Harper’s plan to survive the recession

John Geddes takes a close look at the Tories three-part plan

Harper'In releasing his second quarterly update on his “economic action plan,” Prime Minister Stephen Harper today left little doubt about his government’s strategy for thriving—or at least surviving—through this recession.

It’s a three-part plan based on three questions. What’s happening now? How will things look when the economy picks up again? What will be the long-term cost of weathering this downturn?

The answers he hopes voters will come to believe: Conservatives acted fast to spend money to combat recession; Canada will come through hard times in better shape than most countries; and Canadians won’t be saddled with higher taxes and endless deficits as a result.

Given the Tories’ laughable track record through last fall’s global financial meltdown and the early stages of the recession, you’d think he’d have a tough time positioning his government as sure-footed on the economy. (They first denied a recession was coming, then claimed they wouldn’t have to run a deficit as a result, and then, when the inevitable deficit materialized, they grossly underestimated its size.)

Still, Harper had the elements of a pretty good story to tell in Cambridge, Ont., this morning. For starters, there’s a nice clear chart in the report he released that shows the International Monetary Fund’s outlook for this year, and Canada’s recession looks less severe than the downturn in the other major advanced economies.

Beyond that mildly reassuring forecast for low relative pain, Harper has an upbeat line to spin on stimulus spending, particularly infrastructure. “I’m pleased to report,” he said, “that some 3,000 individual projects across the country are now getting under way.”

That sounds like a lot. The phrase “getting under way,” mind you, is a bit vague. Does that mean shovels turning dirt? Construction workers on the job? Not necessarily. There are a bewildering range of different federal infrastructure funds, both old ones the Tories are now trying to inject new life into and new ones that are barely up and running. Good luck getting a handle on the whole package.
However, from what I’ve been able to gather, Transport Minister John Baird, who is responsible for the much of the infrastructure file, is making extraordinary efforts to hasten the approval process for shared federal-provincial-municipal infrastructure.

A more definitive reckoning will take months. The figures released today for Baird’s key $4-billion Infrastructure Stimulus Fund look suspiciously imprecise. The report shows $2 billion to be spent this year, $2 billion next year. That 50/50 split is too tidy to stand as a candid tracking of how fast money is really being allocated and spent. A clearer assessment probably won’t be possible until well into the fall.

But let’s make two big assumptions. Firstly, that the IMF is right, and Canada does fare a bit better than other industrialized countries. Secondly, that a few months from now most provinces and cities will be reasonably content with the flow of infrastructure billions from Ottawa.

That might leave the voting taxpayer thinking something like, ‘Well, the Tories were slow on the uptake about the recession, but once they caught on they did what they could to soften the blow, and Canada did better than the U.S. and Europe.” That wouldn’t be a bad outcome for testing times.

What’s left is Harper’s most partisan claim: that the Liberals, given a chance, would mismanage the transition from recession back into a growing economy. He claims the opposition parties would all, if they had their way, saddle Canada with permanent high spending that could only be paid for by crushing tax hikes in the near future.

The challenge for Liberal Leader Michael Ignatieff is to prevent that charge from sticking. That shouldn’t be all that hard. After all, Harper is relying on an old pre-Jean Chrétien, pre-Paul Martin, Liberal image. Ignatieff only needs to associate his brand closely with their budget-balancing, tax-cutting record.

On the Conservative-Liberal contrast, Harper was, to my ear, surprisingly muted today. And on the prospect of tax hikes, here’s how he compared himself with Ignatieff: “The leader of the official Opposition said without any doubt that he will be increasing Canadians’ taxes. This is a position that our Conservative government does not foresee.”

Two points. Ignatieff has never said that he will raise taxes, only that it would be irresponsible to categorically rule out the possibility, given Ottawa’s recent plunge back into deficit. And on Harper’s own pledge, if it can be called that, for the Prime Minister to say his government “does not foresee” tax increases is not exactly a read-my-lips promise.

Perhaps Harper is rhetorically reserved on the tax issue because he knows how daunting the federal fiscal outlook really is. The progress report he released today is strikingly silent on when the books will be balanced again—containing no mention of the Harper government’s previous promise to be back in the black by 2013-14.

What Harper’s attempting here is to buck a powerful historical pattern. Before the current slump, there have been six recessions since 1960. In the federal election immediately after each one, the party in power was either reduced from majority to minority or lost outright. So for Harper to survive would be a remarkable feat. And for Ignatieff to fail to defeat him would be a major opportunity squandered.

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