liberals and NDP, not Harper. The question is: why is Gordon trying to give credit where credit’s not due?

  8. I appreciated Mr. Carney’s efforts to use his bully pulpit to bring matters of concern to attention of the public – (some of which were controversial) such as his highlighting the ongoing concern of lagging productivity, and his more recent financial analysis of corporate balance sheets post recession. Even sent the BofC a copy of my supportive comments, for the record. It was acknowledged.

    I trust the institution is small enough that they eventually made it to him. I seem to recall Wells mentioning (on twitter?) running into Carney in an elevator after he had written a tongue in cheek list of things Mark Carney could do, by replacing his name for Chuck Norris. Carney apparently acknowledged he had been shown the post.

    • Late reading the G&M today, but, coincidentally found this in ROB

      ‘Dead’ cash to blame for
      Ontario’s stagnant growth, task force warns

      The group singles out the “dead cash” on the balance sheets of Ontario businesses as an opportunity to boost the province’s prosperity. The issue of dead money surfaced this summer when Bank of Canada Governor Mark Carney said Canadian companies are sitting on cash when they should be investing or returning it to shareholders – comments that sparked an avalanche of criticism from economistsand executives.
      http://www.theglobeandmail.com/report-on-business/economy/canada-competes/dead-cash-to-blame-for-ontarios-stagnant-growth-task-force-warns/article5779990/

    • Well, now that it has been revealed that ! Mr Wells noted that his friend [Mark Carney] “has on occasion been ahead of the Government on economic policy…
      https://twitter.com/nspector4/status/274883696094507008

      it puts the Chuck Norris blog in perspective (nothing at all wrong with that in my view), and provides me additional assurance that Carney had seen my elsewhere blog comments.

  9. “If it weren’t for the vote-subsidy measure, it seems to me that the opposition would have most likely let these measures pass”

    That surely is a debatable point? As is your contention that the opposition parties also committed to not run deficits during the election.[ did you check the record before writing that? I honestly can't recall now]

    In any case i do recall Dion [and the opposition] stating at the time of the update crisis that is was their objection to the economic measures that forced their hand. They received a good deal of scorn from people like Coyne for it.[ he believed that it was only about the per vote cuts]

    “Doing the right thing only reluctantly and as part of a strategy to win a
    confidence vote may not sound like much of an achievement except for
    the fact that he did it. I suppose I might give extra credit to Stephen
    Harper if he had wanted to do the right thing from the start, but what
    really matters is the final decisions he made and implemented.”

    This too is debatable. You might want to give some credit to the opposition for forcing this choice upon him? The larger point being he didn’t abandon austerity because he had seen the light and now belatedly wanted to do the right thing. It was because he had

    no other choice. You make that point yourself earlier.
    Doing something that you must in order to survive politically merits no kind of even back handed credit at all IMO.

  10. No mention then of the infamous …if we were going to have Christmas it would already have happened …prediction from Harper….or some such existential paradoxical contortion anyway. That was right before the no deficits pledge if i remember. That at least was consistent. Although i think he he did later switch to talking about a depression a-coming.
    That was a zany election, green shift an all.

    How Harper earned and kept his rep through all of this is mystifying. Until you factor in luck. The opposition grab for power saved his bacon…and lkely ours…howzat! for an historical irony?

  11. The people who claim that the opposition would’ve voted against the Fiscal Update in the absence of the vote-subsidy measure have different memories of the era than I do. At the time, I was writing things like this and wondering when the idea of a deficit would stop being poison.

    • I think it was open to interpretation. The opposition was using the lack of action, perhaps as a fig leaf for their opposition to the per vote subsidy cuts. But they couched their opposition to the EFU in terms of failure to act to stimulate, as well as the government’s pure fantasyland insistence that it would continue to run surpluses. This despite the fact that government was already running a deficit.

      Also recall the G20 meeting where Harper committed Canada to a 2% stimulus for two years, then returned and proposed austerity instead. I don’t think their opposition was solely based on the per vote subsidy cuts.

  12. It should be noted that Harper’s claim that Canada “has the strongest recovery on the planet” is utter nonsense. There are many developed countries that are ahead of us (GDP growth for 2010-11):

    Korea: 6.3%, 3.6%
    Sweden: 6.2%, 3.9%
    Slovakia: 4.2%, 3.4%
    Poland: 3.9%, 4.4%
    Finland: 3.7%, 2.9%
    Germany: 3.7%, 3,0%
    Canada: 3.2%, 2.5%

    Canada’s economy has many problems: a housing bubble, record levels of personal debt, 500,000 export-related job losses, a massive $50B trade deficit (current account,) record-low productivity growth, corporations hoarding “dead money,” an overvalued dollar killing value-added exports and tourism.

    Mark Carney actually predicted in 2010 that Canada’s economy would trail other G7 countries in a few years. So we need an actual economic action plan to address these issues, not rhetoric and propaganda.

    Canadian economy expanding quickly, but will soon trail G7 countries: Carney
    http://www.theguardian.pe.ca/Business/Personal-finance/2010-04-23/article-1287318/Canadian-economy-expanding-quickly,-but-will-soon-trail-G7-countries:-Carney/1

  13. Its really hard to read the above, when it wrongly gives any credit to Liberals.

    First, Flaherty bought Billions, of mortgage backed securities from the banks to provide them liquidity, so, the Banks did have a huge amount of help. Massive help.

    Second, the problem of a recession has nothing to do with the banks. IF the economy kept on a downward spiral people would have lost jobs for a long time and lost their houses and the Banks would have failed.


    Low interest rates, a properly directed stimulus plan and a soft talking PM saying all is fine minimized the recession.

    there where 3 main points, he leveraged money from people and provinces, willing to pay half or 1 1/3 for ready to go projects so that the turn around would be quick and the amount of money would be greater.

    He put the money into the grass roots, didn’t for the most part hand over money to people like GM to swallow, but rather gave money to home owners who then stimulated the economy by fixing their homes, which increased jobs. Obama crushed a lot of cars south of the border causing an increase in Auto Sales.

    Oil prices dropped and the cost of living dropped while minimum wage in Ontario went up, again putting money into the economy at the grass roots level.

    These are the type of things, not forgetting Job sharing etc.


    the Liberals had nothing to do with it. Our debt had to go up regardless to pay into a stimulus plan. Its still in deficit till this past recession loses its grip on growth.

    • Who sets minimum wage in Ontario?

      Frankly, you don’t really understand what happened. Sounds like you’re shilling. Gordon isn’t.

      • Ginty did, It was one of the 75 Ideas I sent to Harper.

        Ginty also bought the teacher vote in the past forcing a wage disparity and created the crisis we have now. IF wage increases where more moderate, he could have been giving a small wage increase now rather than having labor trouble.

        Remember it was Mayor Miller and the Unions that where causing strikes during the worst of the recession over garbage pick up, taking billions out of the economic cycle…

        John Baird at the time had to rap Miller on the knuckles so he would buy in to the stimulus package system that every other city and province was all to happy to participate in.

        The Left are just as partisan as anyone even at the cost of your job.

      • Look at his chosen account name. It’s just a troll who’s left his bridge.

  14. “It’s important to remember that Stephen Harper’s first
    instinct—austerity—was likely to have accentuated the severity of the
    recession.”

    I disagree. I think it would have had no effect whatsoever.

    And you’ve forgotten the GST cut, which occurred exactly at the time the recession was starting, which is the definition of stimulus. It added 1% to the purchasing power of every individual in Canada, which is a powerful stimulus cross-country.

    I’m always surprised by the fact that nobody noticed the fact that Canada had a perfectly timed stimulus.

    • This IS a bit revisionist. How can you credit a tax cut as wise planning for recession he said he believed wouldn’t happen. Hindsight. Pure hindsight and coincidence makes up a new history. The only way to reconcile that would be to believe he was lying about his belief in the due recession.

      • “How can you credit a tax cut as wise planning for recession he said he believed wouldn’t happen”

        I didn’t. On the other hand, tax cuts always have economic benefits.

        • Always?

        • Like making more “dead money” available for corporations to hoard?

          • Recessions are not luck.

            And cutting taxes is never a bad idea.

            Cutting taxes when a recession is starting is the perfect time to cut taxes, however you are correct that nobody knows when a recession is starting. To call it “lucky” seems to be an inappropriate word.

            Harper’s good decision to cut taxes turned out to be even more valuable than expected.

          • Never?

        • Actually, Stephen Gordon pointed out in another blog that tax cuts are a scam (one he is ironically in favor of.) It’s called “starving the beast” (aka destroying centrist government) which is a 4 step program: 1) recklessly cut taxes; 2) create a budget crisis; 3) justify deep spending cuts; 4) go to step 1.

          America has proven that tax cuts don’t “pay for themselves.” Their economy is in shambles and the country is bankrupt (103% debt/GDP) after 30 years of continuous tax cuts.

          In the post-war era, using progressive taxation, the US not only paid down its debt (from 135% to 35%,) it had high, stable economic growth and rising living standards for all segments of society.

          http://www2.macleans.ca/2012/11/07/starving-the-beast-what-canadian-conservatives-can-teach-us-republicans/

          • Your summary of Gordon’s previous column is completely absurd.

          • LOL. It’s literally what he said. How on Earth would you summarize it?

    • “It’s important to remember that Stephen Harper’s first
      instinct—austerity—was likely to have accentuated the severity of the
      recession.”

      I disagree. I think it would have had no effect whatsoever.

      ***
      Y’know, if you’d stopped there, it might have been halfway plausible. Not the most likely, to be sure, but plausible.

  15. Steve Harper and his gang have pretty much bankrupted
    Canada. No one mentions our return to annual deficits under the Conservatives.
    Our national debt will probably hit a trillion dollars in a few years. If interest
    rates climb this will be a catastrophe

  16. Further recovery will need to solve the issue of dead corporate money and the fact that Canadians are now tapped out in debt. It would appear that the balance of corporate taxes and personnel rates are unbalanced. There has been no good recovery of jobs for our recent graduates, so no good future tax revenues. And with alot of contract jobs & internships facing our youth, there is an additional strain on unemployment. Will miss Carney’s way of pointing this out to the government.

  17. Like many Canadians, Mr.Gordon appears very impressed by people’s titles. Because the government enacted stimulus, he immediately assumes the PM gets the credit, no matter how the situation actually played out.

    Harper was literally forced to enact stimulus. He wasn’t given a choice. He wouldn’t be in power today otherwise in fact. Ignatieff gave up his one and only chance to steal power on the basis of this. Doesn’t anyone remember Iggy’s funny little statment about putting Harper “on probation”? How the government wasn’t even six months old at that point and thus the Governor General would’ve likely given the second place Liberals at shot at governing if the government was defeated? That’s WHY Harper prorogued for god’s sake!

    Jesus, very short memories around here!

    “Ignatieff puts Tories ‘on probation’ with budget demand – The Liberal party will only support the minority Conservative government’s federal budget if Prime Minister Stephen Harper agrees to an amendment calling for a “clear marker” of regular updates to Parliament on the impact of economic stimulus projects, Liberal Leader Michael Ignatieff said Wednesday.”

    http://www.cbc.ca/news/canada/story/2009/01/28/ignatieff-decision.html

  18. Without Harper, Carney & Flaherty Canada would not have survived, you big talkers and writers try it. It is no luck

  19. After years of horrendous deficit spending in the Mulrony Conservative era we are back again with no end in sight. Paul Martin had us finally with an unassailable balanced budget, that is until we got a Conservative government again. “Stevie” the ideologue wanted to be just like his friend George Bush down south so here we are…26+ billion deficit financing and continuing. Manage the economy well? Not a chance! Woe is us……….

  20. The ‘high reputation’ of Harper, Carney, Flaherty et al has a great deal less to do with how wonderfully they have managed the economy, as how well the people who manage both they and the Canadian population as a whole have done their job. Note now, we have had a national debt of some half trillion dollars for the last ~25 years, upon which we have paid some trillion dollars in interest, and still have more or less the same amount of debt (and double those figures if you include prov debts). Put them figures into comparable personal debt figures, and there wouldn’t be many people telling you what a great financial manager you were (the banks would continue loving you as long as you kept paying them of course). Kind of like the cows being led to the milking machine bragging about what a great farm they live on. What Happened http://www.rudemacedon.ca/what-happened.html .

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