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It’s Trudeau’s crummy economy now

Trudeau swept to power with a promise that he will ‘grow the economy’, but most of what happens to the economy under his watch will be out of his control


 
FORT MCMURRAY, CANADA - APRIL 28: Passengers board a coach bus leaving on April 28th, 2015 in Fort McMurray, Canada. Fort McMurray is currently coping with an economic downturn as a result of low oil prices. Most of the layoffs in recent months have affected the transient workforce, prompting many to leave the city in search of work. Canada's oil and gas industry is expected to lose 37% of its revenues in 2015. (Ian Willms/Getty Images)

Passengers board a coach bus leaving on April 28, 2015 in Fort McMurray, Canada. (Ian Willms/Getty Images)

Back in the fall of 2008, just days after Barack Obama was elected President—and more than 10 weeks before he would even spend his first night in the White House—right-wing bloviator Rush Limbaugh got to work rebranding America’s awful economy. “The Obama recession is in full swing,” he told his listeners. “Stocks are dying, which is a precursor of things to come. This is an Obama recession. Might turn into a depression. He hasn’t done anything yet, but his ideas are killing the economy.”

Sound familiar? For the better part of the last year, in ever-darker apocalyptic tones, Conservatives and their supporters have warned Canadians that a vote for either the NDP or the Liberals would condemn the country to a future where we’d all be walking around in potato sacks. Voters didn’t buy it, and instead delivered a resounding majority to the Liberals. But there’s an important lesson from the Obama years that we should remember as we barrel headlong into the era of Trudeau II: Those who feared Obama was a harbinger of doom were as mistaken as those who bought into his hopey-changey message of economic revival. When it comes down to it, the factors that influence a country’s economic fortunes are, by and large, completely out of the hands of those we elect to “manage” the economy.

Canadians can be forgiven for believing that our elected representatives have at their disposal a set of levers that can be pushed and pulled to steer the economy as they wish. Those in office when times are good will go to great lengths—and great expense (see: $100 million in Harper Economic Action Plan ads)—to claim that a strong economy is the direct result of their policies. Likewise, politicians out of power when times are bad hang responsibility for all that ails the economy on the policies of those no-good bums in charge.

Trudeau’s campaign sloganeering on the economy played into the economic-lever theory. To address Canada’s challenges, he repeated ad nauseam that all that was needed was for his party to be elected, so it could “grow the economy.” The cornerstone of the Liberal plan for growth is deficit spending on infrastructure. Yet, while some economists expect the new spending to add half a percentage point to Canada’s GDP growth, any gains are unlikely to come until well into 2016. The Trudeau Liberals will also bring an end to Harper’s campaign of fiscal austerity, which will take away some of the drag that’s worked against the Bank of Canada’s monetary stimulus efforts. But against all these measures, businesses in the energy sector continue to slash investment at a frightening pace, and that threatens to blow an even bigger hole in the economy than the one Trudeau hopes to plug.

Canada’s recent history reveals how little control elected officials actually have over the economy. In the wake of the last recession (sorry, not the one in the first half of this year, but the one before it), Canada was a global outperformer. Harper took the credit, but, in reality, Canada’s economy was already on the mend before most of his government’s stimulus money went out the door. Instead, you can thank the ultra-easy monetary policy of the Bank of Canada, aided by an abundance of cheap money worldwide, which spurred Canadian households to borrow and spend and made the consumer the most important driver of growth. At the same time, the boom in the price of oil and other commodities kept parts of the country’s economy running on overdrive and masked weakness elsewhere.

Yet, for several years now, Canada’s economy has resembled a stone skipping along the water’s surface, each bounce becoming weaker. The economy’s overreliance on consumers has left households carrying a substantial debt load that’s now dampening their spending. The end of the so-called commodity supercycle—the multi-year cycle, from booms to bust—came in 2011, even if it took oil prices a few extra years to respond, and the world now finds itself awash in oil. At the same time, China’s era of hyper-growth is over. With Canada’s small, open economy, these forces dwarf anything Trudeau can realistically influence.

There are things a government can do to support growth, of course, such as creating a stable environment for investment and ensuring a ready population of educated workers. There simply isn’t anything in Trudeau’s tax, spending or even environmental policies that will undermine that to any great extent—despite the direst of warnings from Ezra Levant, Canada’s own Limbaugh, that Trudeau’s victory means “national economic disaster.” It’s simply that those who expect the Trudeau government to single-handedly steer the economy back to strength are just as misguided—and likely to be disappointed.


 

It’s Trudeau’s crummy economy now

  1. Excellent article, and very true, but I would add one caveat: it is not a good idea for, and not the role of, the government of Canada to tell anyone and everyone that Ontario is the worst place on earth to invest.

    • Why do you think there has been a mass exodus of manufacturing company from Ontario in the last 8 years. They couldn’t afford the outrageous cost of electricy that the McGuinty/Wynne government cursed the Ontario people with. Try and power a province with a wind mill see how that works out for ya.

  2. Canada’s economy is not crummy. Spain has a crummy economy … We have it good here after 9 years of Mr. Harpers good judgement.

    You are setting up the parameters by which you will excuse the boy wonder of anything bad that may occur during his tenure.

    You say he will not be responsible for Canada’s economic outcomes, but you never stopped criticizing Mr. Harper who led us nicely through the worst economic times since the 30s. You just referred to it as ‘crummy’. It’s not.

    You are disgustingly bias and that is why publications like yours are dying the slow death.

    • How very true your comments are.Only down the road will we see what Canada’s economic outcome will be under the Libs.

      • Un-bloody-believable !!!!!
        Covering Trudeau’s butt has no bounds I guess. He is still “Designated PM” and you are already making excuses for him. Where is honesty in journalism ? This is terrible.

        • …and others are already lining up to blame him for any dips that occur even before he does anything.

  3. Though Harper liked to take credit for it, the reason Canada weathered 2008 better than most was because we were spared the sub-prime banking crisis -thanks to Paul Martin not letting the banks merge, and requiring more stringent mortgage rules, as well as paying down the deficit in the 90s.
    Conversely the Conservatives blamed this years recession (the only G7 member in recession despite Joe Oliver’s denials) on world events outside our control. However, ironically for a supposedly free market party, the Conservatives have been picking a winner, the oil sands industry. And thanks to all the eggs in the oil basket there has been a massive misallocation of funds to the oil sands, with the rising petrodollar conversely costing Canada 300,000 plus manufacturing jobs.

    Farmers lost billions in value because they couldn’t get their grain to market, because the railways gave preference to diluted bitumen. Now that the Wheat Board was gone, there was no one representing the farmers to get the railways moving like they did the late 90s when the was a strike.

  4. And the excuses begin, I guess it will be status quote for for the next four years for P.M. Free Ride, lol

  5. important, the US economy is now 19 trillion in debt, obama’s legacy will be that he has crippled the most powerful economy in the world, hardly a shining example

    • “$16,000,000,000. Sixteen Trillion dollars. Mainly because it costs money in order to actually invest in an economy. Obama has failed to chop the debt in half, but succeeded in running the economy upwards, which will eventually pay off the debt.” Something Harper could never do because, under his guidance, jobs and opportunities were lost and the economy crashed.

      “Bush had bought plans the US is forced to pay for, and was already into nine trillion dollars of debt when Obama came in. ” Ask.com

  6. There IS much Trudeau can do…legalizing and taxing marijuana will add $ hundreds of millions to the general revenues and at the same time increase tourism and decrease the costs of incarceration.
    By legislating the change to the SOC mandate for assisted suicide he will allow people the right to die on their own terms and save the health care system untold $millions in Canada.
    By replacing the 8600 hopper grain cars(that are approaching the end of their useful lives) he will be assisting western farmers to market their grain and producing hundreds of high paying jobs.
    By changing how the Senate gets paid to one like the English Senate…receive no salary, only a per diem & only if they attend, expense claims vetted and paid monthly in arrears, sign a code of conduct, you break the code, you’re out…he can remove the stain of disrepair from this important legislative branch.
    By slowly reducing corporate welfare (they are sitting on all the largesse, some $680billion that has been shovelled in at the top) and distributing it to the lower income & middle class families (no one making less than $30,000 should pay any tax) who WILL spend it, the economy will expand, in order to get that money companies will have to offer the goods and services they want.
    There are lots of options, he will just have to have the vision to grasp them.

  7. There is a simple way to grow the economy. That is to legalize marijuana which also happens to be one of his promises. The taxes alone on this would allow for some huge infrastructure programs. Everybody is ready and now it is time to move forward. After all what is worse taxation or biker gangs.

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