Harper’s plan to survive the recession

John Geddes takes a close look at the Tories three-part plan

Harper'In releasing his second quarterly update on his “economic action plan,” Prime Minister Stephen Harper today left little doubt about his government’s strategy for thriving—or at least surviving—through this recession.

It’s a three-part plan based on three questions. What’s happening now? How will things look when the economy picks up again? What will be the long-term cost of weathering this downturn?

The answers he hopes voters will come to believe: Conservatives acted fast to spend money to combat recession; Canada will come through hard times in better shape than most countries; and Canadians won’t be saddled with higher taxes and endless deficits as a result.

Given the Tories’ laughable track record through last fall’s global financial meltdown and the early stages of the recession, you’d think he’d have a tough time positioning his government as sure-footed on the economy. (They first denied a recession was coming, then claimed they wouldn’t have to run a deficit as a result, and then, when the inevitable deficit materialized, they grossly underestimated its size.)

Still, Harper had the elements of a pretty good story to tell in Cambridge, Ont., this morning. For starters, there’s a nice clear chart in the report he released that shows the International Monetary Fund’s outlook for this year, and Canada’s recession looks less severe than the downturn in the other major advanced economies.

Beyond that mildly reassuring forecast for low relative pain, Harper has an upbeat line to spin on stimulus spending, particularly infrastructure. “I’m pleased to report,” he said, “that some 3,000 individual projects across the country are now getting under way.”

That sounds like a lot. The phrase “getting under way,” mind you, is a bit vague. Does that mean shovels turning dirt? Construction workers on the job? Not necessarily. There are a bewildering range of different federal infrastructure funds, both old ones the Tories are now trying to inject new life into and new ones that are barely up and running. Good luck getting a handle on the whole package.
However, from what I’ve been able to gather, Transport Minister John Baird, who is responsible for the much of the infrastructure file, is making extraordinary efforts to hasten the approval process for shared federal-provincial-municipal infrastructure.

A more definitive reckoning will take months. The figures released today for Baird’s key $4-billion Infrastructure Stimulus Fund look suspiciously imprecise. The report shows $2 billion to be spent this year, $2 billion next year. That 50/50 split is too tidy to stand as a candid tracking of how fast money is really being allocated and spent. A clearer assessment probably won’t be possible until well into the fall.

But let’s make two big assumptions. Firstly, that the IMF is right, and Canada does fare a bit better than other industrialized countries. Secondly, that a few months from now most provinces and cities will be reasonably content with the flow of infrastructure billions from Ottawa.

That might leave the voting taxpayer thinking something like, ‘Well, the Tories were slow on the uptake about the recession, but once they caught on they did what they could to soften the blow, and Canada did better than the U.S. and Europe.” That wouldn’t be a bad outcome for testing times.

What’s left is Harper’s most partisan claim: that the Liberals, given a chance, would mismanage the transition from recession back into a growing economy. He claims the opposition parties would all, if they had their way, saddle Canada with permanent high spending that could only be paid for by crushing tax hikes in the near future.

The challenge for Liberal Leader Michael Ignatieff is to prevent that charge from sticking. That shouldn’t be all that hard. After all, Harper is relying on an old pre-Jean Chrétien, pre-Paul Martin, Liberal image. Ignatieff only needs to associate his brand closely with their budget-balancing, tax-cutting record.

On the Conservative-Liberal contrast, Harper was, to my ear, surprisingly muted today. And on the prospect of tax hikes, here’s how he compared himself with Ignatieff: “The leader of the official Opposition said without any doubt that he will be increasing Canadians’ taxes. This is a position that our Conservative government does not foresee.”

Two points. Ignatieff has never said that he will raise taxes, only that it would be irresponsible to categorically rule out the possibility, given Ottawa’s recent plunge back into deficit. And on Harper’s own pledge, if it can be called that, for the Prime Minister to say his government “does not foresee” tax increases is not exactly a read-my-lips promise.

Perhaps Harper is rhetorically reserved on the tax issue because he knows how daunting the federal fiscal outlook really is. The progress report he released today is strikingly silent on when the books will be balanced again—containing no mention of the Harper government’s previous promise to be back in the black by 2013-14.

What Harper’s attempting here is to buck a powerful historical pattern. Before the current slump, there have been six recessions since 1960. In the federal election immediately after each one, the party in power was either reduced from majority to minority or lost outright. So for Harper to survive would be a remarkable feat. And for Ignatieff to fail to defeat him would be a major opportunity squandered.




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Harper’s plan to survive the recession

  1. Ignatieff has never said that he will raise taxes, only that it would be irresponsible to categorically rule out the possibility, given Ottawa's recent plunge back into deficit

    Actually John, he did. This is what Ignatieff said, as quoted by The Record (local K-W paper):

    Federal taxes must go up to pay off Canada's increasing debt, Liberal leader Michael Ignatieff said today.
    The challenge, he said, is to ensure the economic recovery is not hurt by raising the taxes, Ignatieff told about 100 people at a Cambridge Chamber of Commerce breakfast meeting.
    Ignatieff's comments were in response to a question from Cambridge business leader John Bell, who wanted to known when the federal debt will be paid back.
    “We will have to raise taxes,but not at the expense of hurting the recovery from this recession." He added that “an honest politician” cannot exclude a tax hike as an option.

    Your "can't rule it out" is a backtrack after he'd realized just how far he'd stuck his foot in his mouth.

    • Since when is speaking the god-honest truth sticking your foot in your mouth?

      • Since politics was invented.

        • Good point.

    • Has anyone put the explicit question to Stephen Harper about raising taxes?

      Has he categorically stated he would not?

      • In Harper's own words today:

        “The leader of the official Opposition said without any doubt that he will be increasing Canadians' taxes. This is a position that our Conservative government does not foresee.”

        They didn't foresee a (bluntly obvious) recession not very long ago… But, there it came.
        Today, they do not foresee raising taxes (as an option for getting outta deficit)… But somehow, we are to believe that our biggest deficits ever will magically be done and over with, without any form of tax hike, in just a few short years.

        For the record, I am inclined to believe the words ''do not foresee'' do not mean ''we won't raise taxes'' at all!

    • John g, you're taking a quote from a newspaper article that took his comment out of context. The question was basically: "If spending cuts are not enough to get us out of deficit, how will you ensure that our children don't get a huge debt burden."

      Why don't you get a transcript of the exchange rather than quoting only part of his statement?

  2. Even if he had, what would privilege that promise above fixed election dates, appointing senators, running a deficit…?

    • To be fair, I don't think you can hold appointing senators against him, because during the course of the last election campaign, he did point out that he might have to appoint senators even though he didn't like the idea.

      I do think that putting it forward during an election is sufficient to say that the promise was legitimately changed, not broken.

        • Oh! Caveat.. unless you're talking about Michael Fortier.

          • Na, I actually had it in my pea brain that he'd more or less promised to not appoint senators – but I now remember him qualifying that – thanks to you. As for Fortier, I'd be more inclined to include that in a compendium of things duplicituous, contradictory and hypocritical by the Cons. But that's getting a bit tangental, and I don't really have few hours to do *that* list justice. :)

  3. There are a lot of second guessers in the media and among the oppostion parties. Nobody and I repeat nobody has said what Harper is doing wrong and how they would do it differently. So we can criticize until the cows come home but it serves little purpose without an alternative plan being put forward. Iggy and the oppostion parties can force an election. That would stop the government for at least 3 months during the campaign and as the new government gets orgnaized. How will that get the stimulus money out any faster? So Iggy needs to put his lizard like tongue behind his teeth, unfurl his hair eyebrows and take a deep breath and wait his turn which will come at some point in the future.

    • "How will that get the stimulus money out any faster?"

      Good point. And now that Harper has wasted months declaring that there would be no recession, then wasting the opportunity to introduce a stimulus package during the November FU, then wasting months proroguing Parliament… well, the opposition has an obligation to shut up and do what Harper tells him, to get the money out faster.

      For the love of God, doesn't Ignatieff understand that this is urgent?!?

    • Lots of people are criticizing the GM bailout.

      Lots of people are criticizing how the stimulus money is being disbursed (just write a damn cheque to each city along with an agreement in general terms on how it is to be spent, and do the checking afterward–picking every damn project is the height of stupiditiy).

  4. Harper is going to resign. Everyone in Ottawa, including his staff already know this. Hes just trying to prepare the hand off to Prentice to be as clean as possible.

    • Oh that's just cruel. Don't tease me like that.

      I had a glimmer of hope for a moment.
      Then reality set in again.

  5. "Nobody and I repeat nobody has said what Harper is doing wrong and how they would do it differently."

    That's bunk. Dumping unsecured dollars into GM, billions into the pulp and paper industry, bailouts for lobster fisheries, make-work projects for every rural riding … all of this salvation for yesterday's heroes comes at the expense of levelling EI eligibilities today, investing in small business employment credits (small business creates most of the jobs, yo) … I even hear there are some opportunities in the nuclear medicine field for new competition (though the PMO killed the idea as they just want to sell AECL assets). Much of this has been roundly criticized.

    Moreover, his government's pathological attachment to cutting consumption taxes (which account for some $39 billion of the deficit) means less revenue coming into the Fed, of which some gets passed to the Provinces and only then may a pittance arrive at the municipal level (where all those shovels are stored). Put up the GST by a point and pass it all to municipalities so they can replace their water and sewer systems? Even for 1 year? Never!!!

    The biggest objection to his "plan" for stimulus spending is that 2/3 of the nation's industrial capacity is sitting idle and we trail Belgium in the export of professional services… and nothing in Harper's strategy is going to change this.

    Where's the incentive plan for any company wishing to set up shop in Canada's smaller cities?

    Right now, the only thing puting any bloom on his rosy economic picture is that the price of oil has ticked up — and in Harper's world, we're all just commodity extractors and shippers. No value-add, no long-term plan. Indeed, in the third decade of the information age, we have no national strategy for technology development and marketing, no "bail-out" for media industries, no investment in technology infrastructures, etc.

    There's plenty to gripe about in Harper's plan … and that's if you believe his spending numbers and forecasts … which hardly anyone with a pulse does.

    • 2/3 of the nation's industrial capacity is sitting idle? Source, please.

      • I think the report I read today was that 30% of capacity is idle – maybe he got the ratio flipped around in his head.

        • Oh, boy! That's a pretty ditzy mistake.

          • Yes, it was a typing error — not one of my ditzy brain. (That two is so darn close the one on my keyboard!)
            It's roughly 1/3 of total manufacturing. Much higher for auto and mining.
            Apologies.

            Here's the source:
            http://www.theglobeandmail.com/report-on-business

            Still, a striking problem for our manufacturing sector.

    • So tell the accidental tourist running the Liberal party to convince the opposition parties to defeat the Harper Conservatives. I don't agree with the GM bailout but can you imagine the screaming from all quarters if Harper had thrown a million people out of work in one fell swoop. I can't believe you think reducing EI eligibility to 10 weeks of work is a sound policy. That would cost employees and employers a cool $1.5 billion. However, its only money not to worry. The Liberals tried building two new reactors to produce isotopes and couldn't get the technology to work after spending billions. So we are where we are. There is no easy answer to the isotope issue.
      Pathological attachment to cutting consumption taxes? Lets quit with the hyperbole. Yes he reduced the GST by 2% points and while it is not considered the best tax to reduce it did help virtually everybody in the country including those who do not pay taxes. Some economists have said that the reduction delayed the onset of the recession.
      The country is in the process of becoming one of lowest corporate tax countries which will help attract investment.

      • continued…
        Other measures have been introduced in the various budgets which over time will help attract more investment.
        You talk about commodity extrators. I would remind you that Canada has been governed by Liberals for most of its existent. So if you are looking for villians there they are.
        Instead of improving Canadian competitiveness and productivity the Liberals were worried about their entitlements and stealing taxpayers' money.
        I can tell you this. if the Liberals get back in power it will be higher taxes, a national daycare program which will not help productivity and of course the old ruse the Kelowna Accord.
        So you may not like what the government has done but I think the alternative will be much worse.

    • "Put up the GST by a point and pass it all to municipalities so they can replace their water and sewer systems? Even for 1 year? Never!!!"

      Municipalities are under exclusive provincial jurisdiction and the federal government cannot pass the money directly to them without agreement from all the provinces. Quebec for instance would never give such agreement and would insist that the money be paid to the province and it would distribute it according to its own priorities. I think several other provinces would do the same.

  6. Speaking of raising taxes, does Harper even realise that his own budget includes an EI tax hike in 18 months and that the extra revenue is already booked in the fiscal framework?

  7. I don't know where this phobia of taxes come from. Just look at these stats:

    http://www.nationmaster.com/graph/tax_tot_tax_wed

    http://www.nationmaster.com/graph/tax_tot_tax_wed

    Aside from Turkey none of the higher taxed countries are particularily horrible to live in. We wanted one of the biggest infrastructure in the world; we got it. We wanted healthcare, we got it. We wanted more social services, we got it.

    Look we took a gamble on the economy and the economy called our bluff. Now we're in huge debt and chances are we're not going to be able to pay it before the next recession.Our kids are going to pay for it one way or another but it will be ultimately be through either more taxes or less services.

    So quit yer belly aching okay!

    • You may want cradle to grave government but I want to keep some of my own hard earned money. Geesh! I can waste it just as well as the government thank you very much. You may like the marginal tax rate of 50% but I sure as hell don't.

      • Meh, label it any way you want, your escapism is not going to pay the bill for your luxuries.

        I'm not implying we should reach for the top. However, even an increase as big as 10%(which would cover most of our new deficit) wouldn't put us in the top ten.

        And before you go all Albertan on me, I am strictly talking about debt reduction measures, not government bloating measures.

    • Harper has no idea of what is needed to move Canada forward. His whole act has been get and keep a little power.
      The people around him, Flarrity/Beard /Clements and now Raitt all failed when they fell off the Mike Harris free ride.
      People seem to forget these people all road on Mikes parade and they never gave anything when they ran Ontario.

  8. Question: How many nuclear reactors we could have built with the GM bailout?

    • That work safely? After spending 600M would another $12.4B be enough. I might asume that your fall back possition would be to buy a French reactor as the beurocrats in charge of AECL (Linda Keen for example) are good for cashing cheques and running meetings but commisioning reators, Not so much.

    • That work safely? After spending 600M would another $12.4B be enough. I might assume that your fall back position would be to buy a French reactor as the bureaucrats in charge of AECL (Linda Keen for example) are good for cashing cheques and running meetings but commissioning reactors, Not so much.

      • I don't think that Linda Keen worked for AECL.

        And the answer is one average sized power reactor, although I'm not sure what the differences are between today's power reactors and the Chalk River reactor or the Maple reactors.

  9. I have not seen 'any' journalist ask mr harper how he intends to pay back this sky rocketing deficit.

    • Ask Iggy and the other opposition leaders. They wanted billions spent and still asking for more stimulus.

      • There you go again. Cheap trick in budokan, your team's in charge hollindahead. Take stock, take responsibility and take note that the principle you were originally elected on was to do better, not be a cheap facsimile of what we didn't want.

        • To be precise, I believe the actual campaign slogan was only 'Demand Better', not "We Will Do Better'.

    • It is not the answer that Upper Canadaians want to hear. Oil @ $100/barrell pays off this deficit the same way it generated the recent surpluses. Even know the 50B budget is using $60 oil… At $70 the $90B in project on hold in Western Canada are viable…. all that is needed now is a stable government… ie no scary potential NEP that the Liberals will always stand for.

    • It is not the answer that Upper Canadians want to hear. Oil @ $100/barrell pays off this deficit the same way it generated the recent surpluses. Even now the 50B budget is using $60 oil… At $70 the $90B in projects on hold in Western Canada are viable…. all that is needed now is a stable government… ie no scary potential NEP that the Liberals will always stand for.

  10. In Harper's own words today:

    “The leader of the official Opposition said without any doubt that he will be increasing Canadians' taxes. This is a position that our Conservative government does not foresee.”

    They didn't foresee a (bluntly obvious) recession not very long ago… But, there it came.
    Today, they do not foresee raising taxes (as an option for getting outta deficit)… But somehow, we are to believe that our biggest deficits ever will magically be done and over with, without any form of tax hike, in just a few short years.

    For the record, I am inclined to believe the words ''do not foresee'' do not mean ''we won't raise taxes'' at all!

    • So don't worry be happy. Whether its Harper or Iggy we will get the higher taxes to cover the deficit. However, I would rather trust Harper for cutting wasteful programs/services than the Liberals consider to be sacred cows.

    • So don't worry be happy. Whether its Harper or Iggy we will get the higher taxes to cover the deficit. However, I would rather trust Harper for cutting wasteful programs/services than the Liberals who consider any program to be sacred cows once put into place. Just like the changes to EI. Lower eligibility criteria will never be changed once implemented.

      • Concerning trust, I'll opt for the one that's not inclined to literally bs the nation.

        The denial of recession was just that. Claiming that Iggy would ''unequivocally'' raise taxes, all the while looking straight at the nation and telling them that he doesn't foresee himself having to do so, is just that… BSing the nation.

        I can't trust that…

      • Sentence two you basically admit Harper is fudging the truth. Sentence three you would rather trust the truth-dodger than the guy who comes out and admits that taxes of some kind at some point will have to go up.

        I was thinking today that the only people I know who are currently unemployed (only two–I don't know a lot of people) would be the ones helped by the lower EI eligibility criteria. They are students who finished school at what must be the worst time ever. Of course their part-time and seasonal jobs are both no longer available to them and worthless for EI.

        But for the rest of us working stiffs, are we really having it so bad that we need, repeat need, all these frivolous little tax credits that have jumped out of the T1 program in the last few years? But now that they're here, how easy will it be to remove transit pass credits, children's fitness credits, and the like?

        • You misunderstood that post (or my position on it). Granted, I suppose I could've been more specific with the ''he'' in the 3rd sentence (the ''he'' was Harper, as in, the one who has gone on BSing).

      • Funny that – there is no federal version of that CON dream weaver you are so faithful to. Harper? Spent like a drunken sailor from the minute he took office, even raising our income tax, blatantly broke a promise on another tax, and continuously tossed money at pure election buying gadgets in hopes to suck those smarter than you into believing. Mulroney? Didn't have the guts to cut.
        Funny that, when it comes to Chretien and Martin, types like you cry out – oh the pain! the transfers! Did they have other options – probably. But in the end they did what you pretend your so-called leader has shown equivocally impotent to complete. Oh EI changes? did you even listen to Harper's 'sham-wow!' pitch today? It's on the horizon!

  11. So don't worry be happy. Whether its Harper or Iggy we will get the higher taxes to cover the deficit. However, I would rather trust Harper for cutting wasteful programs/services that the Liberals consider to be sacred cows.

  12. "Where's the incentive plan for any company wishing to set up shop in Canada's smaller cities? … No value-add, no long-term plan. Indeed, in the third decade of the information age, we have no national strategy for technology development and marketing, no "bail-out" for media industries, no investment in technology infrastructures, etc."

    You may find this hard to believe, but the "incentive plan" for businesses to set up shop, in any sized city, is to stop babbling about all this "investment" in ridiculous government-driven fantasies. Politicians and bureaucrats don't know jack about industry, technology or marketing. They're allergic to business, which is why they got into politics and government in the first place. The thought of jobs and profits being created by entrepreneurs and investors without rampant cronyism and political payoffs literally makes them sick to their stomachs.

    "Our kids are going to pay for it one way or another but it will be ultimately be through either more taxes or less services. "

    I hope it's less services. Because "services" means stuff like, for example, the business "survey" I was forced to participate in recently – a legal requirement under penalty of fines or prison, dontcha know. The morons in Stats Canada are pretending that by probing into how businesses work, under force of law, that they can pass the data onto boffins in some other department who will "help" business work better. Heh. Like eunuchs trying to help things along in a harem. I hope that they run out of money to pay for that kind of garbage.

    • haha! that's hilarious! market survey at gun point, absolutely no chance for the data getting skewed, heh.

      oh well, I like services, it keeps the bottom feeders off the streets when times are bad. The real tragedy is that most of the times we create this national debt to half-assly encourage half-bake ideas that ends up making people owe more money to banks who offshore their investment in blue-chip protectionist countries.

  13. Oh, this (and I'm guessing Jenn's remarks above too) was directed at hollinthehead, not Les Hab… sorry for any confusion.

  14. "So for Harper to survive would be a remarkable feat. And for Ignatieff to fail to defeat him would be a major opportunity squandered."

    I am not so sure. In a recent poll asking who is the best PM, if I remember correctly, 39% said Harper, 36% said Iggy, and 45% said neither.

    So, the timing of the election is very important. If the recession has not completely ended, I think Harper has a better chance to be elected that Iggy. Better the devil you know than the one you don't in handling the recession or its immediate aftermath.

    • George,

      The Devil we know and his gang of right wing clowns have lied, inaction, blame others, and taken credit for other parties work when it proved correct.
      So, far Ignatieff has been open, admit his errors. I know he is not prefect, and mistakes will happen, but so far that I have seen I would rather take my chances on Iggy, then on Herr Harper's NWO.

      • Kim,

        I think your accusations are a bit too general. What you say the Conservatives have done, all parties do, particularly when they are in a minority situation. However, generally speaking, Harper managed the economy pretty well. Of course, the recession which hit us late last year changed the situation, but even there Canada did better than all other G7 countries. So, from a practical standpoint, I personally feel that I am pretty lucky to have had this government in the past five years.

        As for Ignatieff, he may be a good author, but he hardly qualifies as a good business manager in these difficult times. However, apart from saying that he will raise our taxes, he did not provide any indication as to what his economic program would be. Maybe he is waiting until election time to do so, but our electoral period is very short and he may have difficulty persuading Canadians within 30 days or so that his program is realistic and worth supporting. So, I want to see his program before deciding whether he is worthy of my support.

  15. The government of every developed country is in a catch-22. They're out of funds. If they raise taxes, they will reduce public revenues with economic disincentives to produce (i.e. it's just a higher % of a smaller tax base). If they do not raise taxes, they risk putting up the appearance of "fiscal irresponsibility." When will the Canadian people wake up and realize that the only solution to problems like these are deep cuts in both taxes AND MOST IMPORTANTLY spending? The gravy train is over – this recession proves once and for all that welfare statism and entitlement governance does not work, it simply withers the country away. The Liberals would never have been able to cut debt without the economic boom (and commodities bubble) of the 1990s.

    Say it loud, proud, and clear: The government should spend less money to save us all.

  16. A big part of this deficit would be lessened if Harper hadn't handcuffed himself and future governments by cutting the GST. That he can call himself "an economist" is laughable since virtually every economist in the country will tell you that consumption taxes have far less of a negative impact on the economy than business or personal income taxes. He cut the GST for ideological reasons and for purely political gain, rather than the good of the country. Our deficits are now substantially higher as a result of his political gamesmanship.

    • I don't agree with you. Canadians hated the GST right from the time of its introduction by Mulroney. Chrétien got elected in 1993 largely on the promise that he would abolish this tax and then reneged on his promise. Furthermore in Quebec, for example, almost half of the people don't pay any taxes at all because they don't make enough money to pay taxes. There is a good proportion of such people in other provinces, such as people who live on welfare or basic government pensions. For all these people reduction of GST is important.

  17. First go off, anyone who believes a negative, dictator like Harper, deserves what they get.
    Instead of having his staff work harder on the economy, and getting the so called stimulus package out to help us. I paraphrase “shovel ready"; it really takes a long time to move those shovels. His staff took hours upon hours researching the last 34 years of Michael Ignatieff. After all this, their main point is, Michael Ignatieff gave up his larger income and career to become Prime Minister of Canada. He did this because he is only in it for himself. Oh yeah! He is also too intellectual.
    Being Prime Minister, is so much more attractive. You have daily attacks on you, If this was the case, why don't all the CEO's with their huge salaries and bonuses, quit and run for Prime Minister?
    We also have a Finance Minister, who doesn't agree with the financial economists, but has to keep changing his forecast. Usually to conform with these economist's opinions.
    We will never be able to get out of debt and this recession, until we start holding all our politicians responsible.
    Let us send them a message, that we have had enough of their mismanaging of our money.

  18. An election now would only be counterproductive to working out our most severe economic downfall. This is not to be done by politicians but rather knowledgable people with the expertise. They know who they are, will they only admit publicly this is the case. We understand who will pay the bill, I would only like to keep it reasonable which the gov,t does noy have the ability. Taxpayer from Manitoba

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