Caught In A Rut Of His Own Making

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Stephen Harper claims that his is a steady hand at the economic tiller. But now even the conservative C.D. Howe Institute disputes that claim. Carol Goar writes:

But as the government heads into the last year of its mandate, even the prime minister’s ideological allies are beginning to question his judgment. The latest to call for a course change is the C.D. Howe Institute, a fiscally conservative think-tank supported largely by businesses.

In a study released last week, the 56-year-old research organization called on federal policy-makers to recognize Canada is experiencing a slow-growth recovery that requires different tools than the fiscal and monetary standbys of the past. “A significant rebound in Canadian private demand is unlikely in the near future,” says author Christopher Ragan, a professor of economics at McGill University. “Policy-makers should recognize the challenges that emanate from a slow-growth recovery: longer unemployment spells, more part-time employment and increased incidence of long-term unemployment.”

The report's author is Christopher Ragan, an economics professor at McGill. But Ragan is more than an academic. He has also worked for the federal finance department. And he simply points out that Harper's insistence on austerity isn't working:

His depiction of the current state of affairs — presented in language a non-economist can easily grasp — matches what Canadians see around them: a dearth of jobs, a precariously high level of household debt, a hyper-charged housing market, a risk-averse business climate and sub-par growth.

None of these trends is likely to change in the short term, Ragan argues. Cutting interest rates won’t juice growth; they’re already as low as they can go without harming the economy. And stimulative spending is out; Harper refuses to carry a deficit into the next election.

Ragan favours balanced budgets -- but not now. And he offers some suggestions on how to fix the economy:

A new income support program for unemployed workers. Unlike employment insurance, which covers less than half of Canada’s jobless workers, the temporary unemployment assistance that Ragan recommends would be a loan repayable, contingent on income, when the individual found work.

An all-out effort to eliminate barriers to labour mobility. On Ottawa’s part, the primary impediment is EI, which discourages individuals in high unemployment regions from moving. On the provinces’ part, it is incompatible certification procedures for skilled trades and professions.

A renewed effort to improve job training. Ottawa’s last attempt, the Canada Job Grant, was undercut by provincial hostility, wildly exaggerated estimates of skill shortages and a massive influx of temporary foreign workers. 

None of these suggestions are radical measures. They're the kind of things C.D. Howe would recommend. But what they do suggest is that the so called "steady hand" may be a stupid hand -- caught in a rut of its own making.