Monday, February 02, 2009

Buying Time

Michael Ignatieff's decision to support the Conservative budget -- for now -- buys him and the Prime Minister time. Both men have political imperatives for entering their coalition of convenience. Harper's is obvious. His government -- humbled after its pre-Christmas ego trip -- remains in power. Ignatieff, whose party lacks both the policy and financial resources to go to the country, needs time to genrate both.

Most importantly, each party needs time to think through policy. For, as Robert Reich wrote this week, Conservatives and Progressives are advovating two distinct prescriptions for the current financial crisis. Conservatives, who Reich calls "cyclists," believe that we are caught in a familiar boom and bust cycle. They concede the need for some kind of government intervention; but, says Reich, they "blame the current crisis on a speculative bubble that threw the economy's self regulating mechanisms out of whack." Progressives, who Reich calls "structuralists . . . see the problem much differently." They believe "the bursting of the housing bubble caused the current crisis, but the underlying problem began much earlier -- in the late 1970's, when median U.S. incomes began to stall."

When wages bottomed out, women entered the workforce to help make ends meet; and both husbands and wives began working longer hours. When these strategies failed to help them keep their heads above water, they went into debt and -- well, here we are. And, if the money the economy generated didn't go to the people in the middle, where did it go? "As late as 1976," writes Reich, "the richest 1 per cent of the country took home about 9 percent of the total national income. By 2006 they were pocketing more than 20 percent." The last time this happened was in 1928.

Mr. Harper and Mr. Flaherty are clearly cyclists. They believe this downturn will end in two years; and they have Mr. Carney, of the Bank of Canada, on their side. The Liberals need to go back to the policy drawing board, so it's a little difficult to figure out where they stand. But Mr. Ignatieff's initial noises -- about protecting the vulnerable and insuring that the bailout money gets to those who need it -- suggest that he is more of a structuralist than a cyclist.

Where does this leave the public? Stuck in the middle -- which, recent history suggests, is not a comfortable place to be. For, while the political parties are fighting it out in Ottawa, things are getting worse for ordinary Canadians. NAFTA ensured relatively free movement of goods and services across the border; and, when times were good, that meant that some of the wealth generated in the United States flowed north. But the numbers from there last month were particularly bleak. In the last four months of 2008, Americans lost 1.9 million jobs. Because the United States is our biggest customer, a fair measure of American pain will cross our border.

Last week's budget bought time for both the government and the opposition. It's not clear what it bought ordinary Canadians. They do not have the luxury of time -- as they lose their jobs and try to pay their bills.

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