Election 2015

[Edward Campbell]

Campbell Clark, in this article, which is reproduced under the Fair Dealing provisions of the Copyright Act from the Globe and Mail, suggests that M Trudeau "has just broken this election campaign wide open" and that he "is trying to do to Mr. Mulcair what Kathleen Wynne’s Ontario Liberals did to Andrea Horwath’s NDP – outflank them on the left:"

http://www.theglobeandmail.com/news/politics/justin-trudeau-alters-election-equation-with-deficit-spending-gamble/article26137791/

Justin Trudeau alters election equation with deficit-spending gamble

CAMPBELL CLARK
OTTAWA — The Globe and Mail

Published Friday, Aug. 28, 2015

Justin Trudeau has just broken this election campaign wide open. His Liberals have chucked the balanced-budget pledge, at least in the short term, to promise economic growth instead. And now Mr. Trudeau gets to offer a different economic policy.

It makes the Liberals the interventionist party, the only party willing to tell voters they’d spend substantially more in the short term in a bid to get a slow economy rolling.

It’s in part an effort to outflank NDP Leader Thomas Mulcair, who won’t make those kinds of promises. Many Canadians want a more interventionist approach: A Nanos Research poll released Wednesday found 54 per cent say they support a new round of deficit spending to boost the economy.

But it is a big gamble with a charged political symbol, the deficit. Mr. Trudeau is walking right into Conservative Leader Stephen Harper’s accusation that he’d increase the national debt. Still, the economy is the issue, and the Liberal Leader has altered the election equation.

Until now, all parties had accepted they were constrained by more or less the same shackles: balanced budgets, and roughly the same tax rates, give or take a small shift of the burden toward one group or another.

That meant big money wasn’t available. Parties could shift a few billion dollars around, and then claim their child benefits or child care or tax breaks were the best plan. But one major option – using the federal treasury in a bid to boost economic growth – was more or less off the table. It takes billions and billions to have any real hope of nudging growth in an economy the size of Canada’s.

Now, Mr. Trudeau has thrown off the restraints and said he’ll run deficits of up to $10-billion a year for three years in order to allow for a multibillion-dollar increase in spending on infrastructure, raising it from $5.1-billion to $10.2-billion next year. He’s gone where no other leader will go.

Mr. Harper won’t embark on stimulus spending. He’ll attack Mr. Trudeau’s plan as a reckless proposal to indebt the country. But he has accepted the principle of stimulus spending before, running a $56-billion deficit in 2009 to counter recession, amid seven red-ink budgets. Still, Mr. Harper argues stimulus isn’t needed now. His brand is fiscal restraint, and that’s what his supporters expect.

Mr. Mulcair won’t go there, either. And that’s even though some of his supporters would normally expect it. He has decided he must reassure voters that NDP economic policies are moderate, so he’s promised not to alter tax rates, apart from raising corporate taxes, and he’s pledged no deficits.

That has also boxed in the NDP Leader. The New Democrats have also talked about the need for policies that stimulate growth. But without money, they've been confined to a few modest measures such as lowering small-business tax rates.The NDP has also proposed increasing infrastructure spending – but it’s a fraction, one-fifth, of what the Liberals now promise.

Mr. Trudeau is trying to do to Mr. Mulcair what Kathleen Wynne’s Ontario Liberals did to Andrea Horwath’s NDP – outflank them on the left. In this case, Mr. Trudeau isn’t promising the same social programs as the NDP, such as subsidized child care, but he is accusing the New Democrats of “austerity” plans that would prevent them from paying for those promises.

But the key question remains the economy, and Mr. Trudeau now has a distinct offering: stimulus spending to boost growth.

It is still a major risk. Canadian politicians have, since the budget was balanced in 1997 after decades of deficits, usually pledged to keep the budget in the black or, after the financial crisis of 2008-09, explain how they will bring it back to balance quickly.

For most economists, the current deficit debate is pretty weak tea. When compared with a $1.9-trillion economy, there’s not a huge difference between a surplus or deficit of a few billion dollars over a few years.

But deficits are a politically symbolic issue of discipline: If you can’t balance the books now, is it a sign you would let the country slide deeper into debt?

Mr. Trudeau has taken a big risk in opening up that question. He has been weakened by shots at his leadership and discipline. But it is a risk on a proposal that appears to match the public mood. And he has opened up the campaign by promising the kind of economic intervention his opponents won’t match.

But, it seems to me that M Trudeau is doing more than just outflanking M Mulcair on the left; he is also outflanking Prime Minister Harper on the right. Amongst those respected economists who are advocating buying long term bonds, even if it means going into deficit, to fund useful and appropriate long term infrastructure projects, include real, well known fiscal hawks like Kevin Lynch and Don Drummond. This proposal is not a Canadian Labour Congress idea, it comes from the fiscal-political right.

 

[Remius]

I couldn't agree more.  And given the reaction from Stephen Harper yesterday (the first time I've seen him act that way to be honest) I think it may have rattled the CPC a bit.

But with today's budget numbers showing a real surplus for the first half of the year, the CPC can at least flaunt their current plan with something to back it up.  Or at least something that seems to back it up.

 

[Edward Campbell]

I couldn't agree more.  And given the reaction from Stephen Harper yesterday (the first time I've seen him act that way to be honest) I think it may have rattled the CPC a bit.

But with today's budget numbers showing a real surplus for the first half of the year, the CPC can at least flaunt their current plan with something to back it up.  Or at least something that seems to back it up.

Part 1 of 2

And Lawrence Martin, who is certainly no friend of Prime Minister Harper, but who has more than just a wee a bit of truth on his side, takes aim at the Conservatives' fiscal reputation in this article which is reproduced under the Fair Dealing provisions of the Copyright Act from the Globe and Mail:

http://www.theglobeandmail.com/report-on-business/rob-magazine/stephen-harper-economic-genius-or-flop/article26038579/

Harper's economic plan: spin to win

LAWRENCE MARTIN
Special to The Globe and Mail

Published Friday, Aug. 28, 2015

One day over lunch in Ottawa, Ralph Goodale, the warhorse from the flatlands of Saskatchewan, was stomping all over the Conservative record on economic management. The battering the economy had taken in the early months of 2015 was further evidence for the steadfast Liberal that Canadians had been fooled all along into believing the Tories knew what they were doing.

When I pointed out that, compared to his time as finance minister under Paul Martin, the Conservatives had done quite well electorally with their economic record, Goodale’s mood turned.

The difference, he grimly explained, was that Harper knew how to market his work but Goodale’s own party didn’t. The Liberals blew it, he conceded. The economy was blooming when they were beaten by the Tories in the 2006 election, he said. But in the campaign, the Liberals had barely even talked about it. “We didn’t get the message out. We made the operating assumption that it was understood. That tactical decision was mistaken.”

For the Conservatives, Goodale said, “Spin is the number one priority, policy secondary. It’s been clear all along.”

Clear all along?

“Look at the record. Not since the 1930s have Canadian economic growth numbers been so bad as this last decade under Harper.” And no, Goodale argued, you couldn’t blame it on “global conditions,” as the Prime Minister liked to do. The downturn from the financial crisis ended several years ago.

Now, in 2015, as an election approached, there was a new downturn. The Tories’ economic narrative turned sour. Where once Canada was doing better than all the G7 countries, now it was the only country among them with an economy sputtering out recession-like numbers.

The bad news kept rolling in. Oil prices had plunged. Growth numbers fell. Bank of Canada Governor Stephen Poloz called the country’s economic performance in the first quarter “atrocious.” Uncertainty prompted a delay in the budget delivery date. The country’s merchandise trade deficit reached an all-time high. A balanced budget, the much-ballyhooed promise of the government, looked less and less likely, given revenue shortfalls. Labour union economists Jim Stanford and Jordan Brennan did a statistical analysis in which they examined 16 indicators of economic progress for all Canadian governments since the Second World War. Their conclusion: The Harper Tories ranked last.

It wasn’t just labour economists who were doubting the Conservatives’ record, but the Harper team blew off such studies as being biased.

The dogs barked, the caravan moved on. Through the run of bad news, Finance Minister Joe Oliver showed little concern, maintaining a low profile. When the 75-year-old did appear for Question Period in the House of Commons, pitbull Pierre Poilievre, 36, often stood in his place. The young enforcer had been named the new employment minister.

Poilievre, with scant life experience outside politics, had frequently been the subject of unflattering press reports. But he was regarded as one of the party’s best pitchmen by the Prime Minister. Poilievre was not in the job long before it was revealed that he had used a team of public servants, who weren’t supposed to engage in partisan activity, for overtime work on a Sunday. They were called in to film Poilievre glad-handing constituents and promoting the government’s Universal Child Care Benefit plan. Not one to brook criticism, Poilievre then took things a step further, wearing a shirt with a Conservative logo on another round of promotion. His government, a Globe and Mail analysis found, funnelled 83% of the projects under its signature infrastructure fund to Conservative-held ridings.

While one wag suggested the Tories should be hit with a “crass-action” suit, they plunged ahead, eyes firmly fixed on the Oct. 19 rendezvous with voters. Their opponents could gripe all they wanted. They weren’t going to change their ways. They would pound the airwaves with the message that they were doing great things for Canadians. If the experts were saying their balanced budget was not achievable, it didn’t matter; they clung to the boast.

Economic performance, as Goodale noted, was highly susceptible to spin. Harper may never have worked as an economist, but his two degrees in the field taught him an important political truth: Statistics could be found to prove or disprove most any theory one wanted. It was all about who had the biggest megaphones.

******************************

In preparations for the 2011 budget, Alan Freeman, then-assistant deputy minister for communications at the Finance Department, noticed something odd. On the jacket design for the budget, he saw that the word “budget” was missing. In its place were the words “The Next Phase of Canada’s Economic Action Plan: A Low-Tax Plan for Jobs and Growth.”

Freeman wasn’t opposed to the application of a little snake oil to fiscal proceedings. That, after all, was part of his job. But as a public servant rather than a member of the Conservatives’ political operation, he viewed things in a broader perspective.

He went to take it up with Dimitri Soudas, who was then Stephen Harper’s communications director. “Shouldn’t we have the word ‘budget’ somewhere on this thing?” Freeman asked. The Prime Minister’s top pom-pom shaker looked at him coldly. He explained how people like Freeman, formerly a journalist with The Wall Street Journal and The Globe and Mail, were caught up in old inside-the-beltway talk. Didn’t he understand that regular Canadian people “didn’t know what a budget was?”

Freeman wasn’t sure he was hearing right. Did these guys in the Prime Minister’s Office really think that way about the Canadian voter? Further conversation made it clear Soudas was not going to be putting the word “budget” on the budget. Freeman walked away, shaking his head.

For Freeman, the incident was a small illustration of the mindset of the governing team. Reflecting now from his perch as a senior fellow at the University of Ottawa, he is still shaking his head at how the Harper team worked the public-relations levers. “It was quite brilliant, actually. Anything they did that had something vaguely to do with the economy, they branded as part of an Economic Action Plan. In fact, there wasn’t much of an economic plan, “just a political plan. All of their economic policies became instrumentalized toward getting them re-elected.”

The Conservatives brought to Canada a style of government often described as the permanent campaign. Governing was turned into an around-the-clock marketing enterprise. Everything was about controlling the message. They changed the system so that all communications were centralized through the PMO and the Privy Council Office. Even the most minor of press releases—right down to one on the mating season of the black bear—had to be vetted by the centre. The PMO increased in size by 38% from the previous government. New limits were placed on media access. Public servants were muzzled. Conservative caucus members spoke not from their own scripts but from PMO talking points.

At the Finance Department, Jim Flaherty tried to hold his ground, recalled Freeman. But Flaherty too had to buckle under. “Harper would get involved in the most minute stuff. Flaherty would sign off on things he didn’t think were major, but they would come back to us with the message that the big guy didn’t want it.”

Mark Cameron, who worked as a policy adviser at the PMO, came to see Harper and Flaherty as respecting one another. But Flaherty freelanced too much for the boss’s liking. “He didn’t necessarily check before he went out and made statements. That aggravated us.”

It aggravated them to the point where Flaherty’s office was not even allowed to write his own budget. In 2014, for Flaherty’s final budget, over from the PMO came Scott Anderson, one of Harper’s top speechwriters.

Harper wanted the system geared to elevating his own stature. He didn’t appoint a deputy prime minister. He kept his caucus on a tighter leash than any previous prime minister. Documents and press releases that had once been issued under “Government of Canada” now came from “The Harper Government.”

For the 2009 stimulus budget, Freeman was told by the PMO to prepare not only the usual documents but separate booklets on aspects of the stimulus plan. He did so, finding appropriate images of Canadians at work on infrastructure projects and the like, and sent them up for vetting. When the brochures came back, he noticed his pictures had been replaced by photos of Stephen Harper. Freeman went to Flaherty’s deputy minister, Rob Wright, and suggested this was not a good idea. Wright protested and got most of the booklets returned to their original format. But at least some of the brochures, produced at whatever the cost, were never used. “PMO had clearly lost interest once the Harper pictures were gone,” Freeman recalled.

Bureaucrats like Wright and Freeman didn’t have the easiest of times with Flaherty. He could be the jolly Irishman at public events. With the twinkle in his eye and rapier thrusts in the Commons, he was an effective retail politician. But behind the scenes he was on edge, often in a state of irritation. Behind his back, members of his road team referred to him as Krusty. At his sessions with assistant deputy ministers, Flaherty would be flanked by a half-dozen young political aides. The ADMs would present their briefs and there was very little open discussion. They were supposed to know where Flaherty stood and not disagree.

On the broad outlines of policy approach, Flaherty and Harper generally saw eye to eye. They were at one with the underpinnings of conservative economic dogma—low taxes, open markets, smaller government, balanced budgets. That was the plan, said Cameron: “Sound economic fundamentals any free-market economist would support, with middle-class populist initiatives focused at the consumer and household level. A combination of the two.”

But unforeseen developments and the ever-present pull of political self-interest demanded detours. The Tories had to zig-zag so much, said economist Donald Drummond, who prepared budgets for Paul Martin, that “it’s hard to think of a philosophy in terms of what they’ve done.”

The Conservatives’ hand was forced over and over again. Their initial slowness in recognizing the sinking world economy in the fall of 2008 was mystifying. Drummond, by then chief economist at the TD Bank, recalled warning them at the time, as did Kevin Page, head of the Parliamentary Budget Office. But they remained obstinate. As Page recalled, their economic update that fall was authored primarily in the PMO, not by Flaherty. On the big decision to reverse the position taken in the document and go the Keynesian stimulus route, Flaherty was reluctant. Harper was the more avid of the two, according to Cameron.

In fact they had little choice but to reverse themselves. Not only had the government made commitments to the G20 on stimulus, but the opposition parties held a gun to their heads. If they didn’t bring in a large-scale market intervention, their minority would be defeated. It would be “fair,” Cameron candidly acknowledged, “to say events dictated our actions. But we could have screwed up and didn’t, so we deserve credit for that.”

Yet the Tories made great political mileage with the measure they were forced into. They could boast also—and they never let anyone forget it—that Canada did better than other G7 countries through the great downturn. But they had inherited a sound banking and regulatory system as well as a $13-billion surplus and the lowest debt-to- GDP ratio since the 1970s. Given Canada’s positioning ahead of other countries at the outset of the global crisis, and given the good fortune of having resource prices remain high, doing better than other G7 countries—comparisons to the G20 weren’t so flattering—was more a logical outcome than any great feat of governance.

******************************

End of Part 1 of 2

 

[Edward Campbell]

Part 2 of 2

Exceptionalism on the economic front served as a strong weapon in the 2011 election. At the same time he was spending great sums to spur the economy, Harper was able to hold to his promise to cut taxes—and to poison the atmosphere for anyone wishing to raise levies. Through history, the Liberals had used taxation to build their idea of an equitable Canadian society. They were now left spinning their wheels and tongues. In the 2011 election campaign, Michael Ignatieff couldn’t put forward any big new national programs, like a high-speed rail system, because of the cost.

Yet the large deficit the Conservatives had run up, much of it a result of the GST cut and excessive spending in their first two years in power, hardly hurt them on the campaign trail. Nor did the Tories pay a price for Harper becoming the first PM in history to be found in contempt of Parliament. It was for excessive information control—his hiding from Parliament basic costing information on corporate tax cuts, combat jets and other programs.

In governance, the best communications plan is sometimes non-communication. The fewer details provided on financial management, Harper reasoned, the better. The PM had stoked a heated controversy when he killed the mandatory long-form census. Academics like Paul Saurette of the University of Ottawa theorized that today’s Conservatives, unlike the Progressive Conservatives of old, suspected that too much information could too easily contradict gut-driven ideology.

Flaherty wasn’t intellectually curious, recalled Freeman. With the odd exception, only the like-minded were invited to his policy retreats.“The idea was you create your own truths. Don’t be bogged down by studies.” In keeping, the public service, which Harper suspected was overweighted with a Liberal mindset, saw its role changed: Now it would counsel on policy less, and simply follow orders more. Kevin Page noticed the switch right away. “There was a sea change with a capital C.” Nuanced debate was discouraged. “You could see it, the lack of analysis, in the documents, in the language.”

Harper created the Parliamentary Budget Office in 2006, appointing Page to head it in 2008. But when Page started challenging the government’s numbers, Flaherty and the PMO tried to undermine Page’s credibility, even as his numbers held up better to scrutiny than their own. In his book UnAccountable, to be published in September, Page writes that he was told that Harper operatives tried to find dirt in his background to discredit him. He was also brought before a parliamentary committee that, he said, was tantamount to a kangaroo court. “It became very personal,” he writes. “Intimidation and fear-mongering were all-too-common tactics by the Harper government.”

The PMO’s control fixation brought on a marked reduction in parliamentary oversight. Flaherty’s budget bills were turned into sweeping omnibus bills containing hundreds of clauses and measures, such as downgrading environmental oversight, that had little to do with a budget. On top of that, scrutiny at the committee level was further short-circuited by the Tories’ use, in degrees rarely seen, of closure, time limitations, in-camera sessions and heavy-handed tactics to block witnesses.

Harper control required media control. Having spent many years in the media, Freeman now observed from the inside how the press and public could be easily hoodwinked. “One of the impacts of the new media is that nobody has any attention span,” he said. “So the Harper people realized quickly that if they stonewalled or didn’t answer questions, there was a good chance that within two or three days the story would be dead.” The Tories put up any number of new roadblocks to reporters’ accessing information. “Their goal was to make the media instruments of Tory propaganda.”

In some respects, Freeman said, the Conservatives succeeded. When they took away most-favoured nation trading status for China, it meant prices were going to go up on a range of consumer products. “But they did an exception for hockey equipment. They leaked it systematically to the media: We are going to cut the tariff on hockey equipment. It was in the budget as a tiny part of what they were doing. But they spun it so that it became the big story. As a journalist, you should be asking, Do I really want to be used like that?”

******************************

With the recession over and with a majority government in hand following their 2011 election triumph, the Tories could return to core principles like budget-balancing. They began aggressively attacking a deficit that had topped $55 billion. A series of tight budgets would ensure the books would be back in balance by the 2015 campaign.

The trick was to do so while continuing with tax cuts and creating a good level of economic growth. As the Harper team discovered, however, this was no small challenge. The growth strategy became overly reliant on private-sector investment, which wasn’t forthcoming. Bank of Canada then-governor Mark Carney chastised corporate Canada on this front, using the phrase “dead money” in reference to the lack of investment from Bay Street towers. Profits coming their way from Tory tax cuts weren’t being re-invested.

The Harper tax scalpel was wielded widely. His government had brought in the two-percentage-point reduction in the GST, introduced the popular Tax Free Savings Account, sliced corporate taxes and given selective breaks to groups favoured in their electoral math. In addition, they broadly expanded the Universal Child Care Benefit and the Child Care Expense Deduction and they pledged to introduce the income-splitting tax bonus.

Progressives contended that most all of the tax breaks worked more to the benefit of the wealthier segments of society. Critics got a big boost when Flaherty, in an indication he had had enough of taking orders from on high, broke ranks on income-splitting, beginning 2014 by saying, “I’m not sure that over all it benefits our society.” It was a rare example of a senior minister going off-message—on a major platform plank, no less. Shortly thereafter, Flaherty stepped down from the Finance post.

It wasn’t just the left that questioned the wisdom of some of the cuts. The GST reduction was roundly denounced by mainstream economists, who favour cuts to income taxes rather than to consumption taxes. Political motivation was seen to be at the heart of many of the other cuts. The Tories sliced and diced a tax system that observers like Paul Boothe of Western University’s Ivey Business School said needed simplification, not increased complication. Drummond was not on side either. “Our biggest problem in the tax system in Canada is the extraordinarily high marginal effective tax rates paid by people in low- and middle-income ranges.” Referring to most of the Tory measures, he said, “None of that stuff does anything for that problem.”

But with the opposition parties putting up only meek resistance, the Conservatives had made headway not just for the moment but in the long game, persuading Canadians that a smaller state was inherently virtuous.

Still, there were conspicuous weak spots, above all an energy file marred by declining oil prices and stalled pipelines. “The Conservatives had a three-pronged strategy,” said Liberal Finance critic Scott Brison. “Oil, oil and oil.” They were a one-trick pony, charged NDP Leader Tom Mulcair, and now they were paying the price, as were Canadians. The resource exploitation focus, he said, came at the expense of the environment and the country’s manufacturing sector.

Conservatives, naturally, contested the interpretation. Finance committee chairman James Rajotte cited the auto bailouts, the Economic Action Plan and the Capital Cost Allowance program for manufacturers. “That’s hardly ignoring manufacturing,” Rajotte told me. He had done yeoman work for the party and was respected even by opposition critics. But on being overlooked yet again for a cabinet post as the PM turned to the likes of Pierre Poilievre in the lead-up to the election, Rajotte announced he was leaving politics. The Prime Minister also lost his Industry Minister, James Moore, who cited family reasons for stepping down.

******************************

With economic pressures piling up as 2015 began, Harper tried to turn some of the public focus away from the economy to the management of the terror file and to sabre-rattling abroad.

On the economy itself, he was not for turning. While economists suggested stimulus was needed for growth and while the Bank of Canada chimed in with rate cuts, team Harper held to a lean approach and pounded the airwaves in defence of it. And he could indeed point to some good markers: interest rates the lowest in many decades, inflation way down, unemployment below the average of the last 30 years, new free trade deals, middle-class incomes stable, a budget close to balance and taxes way, way down.

To Goodale, the record didn’t sound so good. Under nine years of Conservative rule, job creation, he noted, was a mere half of what it was under the last nine years of Chrétien/Martin governments. The Liberals left office with nine straight years of the budget in surplus. There were seven straight deficits under Harper. The national debt went considerably down under the Liberals, considerably up under the Tories. Trade deficits were non-existent under the Liberals, but a common feature under Harper.

What concerned economists like Boothe, Drummond and McGill’s Christopher Ragan was the long run of low growth, the continuing economic stagnation. Should the below-2% growth rate persist, there were a lot of emerging economies, they said, that could pass Canada by. Jobs would be harder to come by. Living standards would languish.

There are no easy solutions. “Our level of productivity is low relative to everyone else and our growth rate is one of the worst in the developed world,” said Drummond. “It’s not obvious how you tackle these problems.” Ragan agreed, adding that the deficit obsession didn’t make sense in a low-growth environment. Whether the budget was a few billion in surplus or deficit was “frankly immaterial,” given that the debt-to-GDP ratio was in very good shape. Without a change of pattern, he was not optimistic the country could find its way out of the trough in the years to come.

Harper’s “stay the course” rhetoric was mocked by Liberal Leader Justin Trudeau. He pointed out that “the course we’re on has led us back into recession.” The line had some bite. The opposition parties spotted vulnerability in Harper’s economic armour. In response, he made an extraordinary move. Recent election campaigns had hewed close to the legislated miniumum of 36 days in length. Harper more than doubled the 2015 clash to 11 weeks. We’re in the midst of the longest election campaign in 143 years.

No one was fooled as to the reason why. The Conservatives’ purpose was to maximize, with their superior financial resources, their marketing advantage. The longer campaign would allow them to rack up the type of spending on a breed of attack ads and self-promotion spots that had never been seen north of the border.

They were confirming Goodale’s postulate. Policy was secondary. It was primarily about marketing. You spin to win.

I can, I'm sure others will, poke holes in the Martin/Goodale argument that it's all spin, but, to be sure, some of it is. And you cannot take economic performance out of context; contrary to what Ralph Goodale says, some factors can and, indeed, must be blamed on the ongoing economic crisis ... and it wasn't over in 2011, this is probably the most anaemic recovery in modern times. But, that being said, some of you will really enjoy  :nod:  the above article; it will enrage  :rage:  others.

 

[Edward Campbell]

The Globe and Mail, in an editorial which is reproduced under the Fair Dealing provisions of the Copyright Act, asks and answers three questions about the Liberals' deficit promise:

http://www.theglobeandmail.com/globe-debate/editorials/three-questions-to-ask-about-the-liberals-deficit-promise/article26145427/
(My emphasis added, for clarity)

GLOBE EDITORIAL
Three questions to ask about the Liberals’ deficit promise

The Globe and Mail

Published Friday, Aug. 28, 2015

Until Thursday morning, the three leading federal political parties appeared to be agreed that, when it comes to the deficit, this election would be fought according to the Conservative Party’s ground rules: Deficits are bad, balanced budgets are good, and a government’s competency is determined by which side of the line its budget lands on. And then Justin Trudeau’s Liberals decided to try to change the rules of the game.

The Liberals’ new economic plan is built around a promise to deliberately run deficits – up to $10-billion a year for the next two years, with the money used to nearly double federal infrastructure spending. That infrastructure spending, goes the Liberal argument, would stimulate the economy, increase productivity and make Canada more prosperous.

The plan raises three questions: Does it matter if Canada runs small deficits for the next few years? Would spending tens of billions more on infrastructure be a good idea? And could it give the economy a long-term boost?

The answers: No, maybe, and it depends.

No, it does not matter if Canada is a few billion dollars in the red. The Stephen Harper government’s long-standing commitment to balancing the budget this year, or else, is important to the Conservative brand, but it’s fiscally irrelevant. The same goes for the NDP’s political need to insist that, on deficits, it will be as Tory as the Tories. No magical thing happens if the budget goes from a small deficit to a small surplus. No calamity will befall the country if it does not.

When it comes to the federal government’s fiscal health, what matters is the country’s debt-to-GDP ratio – the debt relative to the size of the economy. Canada’s is the lowest in the G7 and marching steadily downward, even with small deficits. So long as deficits are relatively small – and in a huge economy like Canada’s, relatively small means roughly $20-billion or less – the debt-to-GDP ratio will continue falling. Which, to repeat, is what matters. No, the Liberal deficit plan will not blow a hole in the fiscal house.

The Conservatives and the NDP, by promising immediate budget balance, are the equivalent of a family paying off its mortgage on an accelerated schedule, and having to forgo some spending or find new revenue to make that possible. The Liberals are like a family paying off its mortgage on a slower schedule, believing that the extra money can be put to more productive uses than debt reduction.

Are the Liberals right? Maybe. The country clearly has significant infrastructure needs. Mr. Trudeau’s federal Liberals have to some extent lifted their platform from Kathleen Wynne’s Ontario Liberals, who won an election on it last year. Improvements in, for example, mass transit are desperately needed in the vote-rich Greater Toronto Area. The same can be said of Canada’s other cities.

But it’s not as if the Conservative government has been against infrastructure spending. The 2015 Budget – sorry, “Economic Action Plan 2015” – proudly details the upward march of federal infrastructure spending under the seven-year Building Canada Plan of 2007, the 10-year New Building Canada Plan of 2014, the Canada 150 Community Infrastructure Program and the Public Transit Fund. Federal infrastructure spending is at more than $5-billion a year and rising.

For all their talk of smaller government, the Conservatives have not shied away from paying for a lot of ribbon-cuttings and shovels in the ground. Just days before the election call, there was Defence Minister and Calgary MP Jason Kenney announcing $1.5-billion for Calgary’s new Green Line LRT. A few weeks earlier, Mr. Harper announced that Ottawa would be paying up to $2.6-billion to help build Toronto Mayor John Tory’s pet SmartTrack transit project, “once a formal application has been received and approved.” So a transit scheme cooked up to win a mayoral election, and which was not any of the regional transit agencies’ first order of business, has now been promised billions of federal dollars – before there’s even a finished plan for spending those dollars. But hey, it’s infrastructure.

All of which points out the devil in the details of the Liberal plan. With interest rates as low as they are, it may make sense to pull future infrastructure investment into the present. Economists ranging from Harvard professor and former U.S. treasury secretary Larry Summers to former Bank of Canada governor David Dodge favour the idea; Mr. Summers in particular speaks of it as a “free lunch” that will pay for itself. If the money is well invested, it will deliver higher economic productivity. If it is poorly invested, it won’t. When politicians are in charge, that can be a challenge. Their bottom line is immediate electoral benefit, not long-term economic returns. They are vote maximizers, not profit maximizers.

Just look at how things have gone in Canada’s largest city over the past two decades. Political calculation, not economic reason, built the Sheppard subway. Political math, not a sound accounting of costs and benefits, is promising to build a multibillion-dollar subway to Scarborough. Political reality, not a rational business case, has Toronto seriously considering pushing a SmartTrack train and a subway through some of the same low-density Scarborough neighbourhoods.

Bad things can happen when politicians get excited by the promise of flashy new infrastructure. From Ontario’s Green Energy Plan to Alberta in the 1970s and ’80s expensively and mistakenly subsidizing new industries, politicians have a poor record of picking winners.

That’s the challenge for Mr. Trudeau’s Liberals: He and his party have to prove to Canadians that, under this plan, their money would be invested prudently, wisely and at arm’s-length from the politicians. They have seven more weeks.

I take issue with one point: It is naive, in the extreme, and it borders on being silly, to suggests that government spending, on anything, should be kept "at arm's-length from politicians." That will not happen, because it cannot happen and it probably, in our system of government, and given 1,500 years of our political traditions, should not happen.

I applaud M Trudeau for coming out with this policy, but I doubt he and his colleagues can invest Canadians money "prudently" or "wisely."

 

[Acorn]

Re the Lawrence Martin article: While I agree it's not all about spin, it's not very flattering is it?

 

[Edward Campbell]

Re the Lawrence Martin article: While I agree it's not all about spin, it's not very flattering is it?

Well, it is Lawrence Martin so I hope no one expected "flattering" or, even, "fair and balanced." Mr Martin is an interested and interesting writer, but he doesn't even pretend to be non-partisan.

 

[Edward Campbell]

Here, from iPolitics, are Ekos' latest polling results ...

   

          ... The NDP maintain a comfortable lead while the Liberals are closing the gap with the CPC.

 

[dapaterson]

Here, from iPolitics, are Ekos' latest polling results ...

   

          ... The NDP maintain a comfortable lead while the Liberals are closing the gap with the CPC.

Those numbers are wholesale; the important numbers are retail - riding by riding.

 

[Brad Sallows]

>But then we're subsidizing truckers vs rail companies, and buses vs passenger rail.

Ironically, without roads, trucking companies, and bus companies, the rail companies don't have much of a viable business.  I'll stick with my bright line between infrastructure "anyone can use" and infrastructure which is basically a business.

 

[Brad Sallows]

Current debt as a percentage of GDP is around 32%.  At the end of 81-82 it was 29%.  Five years later it was 49% and climbing fast.

The point: "events" don't creep up on us slowly.  (Another example: recent Chinese turmoil.)  We lost control of our spending in the mid '70s long before the problem of the cost of debt became apparent.  I see the same school is speaking its voice that spoke then: it's OK if you keep debt growth below GDP growth.  The hidden assumption: no significant change in the cost of servicing debt.  (Interest rates really have nowhere to go but up.)

When people presume to talk about small deficits, it staggers me a little to read sums like $20B.  $2B, maybe.  If $30B is high (referring to several of our past years, not the exceptionally high watermark of $55B in 2009-10), $20B is moderate, not small.

We shouldn't be riding a string of primary deficits into the next real recession.

 

[Edward Campbell]

Andrew MacDougall,* in the Ottawa Citizen says that Justin, Trudeau, by surrounding himself with candidates who he presented as his "economic team" was tacitly admitting that the Conservative ads are right: he's Just Not Ready!

MacDougall says, and I agree that, "It’s the Prime Minister that makes the final budget calls. It’s the Prime Minister that sits in a room at high-stakes economic summits. While support is required and dissenting views a must, there isn’t time during a crisis to ring around 31 different offices to find out what to do."

_____
* Caveat lector: Andrew MacDougall is the Senior Executive Consultant at MSLGROUP London and is a former director of communications to Stephen Harper.

 

[Altair]

Andrew MacDougall,* in the Ottawa Citizen says that Justin, Trudeau, by surrounding himself with candidates who he presented as his "economic team" was tacitly admitting that the Conservative ads are right: he's Just Not Ready!

MacDougall says, and I agree that, "It’s the Prime Minister that makes the final budget calls. It’s the Prime Minister that sits in a room at high-stakes economic summits. While support is required and dissenting views a must, there isn’t time during a crisis to ring around 31 different offices to find out what to do."

_____
* Caveat lector: Andrew MacDougall is the Senior Executive Consultant at MSLGROUP London and is a former director of communications to Stephen Harper.

Since when is having a team a bad thing? :facepalm:

 

[ModlrMike]

Since when is having a team a bad thing? :facepalm:

When leading by consensus is not an option.

 

[Edward Campbell]

Since when is having a team a bad thing? :facepalm:

You and I might believe it's a good thing, but, as I have mentioned many times, we tend to follow the US, somewhat slavishly, in many things, including, sadly, politics. In the USA it's all about the individual leader ~ parties and party discipline, in the congress and between the congress and the White House, are weaker there; the leader matters most. We are, I think, becoming similar: it's less the Conservative Party of Canada than it is Stephen Harper and his candidates ... not a team as much as a leader and followers. Like it or not, that's what M Trudeau is up against.

 

[Brad Sallows]

A "team" is bad when the staff are more qualified to lead than the CO and they know it.  I realize many people think it is just horrible that Harper is firmly in charge, unlike limp noodles such as Chretien, Mulroney, or Trudeau, but the other end of that spectrum is even less desirable.  Then you end up with a palace court where people spend more time jockeying for position, and the leader defending his, than they do on state business.

The slew of articles suddenly speaking out in favour of deficits is remarkably well-timed.

 

[Remius]

The poll tracker from Eric Grenier shows the conservatives are in danger of being relegated to third in the next series of polls.  Not the best way to start the post labour day campaign phase if it holds true.

http://www.cbc.ca/news/politics/canada-election-2015-grenier-polls-aug28-1.3206184

I wonder, like Eric Grenier does, if the appetite for change will be tempered by the recent news of a surplus (even if spun).

 

[Altair]

A "team" is bad when the staff are more qualified to lead than the CO and they know it.  I realize many people think it is just horrible that Harper is firmly in charge, unlike limp noodles such as Chretien, Mulroney, or Trudeau, but the other end of that spectrum is even less desirable.  Then you end up with a palace court where people spend more time jockeying for position, and the leader defending his, than they do on state business.

The slew of articles suddenly speaking out in favour of deficits is remarkably well-timed.

I don't think that's the case here. The liberal party needs trudeau more than trudeau nerd the liberal party.

This party was consistently getting demolished in elections, with every result worst than the last. Ignatieff almost destroyed the party.

When trudeau took over the party, it was broke, it's membership numbers were abysmal and it had not big name candidates for the leadership other than garneau. If Garneau had taken over I'm sure Stephen Harper and the attack ad machine would have ripped him to shreds by now. One of the only reasons trudeau has been able to withstand the barrage of attack ads is that Canadians already sort of knew him. Garneau would have gone the way of dion  and Ignatieff as brilliant individuals but horrible leaders.

Trudeau might not be the strongest in terms of education and political experience like many on his team, but he has been the sole guy in past decade (maybe further, because I think martin also failed in this regard) who can confidently lead the party. There is nobody on his team who can usurp him, no one who can challenge him. He needs them for their brains experience and knowledge, they need him because he is the guy holding the party together.

I think that's a good balance.

 

[Edward Campbell]

Since when is having a team a bad thing? :facepalm:

Maybe, when the "team," part of it, anyway, named Rob Burton, the Mayor of Oakville, ON ( @OakvilleMayor ) goes online (on Twitter at 9:18 PM - 28 Aug 2015) and compares the Canadian Corps of Commissionaires, who have been hired to provide security at Conservative events, to the NAZI brownshirts ...

                   

 

[The Bread Guy]

Maybe, when the "team," part of it, anyway, named Rob Burton, the Mayor of Oakville, ON ( @OakvilleMayor ) goes online (on Twitter at 9:18 PM - 28 Aug 2015) and compares the Canadian Corps of Commissionaires, who have been hired to provide security at Conservative events, to the NAZI brownshirts ...

                   

Thanks for sharing that tidbit - first I've heard of the security vets being Commissionaires, since the party's been pretty tight-lipped with the media:

.... Conservative spokesman Kory Teneycke characterized the additional security officers as part of the party's logistical team.

"We don't comment on our event logistics, that's not something that's new," said Teneycke, who took issue with the characterization of the additional personnel as "security."

"PM security is about (prime minister personal detail) ... how we manage the logistics of our events, that's a different matter and we don't talk about it."

Teneycke said the party is responsible for footing the bill for "event logistics and event planning," suggesting the security is being paid for by the party, but he would not say whether they are licensed to work as security guards ....

As for His Worship's tweet .... :facepalm: