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Recession Spurs Debate Over Which Leader Is Best For Economy

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OTTAWA — Political parties jumped on Tuesday’s announcement that the country was in a recession for the first six months of the year, each telling voters the figures showed that it would be the best choice to govern over the economy.

Conservative Leader Stephen Harper told supporters in Burlington, Ont., that the election is a choice about which team has leadership and the experience to keep Canadians safe and keep the economy moving forward. He said Tuesday’s numbers showed “the Canadian economy was back on track.”

Statistics Canada reported the GDP had fallen on an annualized basis by 0.5 per cent this second quarter, after declining by 0.8 per cent during the first quarter of the year. The agency also had a bit of good news, reporting that growth had gone up in June by 0.5 per cent.

The June figure showed the biggest monthly economic growth in the Canadian economy in more than a year, Harper said. “This confirms the renewed growth that most have been predicting,” he added.

“The answer is not permanent deficits, higher taxes. Now, more than ever, it is time to stay the course with the government's balanced budget, low tax plan for jobs and growth.”

The NDP’s Andrew Thomson, its star candidate in the Toronto riding of Eglinton–Lawrence, also the party’s current spokesman on financial matters, called the Statistics Canada report “predictable” and a “disappointing development for Canadians.”

“The forecast today confirms that Stephen Harper is presiding over Canada’s second recession in over seven years,” the former NDP Saskatchewan finance minister said.

The definition of a recession — by the government’s own legislation — is two consecutive quarters of negative growth.

But this wasn’t about one month’s job numbers or one quarter’s financial numbers, Thomson told reporters in Ottawa, this was about a “lost decade” under Harper that was defined by crumbling infrastructure and job losses.

“Stephen Harper and Joe Oliver’s plan for the economy for our finances and for our country has failed.”

Liberal leader Justin Trudeau, campaigning in Gatineau, Que., agreed that the new GDP numbers showed Harper’s plan had failed Canadians and a new approach is needed.

“Stephen Harper’s approach has not worked to grow the economy, to create the kinds of jobs and opportunities that Canadians need, and that’s why we put forward a plan that invests in Canada and invests in growth.”

Trudeau announced last week that, if elected, the Liberals would spend $60 billion in new infrastructure spending over 10 years and run deficits for three years, including two of up to $10 billion, before balancing the budget in 2019-2020.

He said his plan wasn’t drafted to specifically address the likely short-term recession but rather is designed to encourage growth.

On Tuesday, Harper mocked Trudeau, saying the Liberals had offered a solution to a problem that didn’t exist, but he deflected questions whether the new GDP numbers suggested a slowing in not just the oil, gas and mining sectors but also in other areas of the economy, such as construction and manufacturing.

On Monday, Harper had said the Canadian economy had slowed because of the drastic drop in oil prices, and he insisted that 80 per cent of the country’s economic sectors are functioning just fine — a assertion recently dismissed by The Canadian Press’ “Baloney Meter.”

He had lashed out at Trudeau, saying the Liberal leader can’t be trusted to take a “long-term view” or enact “a long-term plan” because he keeps changing his mind on deficits.

“He’s gone from saying, ‘well, deficits don’t matter ‘cause the budget will balance itself,’ to ‘we are going to have a deficit and isn’t it an awful thing,’ and now, ‘no, I want to run deficit ‘cause they’re a good thing,’” Harper told party sympathizers. “We cannot afford people who are not ready, changing their plan every couple of weeks.”

One of Trudeau’s financial advisors, Toronto Centre candidate Bill Morneau, suggested Tuesday that the GDP number proves change is needed in Ottawa.

The Liberal plan, he said, is required to spur economic activity amid weakening growth and low interest rates.

“Whether the [GDP] number is one decimal point up or one decimal point down doesn’t change the fact that we haven’t addressed the challenge of growth,” Morneau, a business executive, said.

Instead of growing the economy for all Canadians, Morneau said, the Tories are focused on delivering boutique tax cuts to certain segments of the electorate.

‘Not a plausible position’

And the NDP, he added, can’t deliver growth-focused projects because it has already pledged billions on daycare and seniors’ pensions and placed itself in a “fiscal straitjacket”by promising to run a balanced budget.

“It’s not a plausible position. They will eventually be left in a position to identify the cuts to services or programs that will be required, if they do in fact want to balance the budget in 2016,” he said.

But Peggy Nash, the NDP industry critic and incumbent candidate for the Toronto riding of Parkdale–High Park, said it is the Liberals who are being untruthful about their spending plans.

“Justin Trudeau’s economic plan has a hole so big it could be a tourist attraction,” she said in a news release, suggesting the Liberals had shortchanged their predictions by $11.4 billion. “His deficits keep growing faster than the Bay of Fundy tides come in and out.”

On Monday, Mulcair said it didn’t matter what the statistical agency reported.

“Whatever is in that report,” he said while campaigning in Saskatchewan, “it's not going to change the fact that Stephen Harper's plan is not working.''
Harper has overseen an economy, he said, that has led to 200,000 more people unemployed since the 2008 recession and 400,000 manufacturing jobs lost since Harper came to power.

“We have a less balanced and less diversified economy today, and it’s a more fragile economy,” he said.

Harper’s economic message

Unifor chief economist Jim Stanford told HuffPost it also didn’t really matter what Statistics Canada reported Tuesday, because fewer and fewer Canadians believe Harper’s message on the economy.

“The gap between the self-congratulatory messages of the government and the very tough reality faced by most Canadians is just too big.”

More Canadians face unemployment or precarious employment, stagnant wages and high household debt, he said.

After four years of majority Conservative government, he said, Canadians are watching the country underperform the U.S. economy by a huge margin and falsely being told that Canada is the envy of the world.

“[Harper] wants us to look at the basket cases like Greece, but if we count all 34 members of the OECD, Canada under his tenure is in the bottom half of it. There are a lot of countries that have done much better than us,” Stanford said.

Canada needs a new long-term model for growth, he added, praising the Liberals’ infrastructure program and the NDP’s childcare plan as growth-inducing projects.

But Finance Minister Joe Oliver seem to suggest Tuesday that new big-ticket spending to promote growth isn’t needed. He took to Twitter to note the “buoyant month of June” result.

Several economists agreed that Tuesday’s numbers were a sign of not much of a recession.

BMO chief economist Douglas Porter called it “the mildest of variety and one of the strangest recessions ever.”

CIBC economist Avery Shenfeld said the first half of the year was "as weak as advertised," but a strong performance in June suggested that the third quarter of the year would return to growth.

Canada is "not yet [in] a recession,” he said.

Jonathan Rose, a political scientist at Queen’s University, told HuffPost all three parties could find a win in Tuesday’s numbers.

The positive June number would reinforce the Conservatives’ message that they are the best economic managers and should be trusted to continue governing. But the overall negative number would give the NDP and the Liberals an opportunity to tell Canadians how their plans would address the slump.

“The specificity of Trudeau’s platform allows ready-made criticisms to be levelled, [while] the vagueness of the NDP platform makes them a little bit more immune to criticism, because (they) can weave and duck a little better,” Rose said.

With the polls so close and the Liberals and NDP chasing the same group of people, Rose said it isn’t a surprise to see each party adopting the other’s traditional positions.

“The Liberals are famous for campaigning from the left and governing on the right,” he said. “The NDP, they are trying to assuage voters that they are not wide-eyed socialists, that they are reasonable stewards of the economy and responsible fiscal managers.”

‘Making the math work is difficult’

Kevin Milligan, associate professor of economics at the University of British Columbia and a member of Trudeau’s economic advisory panel, warned that even if the economic numbers are better than expected, the picture remains of a sluggish economy that has weakened since the Tories tabled their budget this spring.

The NDP and the Tories have placed themselves in tougher situation that the Grits, said Milligan. With the NDP saying it won’t raise personal income taxes, and hike corporate taxes only slightly, the UBC prof said he isn’t sure what revenue tools the party has left in its toolkit.

“The volume of the expenditure promises versus the volume of the revenue promises doesn’t seem to line up yet,” he said. “Making the math work is difficult.”

But Harper, Milligan said, has an even more daunting task of coming through on his pledge to balance this year’s budget, already in deficit, with only five months left to go in the fiscal year.

Tax increases would take time to legislate, and finding billions in cuts in departments towards the end of the year would be incredibly difficult, he added. “Even if they could figure out what cuts to make on a whiteboard, there is also the time dimension that suggests they’d fall short.”

By saying they would run deficits, Milligan said, the Liberals had given themselves some breathing room and borrowed some “fiscal credibility” while on the campaign trail last week by bringing out former Liberal prime minister and finance minister Paul Martin — someone known to be a deficit slayer.

Canadians, he suggested, shouldn’t be afraid of “modest” deficits. It isn’t like potato chips where one inevitably leads to another, Milligan said.

The University of Calgary School of Public Policy’s Jack Mintz disagreed about the plan to run a deficit. Deficits aren’t needed, he said, even if he too worries about Canada’s long-term growth.

“We have stalled infrastructure projects, we have stalled resource projects, we have manufacturing and industry that have not been as particularly innovative as I think they could be, and I think there are many longer term issues that need to be addressed, but I’m not convinced any of the parties have a good handle on these longer-term issues,” the conservative-minded economist said.

Regardless of Tuesday’s announcement, Mintz cautioned, the parties shouldn’t overreact.

“This is a bit of tempest in a teapot,” he said. “We’re not in a deep recession or anything like that. This is not 2008-2009.”

– With a file from Daniel Tencer

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