Tuesday, January 13, 2009

Steve Speaks

MacLean's has an in depth interview with Stephen Harper, which has generated a fair amount of online buzz.

Paul Wells thinks it's newsworthy that Harper will include the abolition of public financing as part of his next campaign platform. Given what we saw last campaign, I think it's newsworthy that this means Harper will have a platform next campaign.

Regardless, one answer from Harper caught my eye. I reproduce it here, with my comments added in:

Q: Do you think it’s fair to say that the big-spending liberals of Canada and North America are taking advantage of the political situation to drive through more of their ideological agenda?

A: Well, look, this is a risk. First of all there’s nothing—I should be clear—there’s nothing unconservative about running deficits during a recession.

Well, duh. Let's look. The conservatives in the States have run up a trillion dollar deficit. The Conservatives in Canada will run a 30-40 billion dollar deficit this year - Canada's biggest deficit since...the last time we had Conservatives in power. In fact, Harper's 2006 balanced budget (a product of 13 years of Liberal government) was the first balanced Conservative budget in Canada in 90 years.

No, on this point, Harper and I are in complete agreement. There is nothing unconservative about running deficits.

There’s actually pretty strong economic theory that would indicate that you don’t start raising taxes and reducing government economic activity during a downturn, but what we’ve got to be sure of as we enter a deficit [is] that those spending measures are short-term and that we’re in a position where, as the economy recovers, we move back into surplus.

Huh? Captain GST-cut, who eschewed the carbon tax is suddenly listening to economists?

And obviously the risk the government faces is that this becomes an excuse for permanent long-term spending that is, in fact, not stimulative, it’s just simply big government that becomes a burden on the economy.

True. It would be a shame to spend for the sake of spending in good economic times. Of course, this ignores the fact that Jim Flaherty is the biggest spending finance minister in the history of Canada.

That is a significant risk, which is why I think it’s important to have a Conservative government managing this kind of program.

Again, can someone explain to me why the Conservatives should be considered better economic managers when every shred of evidence in our country's history points to the exact opposite conclusion?

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19 Comments:

  • Calgary Grit: That's the $12 Billion dollar (lost contingency fund) question...

    We follow the conservative lying and bogus propaganda from down South about "tax and spend liberals", but when we compare it to historical evidence, we find that the Liberals were always the best fiscal managers.

    Good post.

    By Blogger WesternGrit, at 9:49 PM  

  • The Conservatives started out fine, making the largest debt payments in Canada's history. We would have been debt free in 50 years. Also they were moving government spending down to 38 per cent of GDP, from 40 something.
    As Andrew Coyne wrote in MacLeans, it was the increase in spending-not GST cuts-that turned everything into such a mess.
    Things will turn around quickly, but the Liberals may be back in power by then.

    By Blogger nuna d. above, at 9:57 PM  

  • All current finance ministers are the biggest spending finance ministers ever. There is inflation, you see.

    Per GDP, Flaherty isn't even CLOSE to #1, although yes, he is higher than his Liberal predecessors.

    By Anonymous Anonymous, at 10:53 PM  

  • Anon, he outspent Paul Martin when he was in bed with Jack Layton. He's way past his predecessors.

    By Blogger Mike, at 11:09 PM  

  • Not to nitpick, but I think you and I disagree about what I found newsworthy in the interview. Hey, guess I am here to nitpick after all.

    By Blogger Paul Wells, at 11:11 PM  

  • If we are into revealing the truth, I want to know when Harper was in bed with Jack Layton in 2006. In my recollection, it was the Libs propping up the Harper govt. I don't remember Mercer making a skit about the NDP abstaining.

    By Blogger janfromthebruce, at 11:39 PM  

  • Jan, but the jokes of NdPers having a clue about fiscal management make up for it... While there is plenty of good debate on the idea of tax cuts during a recession, only Jack-o and his wacko band of clueless screamers would think raising taxes during a recession makes sense. RB Bennett sense, I suppose.

    By Blogger burlivespipe, at 2:54 AM  

  • In the latter part of the interview Harper talks about how the opposition will have to run as the coalition in the next election. Even if the coalition has been disbanded the Conservative party will still be able to use it against them quite effectively.

    Is there anyway around this? I mean other then passing this budget and letting history pave over a few of the mistakes made in the past few months?

    By Blogger AndyDoan, at 7:41 AM  

  • "I want to know when Harper was in bed with Jack Layton in 2006."

    Serves me right for that poorly constructed sentence. I was of course referring to Paul Martin being "in bed" with Jack Layton, when he (Martin) accepted changes to the budget in May 2005 in order to save his government.

    Harper and the Conservatives were apoplectic, of course, screaming about socialist spending schemes and social engineering. And once in office, promptly increased spending by about 8% above what Martin did with Layton's input the year before. Then did it again last year.

    Given the history, I have to wonder why people think the Conservatives are the fiscally responsible party - hell, they put us into deficit with their big spending + tax cutting ways. One would have thought watching the Americans make this gigantic mistake for 8 years would have been enough...

    Of course, those of us from Ontario aren't surprised...this is what Deficit Jim Flaherty did to us in 2002.

    Conservatives are at least as fiscally irresponsible as the NDP ever was. They just lie about it better.

    By Blogger Mike, at 9:27 AM  

  • I always thought Canadian neocons were Friedmanites. Whatever way the wind blows I guess. I *am* excited that we'll have an election with a platform next time though. That'll be neat.

    By Anonymous John D, at 9:49 AM  

  • I think the image of North American conservative parties (whether they be Conservatives or Republicans) as the more fiscally conservative parties boils down to tax cuts. Their dogmatic insistence on tax cuts allows them to present themselves as being for 'reducing the size of government'.

    This is absurd. I'd take a "tax-and-spend" liberal over a "don't-tax-but-still-spend" conservative any day. Ideally, I'd want a party that is willing to reduce both taxes and spending, but in the absence of such an option, the "tax-and-spend" liberals are the more fiscally conservative choice.

    All of the above refers to policy during the good times. During a recession, spending without taxing is unfortunately necessary. However, as you demonstrated so effectively, given the past records of the two parties, I see no reason to believe that the Conservatives would be more responsible in handling this contingency.

    By Blogger - K, at 11:19 AM  

  • AndyDoan: "In the latter part of the interview Harper talks about how the opposition will have to run as the coalition in the next election. Even if the coalition has been disbanded the Conservative party will still be able to use it against them quite effectively. Is there anyway around this?"

    If the Liberals learned anything from the last two years I hope it is "don't let the Conservatives frame / define our message". The Cons spent two years making the last election about leadership. As you point out they are trying to make this election about a coalition - whether there is one or not. The Cons messaged both of these topics as fear based (ie emotion based) issues.

    Here's a passage from Thom Hartmann's "Cracking The Code: How To Win Hearts, Change Minds, and Restore America’s Original Vision" (a liberal one).

    'Once we begin using a frame someone else has constructed we're constrained by their deletions, distortions and generalizations. We can't counter this kind of argument by staying inside another person's story. The way to respond is to take back control of the story by proposing a more powerful frame and a more compelling story.'

    The Liberals need to create their own frame / message - based on the liberal story - to define the next election ... and make sure it is more compelling than the coalition. Denying the coalition frame will simply reinforce it. The message also needs to connect on an emotional level, not just logic.

    I hope the Liberal communications staff and strategists run to pick up a copy of this book. Although the book is written in the context of the American liberal and conservative stories, the Cons are using the same messaging techniques as the Republicans. The Liberals (and Democrats) have to learn the same skills - and put them to better use.

    Good read for everyone.

    By Anonymous Anonymous, at 12:20 PM  

  • Again, can someone explain to me why the Conservatives should be considered better economic managers when every shred of evidence in our country's history points to the exact opposite conclusion?

    Well, if we take the period from '84 onwards as "history" for the moment ...

    It's been said before - but the Tories (PC version) brought in measures such as the original FTA, NAFTA and even the GST - all of which were opposed by the Liberals at the time, to one degree or another - which made it easier for the post-'93 Liberals to balance the books.

    Let's also remember (for those who were around back then) as well that pre-'93, the Libs, when in opposition, howled whenever the Tories made even modest movements towards curbing spending. I can only imagine when the Libs back then would have said/done if the Tories had introduced the cuts that the Chretien-in-government Liberals made.

    Now, notwithstanding the above, (1) it's still easy to argue that the PC's didn't do nearly enough to get the budget under control (which is one reason why the Reform Party was able to gain the strength it did among small-c conservatives), and (2) the Chretien-Martin team of the mid to late '90s does deserve credit for having the will to take care of the deficit.

    But to simply say "Libs Good, Tories Bad" ignores a fair bit of water that went under the bridge from '84 onwards.

    By Blogger Jason Hickman, at 12:55 PM  

  • Hey, Jack sleeps around. It's hard to remember who he slept with and when.

    By Anonymous Anonymous, at 1:07 PM  

  • Calgarygrit, you have a few points, which are sadly, rather thin.

    -"Conservatives have historically run bigger deficits than Liberals"

    This claim is true, but surely needs the following qualifiers:
    1. Dion's spending plans in this election were far more unrealistic than Harper's, and would have resulted in either a much larger deficit for 2009 or a much smaller stimulus. Moreover, the green shift would have posed extremely high costs on some sectors of the economy in what are already bad times.
    2. Canada has very rarely run surpluses in its history. By your rather facile logic, I could say that the Liberals are poor economic managers because there have been more Liberal deficit years than Conservative ones (since the Liberals have governed more).

    -"Harper/Flaherty unwisely raised spending and cut taxes during economic good times, resulting in a deficit today"

    1. Counterfactual: Paul Martin wins the 2006 election with a weak minority and governs with the support of the NDP or Bloc. Do you really think it is likely Martin would not have spent at the very least a large proportion of the money the Tories sunk into the GST cut and spending increases (eg. on national childcare, Kelowna, etc. - ongoing program spending spawning large bureaucracies)?

    2. Government surpluses are plowed into either mini-updates (spending and tax cuts), or debt reduction. The reduction in interest of even massive debt payments is pretty small on a year-to-year basis, so it is factually incorrect to argue that a Liberal government would have anything close to a surplus.

    3. Even if you don't like my argument above, you really need to defend your premise that "in good times governments should run surpluses".

    After all, they have three options:
    -run deficits
    -balanced budget
    -pay off debt

    The first option has the negative that it causes a "crowding out effect" as government borrowing crowds out private lending, raising interest rates ceteris paribus (irrespective of the bank rate). On the other hand, such spending/tax cuts can have long-term and short term economic benefits. A GST cut might be effectively inflationary in the short term, but might also increase the saving rate over the long haul (albeit probably less than an income tax).

    Running a surplus and paying down debt would net the feds only a small decrease in the cost of interest payments. Even then, it would mean repayment of debt that is mostly held in bonds, which can be renewed indefinitely, where the interest paid is very small.

    Considering that the Tories were running balanced budgets (no crowding out effect), the tradeoff they made (which the Liberals almost certainly would have made if in power) was logical.

    4. Canada's deficit as a % of GDP is smaller than that of any of the other major economies I have seen figures for. In Canada a 30 billion deficit represents a 2.3% of GDP.

    By contrast, the US 1 trillion dollar deficit represents 7.2% of GDP.

    I suppose you have one point - Harper has been inconsistent. That is probably true. But hey, he is only following the winning team that said:

    "Conscription if necessary but not necessarily conscription"

    "Zap! You're Frozen"

    "The deficit, she takes care of 'erself."

    By Blogger hosertohoosier, at 5:49 PM  

  • Wow a lot of people have way too much time on their hands.

    By Anonymous Anonymous, at 7:37 PM  

  • Please spell Maclean's right...I know I'm being lame, but I expect CG, of all bloggers, to get that one right.

    By Anonymous Anonymous, at 9:48 PM  

  • H2H - Valid points, but you can't really base the argument on what the Liberals WOULD have spent under Dion, or under a Martin minority...

    By Blogger calgarygrit, at 1:01 PM  

  • Anon: Thanks for the detailed response. I worry that exactly what you say is happening. The Cons are defining terms of engagement for an election called sooner then later.

    My personal take on the situation is that the only thing to get the Libs out of this mess is time and the appearance of responsible governing in the meanwhile. Which means turning back on the coalition.

    The Liberals have waited too long for the type of leader that they have now. I don't think they are going to want to drag him into battle too soon or too often. Best to build strength while keeping their cards close to their chest. Wait to get the Cons in a situation where they can define the terms of battle for a change rather then the other way around.

    By Blogger AndyDoan, at 3:45 PM  

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