Predicting the defining issue of a federal campaign is notoriously tricky. Old political hands will tell you elections always end up turning on the question of leadership. But leaders need something to talk about—that’s why they invented platforms. A well-crafted one can sometimes set the agenda, the way Stephen Harper managed to do in his last two campaigns with easy-to-understand pledges aimed at middle-income voters. Often factors beyond a politician’s control take over, the way the fresh memory of the sponsorship scandal blighted Paul Martin’s first run as Liberal leader. Perhaps the only time an election’s core concern is thought to be obvious going in is when the economy is in the tank.
Now, though, with speculation about a fall election heating up, even the formerly safe bet that this campaign would be all about the recession looks uncertain. Only a few months ago, just about everybody in Ottawa’s political set thought Harper had slipped in under the wire by winning last fall’s election just before Canadians realized that the financial meltdown of 2008 was the prelude to a full-blown recession. But with only a minority, there was no way he could dodge having to run this year or next on how his Tories managed through the slump.
Or could he? Listen to Liberal Leader Michael Ignatieff spelling out exactly what he wants voters to base their next choice on. “The ballot question,” Ignatieff said as his caucus girded for battle at a summer’s-end meeting in Sudbury, Ont., “is, ‘Who is best placed to lead Canada into the economy of tomorrow?’ ” That’s a far cry from, say, “Who can best lead Canada out of its current economic miseries?” Or, “Who screwed things up here in the first place?” The clear implication of Ignatieff’s ballot question is that Liberals no longer believe voters can be counted on to punish Harper for leading Canada into hard times.
History suggests this is an unusual concession. After all, Brian Mulroney’s landslide Tory win in 1984 came on the heels of the painful 1981-82 recession, and Jean Chrétien’s annihilation of the Conservatives in 1993 followed the 1990-1992 economic downturn. In fact, every recession since 1960 has been followed by the party in power either being reduced from majority to minority or thrown out altogether. Ignatieff’s decision to run on his vision for the future, rather than Harper’s handling of the present, suggests Liberals believe that the political ramifications of the 2009 recession are different.
And they might be onto something there. Don Drummond, TD Bank Financial Group’s chief economist, and a former long-time federal Finance official, senses a certain relief over the fact the recession didn’t pack quite the wallop doomsayers had predicted. In terms of the numbers economists use to measure a shrinking economy, Drummond told Maclean’s this year’s slump turned out to be “a garden-variety deep recession—a little lighter than the early ’80s and a bit deeper than the early ’90s.” Those two recessions cost the parties unlucky enough to rule through them dearly. The difference now is that many Canadians were braced for far worse. “If you put aside the numbers, there were many, many who were expecting Armageddon—all the references to the return of Great Depression,” Drummond says. “So I would say that in most respects it turned out to be lighter than many had feared.”
But judging the recession less severe than the horrific worst-case scenarios is not the same as crediting the Tories with skilfully steering through it. Memories of the government’s sluggish reaction to the souring economy in 2008 will linger. Harper declared during last fall’s campaign that the danger of a recession had already passed. After winning the election, the Tories tabled an economic update that dared dream of continuing federal surpluses—a forecast that proved laughable when Finance Minister Jim Flaherty had to switch this year to projecting a $50-billion deficit. The Tories signed on to coordinated international emergency measures—low interest rates, steps to spur bank lending, and stimulus spending—widely credited with easing and shortening what might have been a much more severe downturn.
That does not mean, however, that the Conservatives will be able to run on a convincing case that their centrepiece program—infrastructure spending—did the trick. Pressed by all the opposition parties, supported by an international consensus, the Tories touted a $12-billion infrastructure program over two years as the engine of their recovery plan. The government won’t release fresh analysis of that plan’s progress until a report slated for release late this month. But the best publicly available data shows no gush of government spending on actual new construction in the three months leading up to the easing of the recession over the summer.
Those numbers are tucked away in so-called national accounts data released by Statistics Canada late last month. Spending in April, May and June by all levels of government on buildings like schools, hospitals and office towers rose by 2.4 per cent to about $4.5 billion, about half the rate of increase in the same period a year earlier. And spending in the same spring quarter on engineering projects like bridges, roads and sewers increased 3.8 per cent to $6.6 billion, a significant jump, but again well below the 7.4 per cent rise in the same quarter of 2008.
In other words, government spending on infrastructure in the spring after Flaherty announced his big stimulus push, just before the sprouting of the summer recovery, didn’t noticably charge ahead. Rushing billions out the door is hard to do. Drummond wasn’t surprised. “People selectively choose to ignore the history,” he said. “We have always had the experience that fiscal stimulus has kicked in later than people would have hoped for. If you go back to the mid-1980s, we did exactly the same thing. When the money started to flow, the economy had started to recover on its own.”
