Liberals playing with numbers
Canada holding up well, says BMO economist
John Ivison, National Post
Friday, September 04, 2009
All warfare is based on deception, wrote the Chinese fifth-century general Sun Tzu, an observation that applies equally to politics.
Not outright lies, you understand -- rather distortions of the truth intended to mislead the confused voter, who doesn't have time to separate the rhetorical wheat from the chaff.
Take the Liberals' efforts at misinformation this week. Canada has the worst-performing economy in the G7, said Liberal leader Michael Ignatieff. Unemployment is at a 20-year high and we have the worst deficit in our history, he added. It makes it sound like Prime Minister Stephen Harper has presided over an economic meltdown that will see us join Iceland and Hungary in line for International Monetary Fund handouts.
Never fear, claims Mr. Ignatieff, "we can do better." The Liberals will ride to the rescue and restore the $52-billion deficit hole in the nation's finances to surplus. "We'll clean it up without raising taxes," he pledged.
This is like an octopus squirting a cloud of black ink to disorient its prey. As Douglas Porter, deputy chief economist at BMO Capital Markets, pointed out in a research paper yesterday, the reality is that Canada has suffered heavily during this recession, in particular witnessing the disappearance of its fiscal and trading surpluses. However, we have held up relatively well, not only when compared with most other countries, but also in comparison to previous recessions.
Specifically, he pointed out that Canada did indeed witness a decline in the second quarter that was the worst in the G7. However, even with that second-quarter dip, Canada still recorded one of the lightest hits to output in the industrialized world. In fact, Canada's downturn was less severe than the recession of the 1980s, even as the global economy was dragged into the worst slump of the post-war era.
While the unemployment rate has jumped nearly three percentage points to reach its highest level in 11 years, Mr. Porter pointed out that job losses have been only half as severe as the United States in percentage terms.
"The unemployment rate is not particularly high on a long-term basis.... Job losses have been lighter than the two prior recessions, when the jobless rate rose well into double digits," he said.
The Liberals have attacked the Conservatives on domestic spending -- the stimulus package has been too slow and ineffective; on trade policy -- Canada is now in a merchandise trade deficit for the first time since the 1970s; and on budget deficits -- the Conservatives underestimated the recession in last fall's fiscal statement and in the January budget.
But in each case, Mr. Porter offered convincing counterpoints -- domestic spending has held up better and is rebounding more quickly than in the United States.; exports have been hit by forces beyond the control of all policy-makers; Canada's net debt will still be the smallest in the G7 as a share of GDP.
Reading the list of Liberal attacks, you would hardly know that every jurisdiction in the world has been hit by the same pressures to domestic spending, trading relationships and budgets.
Mr. Harper is not above squirting some ink himself. He is in accord with Mr. Ignatieff that the economy can be brought back into surplus without raising taxes. According to Mr. Porter this would require four years of solid recovery and a 1% cap on spending for the same period. Since the Conservatives have racked up annual spending increases averaging 7% in recent years, Mr. Harper's assertion is simply not credible.
In addition, the Prime Minister's claim that defeating the government on its budget motion later this month could jeopardize the $1,350 home renovation tax credit is deliberately deceptive. He knows full well that once a budget measure has been adopted, it must be implemented. The Liberals support the tax credit and since the budget has already been passed, the Canada Revenue Agency can operate as if the implementation details have been passed, too.
But it is Mr. Ignatieff's interpretation of the economic evidence that is most troubling. Anyone who takes a dispassionate look at the numbers will come away wondering why the Liberal leader is trying to start a political war over an economy that could clearly be in much rougher shape.
As Mr. Porter concluded: "Timely and appropriate policies prevented a Great Recession here."
There is no polling evidence to suggest that a sizeable segment of Canadians blame the Harper government for the global downturn or for its response to the crisis.
Why didn't Mr. Ignatieff simply bide his time until the Conservatives started to come apart at the seams, as all governments do, and let the prize come to him?
It suggests not only arrogance, impatience, vanity and vaulting ambition but, more worryingly, economic illiteracy in a man who would be prime minister.
