The Prime Directive: Do Nothing

When it comes to managing the Canadian economy, Tom Walkom writes, the Harper government's prime directive is do nothing and let the American economy drag us along. The strategy is nothing new:

It is, in fact, a classic Canadian strategy. The Liberal government of Jean Chrétien and Paul Martin used it to great political effect during the downturn of the ’90s. But it requires the U.S. to play ball. The Americans, somehow, have to goose their own economy.

The problem this time is that Barack Obama faces a House of Representatives who believe in the same mythology which infects the Harperites. And the odds that Obama will be able to stimulate the American economy enough to revive our economy are slim. Even though U.S. unemployment numbers have improved:

Census figures reported by the New York Times show that median household income in the U.S., after adjustment for inflation, has not recovered since the recession. In fact it is 9 per cent lower than it was in 1999.

To even begin to solve America’s problems requires strong government action from Washington. But as Obama, in effect, admitted Tuesday, Washington remains dysfunctional.

The Republicans -- and their northern cousins, the Harperites -- continue to believe that the way to salvation lies in cutting spending and doing nothing. Hooverian economics is alive and well.

And all that really matters is re-election.

Insanity Drives The Bus

Stephen Harper insists he is all about strengthening the economy. Not so, writes Tom Walkom. He is abandoning it:

The reasons are political. Prime Minister Stephen Harper and his finance minister, Jim Flaherty, now have only one goal in mind — the 2015 federal election.

And they are determined to slash government spending in order to balance Ottawa’s books before then.

They calculate that a fiscal surplus in 2015 will allow their party to offer voters a platter of tasty tax cuts that will win it four more years in power.

As a political strategy, it has worked before. It's been all about buying votes with tax cuts. But as an economic strategy, it's madness:

In Canada, the official unemployment rate still hovers near 7 per cent. The Canadian Labour Congress calculates that when those who have given up looking for work plus involuntary part-time employees are added in, the real jobless rate reaches about 17 per cent.

The country remains divided. Canadians able to take advantage of the oil boom are doing all right. But those connected to manufacturing, particularly in Ontario, are not.

The rich make good money. Census figures show that those in the top one per cent of income earners average $381,300 a year — about 10 times the national average.

Yet those at the bottom find they need two or three minimum-wage jobs just to stay alive. Debt-burdened students graduate from university and college only to find that full-time jobs simply don’t exist.

Mr. Harper owes his political existence to the wealthy. And he's quite willing to strangle everyone else to stay were he is:

All of this is having a direct effect on jobs. The Parliamentary Budget Office says Ottawa’s spending cuts cost the economy 12,000 jobs last year. It estimates that this figure will rise to about 80,000 by 2016.

Up to now, Harper and Flaherty were careful to leave their options open. Both routinely warned that the fragility of the world economy might interfere with their budget-balancing plans. In 2009, the Harper government willingly incurred billions in debt to get the shell-shocked Canadian economy moving again.

Stimulus kept the Harperites in power. Now they calculate that austerity will do the same. But, Walkom warns:

In such a world, fixating on deficits is madness. Nonetheless, Flaherty and Harper are rolling the dice. The stakes are dangerously high.

The situation is grave when Insanity drives the bus.

Inequality For All Canadians

As the Robert Reich film, Inequality for All, hits theatres this weekend, Jordan Brennan and Jim Stanford write that what has happened in the United States has also  happened in Canada:

Now Statistics Canada has turned its attention to the problem, too. The agency’s National Household Survey has documented the stark differences in personal income between the richest 1 per cent and the rest of us. The data are less precise than would have been attained from the former long-form census (which was cancelled by the data-phobic Conservative government). But despite its flaws, the report confirms that the gap between rich and poor in Canada has become enormous.

Incomes for the bottom 90 per cent of Canadians averaged just $28,000, according to the report. In contrast, the top 10 per cent took home an average of $135,000. And the top 1 per cent pocketed $381,000.

We like to think that somehow we're more humane that our American cousins. But the data -- even though the Harper government tries to hide it -- tell a different story:

Income inequality has reached a historic extreme. Inequality was high during the 1920s and 1930s (the “gilded age”), but fell sharply during the Second World War (as Canadians got back to work and taxes were raised to pay for the war effort). The three decades after the Second World War — a “golden age” of controlled capitalism — saw further decline in inequality. The economy was booming and powerful institutions (like progressive taxation and surging unionization) ensured the wealth was broadly shared.

Since 1980, however, we’ve entered another “gilded age.” Business-friendly economic and social policies replaced the former Keynesian welfare regime. In recent years, inequality has reached levels higher than at any time since the 1930s. And it is clearly staying that way, regardless of small year-to-year fluctuations.

And it's not just a matter of political philosophy:

Does income inequality matter? There’s a growing consensus among scientists from many disciplines that it does: in complex, surprising and economically important ways. Numerous studies document a powerful relationship between income inequality and varied dimensions of social pathology.

Indicators as diverse as happiness, mental illness, infant mortality, children’s educational performance, teenage pregnancy, homicide, imprisonment, social trust and social mobility all get worse as the income gaps within society deepen.

The Harperites insist that they know what they're doing. They don't understand -- or care to understand -- the consequences of their policies. They only understand who will reward them. And, so far, that's been enough to keep them in office.

Harper's Achilles Heel

I wrote yesterday that, when it comes to the economy, Stephen Harper takes his cue from the 19th century. And that perspective, Lawrence Martin writes, should make the economy Mr. Harper's Achilles heel. Ralph Goodale certainly thinks so:

A more partisan view came this week from Ralph Goodale, Paul Martin’s former finance minister, who with charts and graphs argued that Stephen Harper “has the poorest economic growth record since R.B. Bennett.” That may be partisan — it’s also quite an indictment, since Bennett was in office during the deepest trough of the Great Depression.

[And] an overall growth record that, as Goodale claims, is worse than that of any government in eight decades still has a powerful ring to it — and it’s something on which the Liberals should be blasting Harper daily. If the Conservatives were in opposition and the Grits were putting up those numbers, you can be sure the Tories wouldn’t be letting them off the hook with talk of ‘global conditions’.

And therein lies the problem. The Liberals and the New Democrats have not taken on Harper's claim to fame -- that he is a competent steward of the economy. Having a Master's Degree in Economics doesn't make it so:

Another point Goodale’s been hammering home is the spike in our national debt under the Tories: the figure he cites is $169 billion. There’s been a lot of talk about the deficit, a problem which was worsened by the government’s two per cent decrease in the GST. But the debt hike has not received the attention it’s due. Under Chretien and Martin, as Goodale noted, the debt-to-GDP ratio was cut by more than half. Under the Tories there’s been no reduction in that ratio.

Some other statistics of recent vintage are hardly flattering. Newly released global competitiveness rankings from the World Economic Forum place Canada at a dreary 14th. On the trade front Canada now has a billion-dollar deficit. Our current account deficit of three per cent of GDP makes Canada the worst performer in the G8 in that category.

Harper's record is at odds with who and what he claims to be. That is more than an Achilles heel. It's a travesty.

The New Charge Of The Light Brigade

For the last decade, Stephen Harper has been pitching the idea that he and his party -- which has changed its name three times -- have given this country economic stability. But, despite the re-branding, Tim Harper wrote this week that the numbers tell a different story:

In Harper’s Canada, more than four in 10 of us live paycheque to paycheque.

Almost half of us over 50 have barely one-quarter of what we will need for our retirement.

In Harper’s Canada, wealth is the domain of middle-aged white men, but if you are a visible minority or an aboriginal working full time you are earning well below the national median income.

We’re working longer — four in 10 of us are still working at age 66.

One in four of us who own homes are paying more than 30 per cent of our income to keep them, a debt level that many will find unsustainable.

In the absence of a national post-secondary education strategy, university tuitions will triple in a generation, soaring to new levels, saddling our graduates with more debt and forcing Ottawa to forgive more student loans.

No one should be surprised. The same thing has been happening in the United States -- and for a longer period of time. Joseph Stiglitz, in The Price of Inequality, has exposed the economic balderdash behind the phenomenon.

Yet Harper is not a man to be swayed by facts. And -- what is even more surprising -- as a man who claims to be an economist, he pays no attention to statistics. Yet he insists that he knows what he's doing.

It's the 21st century version of The Charge of the Light Brigade

It's Still The Economy, Stupid

Justin Trudeau has been talking about pot. Tom Mulcair has been talking about abolishing the Senate. But, Paul Wells writes in Macleans, that talk will not generate votes in the next election. The focus will still be on the economy. The Liberals may think they can remind voters of the Chretien-Martin years, when the nation was running budget surpluses. However,

This is something else that Liberals cannot understand: the notion that most Canadians are no longer properly grateful for the work Jean Chrétien and Paul Martin did to clean up deficits in the 1990s. In fact, a growing number of Canadians, even the ones who don’t smoke a lot of pot, have dim memories of the 1990s or none at all.

This helps explain a Harris-Decima poll from the end of August that inquired about respondents’ opinions of the national political parties. Trudeau’s net favourable impression is way higher than Harper’s and a fair bit higher than NDP Leader Tom Mulcair’s. Respondents were likelier to believe Trudeau “shares your values.” He’s having a strong year in the polls. But Harper still has a slight edge over both Trudeau and Mulcair on “judgment,” and on “economic management” it was a blowout: 39 per cent prefer Harper to only 20 per cent for Trudeau and 15 per cent for Mulcair.

Those numbers are a little strange, because a good case can be made that Harperian austerity was exactly not what the Canadian -- or the world  -- economy needed. As for the Senate, talking about abolition is much easier than doing something about it:

Canadians are angry at the Senate right now. That’s not the same as believing any party has the ability, once in power, to do much about it. His Senate tour illustrates a little-noticed difference between Mulcair and his predecessor Jack Layton. Layton came from Toronto city politics. He hadn’t the faintest interest in constitutional tinkering. The NDP stood for abolishing the Senate, as it always had, and Layton never talked about it. Mulcair comes from Quebec provincial politics, where a generation grew up believing that if you have no constitutional scheme to peddle you cannot be serious.

Pot and the Senate will be red herrings by the time the next election rolls around. If Trudeau and Mulcair are to be successful, they will have to convince Canadians that Stephen Harper is not the economic icon he claims to be.

Lousy Economists

As a response to the Great Depression, western governments put in place several "economic shock absorbers" -- unemployment insurance, welfare and baby bonus cheques -- to cushion the negative effects of an economic downturn. But neo-conservatives, convinced that they encouraged people to become fat and lazy, systematically destroyed those shock absorbers. Under the banner, "Makers Not Takers," people like Paul Martin and Stephen Harper cut back on government assistance to Canadians. Carol Goar writes, in The Toronto Star, that the war on the poor continues:

[Jim] Flaherty has ruled out “risky new spending schemes” — by which he means improved social programs. His March budget might include a couple of targeted poverty-alleviation measures for aboriginal Canadians, but nothing broadly based. On the tax side, he aims to reduce the number of brackets, making it less progressive and allowing high-income earners to keep more of their money. (Canada and the U.S. are going in opposite directions on this issue. Washington’s top personal tax rate is 35 per cent. It is slated to rise to 39.6 per cent next year. Ottawa’s top rate is 29 per cent. It is expected to remain stable or go down.)

And while Flaherty makes the rich richer:

[Diane] Finley is making it harder to get employment insurance. Immigration Minister Jason Kenney is making it harder for new Canadians to rebuild their family support networks in this country. Revenue Minister Gail Shea is making it harder for Canadians without Internet access — typically the poor and the elderly — to claim tax refunds and credits. Infrastructure Minister Denis Lebel is making it harder for the provinces and municipalities to plan public works projects and hire workers. And Labour Minister Lisa Raitt is weakening the collective bargaining system.

The stabilizers were an attempt to increase demand when economies -- and people -- were struggling. They were not just a compassionate response to people who found themselves between a rock and a hard place -- they made good economic sense.

But Mr. Harper and Co. believe compassion is a character flaw. And -- their own propaganda aside -- it's painfully obvious that they're lousy economists.