Tag Archives: Economic Action Plan

Romancing a stoned and sluggish economy

 

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In hard times, few articles of faith are more dear to the Harper Tories than the dogma of economic salvation through stimulus spending. After all, this is what kept Canada from losing its capitalist soul during the Great Recession. Was it not?

To hear the freshly minted Finance Minister Joe Oliver sputter you might wonder. “We worked hard to return to a balanced budget to throw it all away,” he told a business crowd in Toronto last week, alluding to the feather-weight, on-paper-only budgetary surplus of $2.2 billion for fiscal 2014. 

It was his first speech as the late Jim Flaherty’s successor, and he was, among other things, concerned about establishing his street cred.

“So do not expect a big stimulus program,” he announced with a thump.

Instead, now that the country is back on track, chugging away, it’s only fair and sensible to return the moolah to “hard-working, taxpaying Canadian families.” (Really, Mr. Oliver, is there any other sort?) “We’re going to, of course, be talking to people.”

All of which sounds mighty “Main Street” of the good fellow. Still, his posture towards the economy and his fellow citizens assumes certain facts that may not be in evidence – at least, not entirely. Have the happy days actually returned? 

True, the country has managed to avoid many of the predations that visited its allies and trading partners during and after the financial collapse of ‘08. Among other mercies, both large and small, the treasury wasn’t impelled to bail out any banks or credit unions.

But the nation’s economic performance cannot, in any rational way, be described as robust. We didn’t come sprinting off the blocks. Our gait was more tentative; like that of a late-night office worker skittering to his car in a bad part of town.

According to RBC Economic, in March, the unemployment rate across the county was 6.9 per cent, representing a 24-basis-point (0.24 per cent) improvement over the previous month. Year-over-year, however, the uptick was almost negligible, even statistically meaningless. 

That’s been more-or-less the story for real gross domestic product. In April 2013, GDP advanced by 13 basis points, then in December of that year, it dropped by 53 points, only to recover in January by 51 points. The net gain was a virtual (though not quite) zero sum.

Again and again, the indicators refuse to support the more populist brands of politicking. Manufacturing shipments swing up a couple of percentage points in one month; and down again in another. Inventories and unfilled orders continue to oscillate gently along the x axis, denoting a no-to-low-growth commercial environment.

Under the circumstances, does awarding Canadians with sums that would, per capita, amount to chicken feed represent the best use of any largess the federal government might one day find itself holding? Are there not more effective ways to stimulate the economy than helping each taxpayer save a few hundred bucks on his T2014 Schedule One? 

In fact, Mr. Oliver said it himself. “We need to discuss domestically the issue of skills shortage, infrastructure and productivity and how that is all addressed in our fiscal framework,” he declared after his speech in response to a question from an audience member. Moreover, he added, Too many Canadians are looking for work.”

But apart from restating the blindingly obvious (over and over again), this government’s chief lieutenants have been loath to embrace a more progressive, pervasive and enduring version of what they all agree worked reasonably well during the Great Recession.

If any lesson emerges from the past few years’ experience on the global roller coaster, it is that government stimulus spending can have important palliative effects on troubled economies. 

The other one is that such exercises in monetary loosening are almost never bold enough or targeted well enough to render the structural changes that are necessary to keeping an economy nimble, entrepreneurial and innovative. The western world can thank the corrosive policies of self-hating government archetypes, such as the late Margaret Thatcher, for that.

When times were hard, the Harper Tories genuinely adored the stimulus phase of their Economic Action Plan. Clearly, though, times change and so does romance.

 

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No need to gild the finance minister’s good record

 

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They came not to bury Caesar, but to praise him. Boy, did they ever. 

Former federal Finance Minister Jim Flaherty’s passing on Thursday – at 64, reportedly from a heart attack – dominated the front page of the Globe and Mail’s Friday edition. In fact, “dominated” might not be the right word; utterly blanketed would be a more accurate description. 

Apart from an ad announcing Toyota’s “red tag” days, nothing else appeared Page-One-worthy for “Canada’s National Newspaper”. 

Our “guiding force” was gone; the man who “shaped the Conservative Party, the nation and the world’s response to the Great Recession” was no more, tragically cut down in the late-middle-age of his life. It took eight reporters and editorialists to say so.

Political Affairs Correspondent John Ibbitson’s walk down memory lane was almost affecting: “In politics, you do what you gotta do. . .At the end he (Flaherty) was pretty happy with his record. . .But then, he was a pretty happy guy. Back when we were  both at Queen’s Park, he’d drop by the press lounge every now and then late on a Friday afternoon to mooch a beer and find out what the boys and girls were saying. He always greeted you with that impish grin, trolling for gossip, though he seldom offered up any of his own.”

At the back of the paper’s front section, the lead editorial continued the eulogy: “Goodbye to the little giant. . .Mr. Flaherty was a giant in the Harper cabinet, and not just because he ran the department whose control of the purse strings makes it, to some extent, the ministry of everything. He was one of the few Harper ministers who acted with considerable independent authority.”

Indeed, it’s difficult, even impossible, to recall another Canadian public official of Flaherty’s metier accorded such a fulsome tribute as this. Pierre Trudeau, Tommy Douglas, Jack Layton, perhaps; still, they were all leaders of national parties and political movements. They weren’t finance ministers.

But, of course, therein lies the answer. 

One of the great foundational assumptions of the post-recession era – especially by the Ontario-centric national press gallery – is that Mr. Flaherty’s foresight and steady hand prevented the country’s Toronto-based financial institutions from circling the drain along with all the others in the wild, wild west during the financial collapse of ’08. For many media mavens, that “fact”, alone, makes the former finance minister’s track record a far more compelling story to tell than even the prime minister’s.   

Another key supposition of the modern age is that Mr. Flaherty’s fiscal stimulus program (Economic Action Plan) – all tallied, about $150 billion – was singularly responsible for preventing the economy from crashing and burning, given the private lending community’s terror of bad debt during the recession. Again, this “fact” has served the frequent press portrayals of the “little giant’s” rock-star status both at home and abroad.

There’s truth in both claims: Mr. Flaherty was a competent steward of the economy in tough times; had he been an inflexible ideologue with a fetish for balancing the nation’s accounts in a zero-growth environment, the road to recovery would have been much rockier than it was. 

But the real secret behind Canada’s relatively robust financial performance during the era of diminishing expectations – at least compared with those of the United Sates, and much of continental Europe – was, and is, its responsible and well-regulated banking system and monetary traditions. 

Mr. Flaherty deserves plaudits for not messing with these (the way former U.S. President Bill Clinton disastrously did with his nation’s laws when he repealed the 1933 Glass-Steagall Act that had, for 66 years, successfully separated commercial from investment banking). But he doesn’t deserve credit for engineering a recovery with a system he merely inherited. 

Neither does he warrant much praise for using the Economic Action Plan creatively and to truly productive effect by making strategic investments in crucial infrastructure, higher education and training, advanced technology commercialization, and work-based poverty reduction programs. To have done so would have invited internecine warfare in his own party. 

Mr. Flaherty should be remembered in public circles as a bright, decent, effective, and tough cabinet minister. He was also that rarest of birds in the Harper government: he could both tell and take a joke. 

But he was not Caesar, and he never sought that company. 

Perhaps, that’s one reason he left Parliament a month ago: Too many little emperors running about, taking credit where credit is, most certainly, not due.

 

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