An economic challenge the Tories won't meet

source : Thomas Walkom
Dec 06, 2008 04:30 AM
Comments on this story (51) Thomas Walkom
The biggest winner from this week's botched coalition attempt is Stephen Harper. The biggest losers are those Canadians who had hoped the government – whether Conservative or otherwise – would act seriously to confront the economic crisis.
As if to underline this, Statistics Canada announced yesterday that the country lost more than 70,000 jobs last month, most of them in Ontario.
First, the coalition. The attempt by the Liberals and New Democrats (with Bloc Québécois support) to replace Harper's Conservative government was always fragile. But who could have predicted how quickly their project would start to collapse?
All it took to break the nerve of the Liberals was a bad video (the bizarrely amateur filming of Liberal Leader Stéphane Dion's address to the nation Wednesday evening), a few Conservative attack ads and the widely expected decision of Governor General Michaëlle Jean to let Harper suspend Parliament.
By Thursday, Dion was hinting that perhaps a compromise could be found that would keep Harper in power.
His would-be heir, Toronto MP Michael Ignatieff, went even farther, describing the entire coalition scheme as a useful instrument in the opposition's ongoing attempts to influence Harper – that is to say, a bargaining ploy rather than a serious attempt at governing.
That puts Harper back on top. When Finance Minister Jim Flaherty delivered an economic update 10 days ago that appeared to demonstrate no understanding of the economic crisis, Harper calculated that the Liberals were too disorganized to oppose it.
It seems he was right. The only surprise is that it took the Liberals a week to figure this out.
In theory, the three opposition parties could still bring down Harper's government next month and form their own. But to do that, all three would have to keep their resolve, which right now seems most unlikely.
Nor, having spent their powder, do the opposition parties have the leverage to persuade Harper to accede to any future demands.
That means that the plan to guide the country from recession will be the one hinted at in Flaherty's update. And that, quite simply, is not enough.
There will be some good news. A Harper government will probably bail out the Big Three auto companies. It was on its way to do that before Parliament blew up. It will also try to accelerate spending that it has already announced on projects such as sewers and roads.
But Flaherty has also said that a major new stimulus package is not in the cards. He insists that his government has already met its international commitment to boost the Canadian economy with tax cuts or spending and that it doesn't need to do any more.
In this, he is absolutely wrong. And as an economist, Harper knows it. Organizations such as the Group of 20 and the International Monetary Fund are calling on countries like Canada to act now to pour new money into their economies in order to offset the global slump, and to accept huge, short-term deficits as the necessary cost. They are not asking them to boast about the past.
The IMF suggests that Canada's government run a deficit next year of more than $30 billion as part of a concerted international effort to prevent global economic collapse. Otherwise, it predicts, the crisis can only get worse.
That is the scale of the challenge. It's not clear that the coalition partners would have met it. It is quite clear that the Conservative government they inadvertently emboldened will not.
Thomas Walkom's column appears Wednesday and Saturday.