The Tories are doing what they must – but they don't like it

Ottawa - "Énoncé économique" et crise politique

Since the Canadian election, the Harper government's approach to the economic crisis has had to change - further evidence of which was offered yesterday by Finance Minister Jim Flaherty in his economic update.
Of course, the opposition parties decried the federal government's failure to do more. But think back to the final days of the election campaign, when Prime Minister Stephen Harper declared that the government had already done what was needed, that Canada was better off than the United States and that deficit financing was out of the question.
What a difference six weeks has made. Now, the government uses words such as "recession," and will run a deficit. Mr. Harper even warned about remembering the lessons of the Great Depression. Mr. Flaherty's economic statement yesterday said there would be small surpluses in the next two years. There isn't one economist in Canada who believes that. Further stimulus, he said, "could result in a deficit." Replace "could" with "will."
Polls surprised the government. After the election, the Conservatives polled the country - they poll all the time - to help interpret better the voting results. They found, among other things, that Canadians were indeed ahead of the party in wanting government action to protect them from the economic tsunami. Canadians were ready for deficits, as long as they were not too large and did not portend a return to years and years of deficits. Even Conservative supporters were not hostile to deficits. Canadians were cautious about deficits, but they did not reject them - exactly the tone Mr. Flaherty tried to adopt yesterday.

Canadians had been hostile to deficit financing since the 1973-95 nightmare years. It was an article of political faith, across the political spectrum, that any politician who recommended deficits or presided over them in power would be removed from office. Canadians had apparently been inoculated against the easy temptations of deficits.
It is a testament to the severity of the crisis that Canadian public opinion has changed, so that the questions now are: How large a deficit, for how long, and by what means? The country will have to await an early budget, perhaps before the end of January, for the government's detailed answers.
In the United States, the government-in-waiting of president-elect Barack Obama began signalling it favoured yet another massive economic stimulus package. The International Monetary Fund, the bastion of economic orthodoxy, urged countries to offer stimulus equivalent to 2 per cent of their gross domestic product - a huge number. British Prime Minister Gordon Brown, with whom Mr. Harper spoke frequently in the last stage of the campaign, and French President Nicolas Sarkozy both demanded concerted international action.
Canada, though in better fiscal shape than every other G8 country, simply could not stand alone with the position as articulated by the Prime Minister at the end of the election. Canada would have looked silly, and unwise, to stick with the election position that enough had already been done, what with the GST tax cut, infrastructure spending and lower corporate taxes.
Instinctively, the Conservatives do not want to do what they must: offer more stimulus than they would have imagined necessary. Their preference in power, for the most part, has been to achieve objectives through the tax system, rather than big spending.
The tension between instinct and reality wove its way through the economic statement, a curious document that was exceptionally cautious, given the magnitude of the crisis. If these measures are all the government intends for the budget - and they are not - the Conservatives will be crucified politically, to say nothing of having responded too tepidly to the crisis.
There were no tensions, however, in a typically Harperite move - the proposed elimination of tax subsidies for political parties, a measure designed to hurt the Liberals, in particular, but an outrage against encouraging people to donate to political parties. This is Conservative partisanship at its very worst, and so typical of the party these days.
The Conservatives raise money more easily than the others, so by eliminating the $1.75 per vote subsidy, they are trying to use this economic crisis for their partisan advantage. Canadians fought a long battle to get these inducements for people to give to political parties; they can't let one party's naked self-interest push back the progress.

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