Beyond The Commons

Aaron Wherry covers all the goings-on in and around Parliament Hill. Follow Aaron on Twitter: @aaronwherry

Categories: Beyond The Commons, Capital Read

The economist

by Aaron Wherry on Thursday, January 13, 2011 3:50pm - 72 Comments

Stephen Harper, September 2008. “My own belief is if we were going to have some kind of big crash or recession, we probably would have had it by now.”

Stephen Harper, October 2008. “I know economists will say well, we could run a small deficit but the problem is that once you cross that line as we see in the United States, nothing stops deficits from getting larger and larger and spiralling out of control.”

Stephen Harper, October 2008. “We’ll never go back into deficit.”

Stephen Harper, December 2008. “The truth is, I’ve never seen such uncertainty in terms of looking forward to the future … Obviously, we’re going to have to run a deficit.”

Stephen Harper, February 2009. “Of course there’s all kinds of risks of inefficient, expanded government policies that will continue into the future. I’m not suggesting there aren’t long-term risks. But I was taught early in economics classes, the famous economist John Maynard Keynes said that, ‘At times like this, we remember that in the long run, we’re all dead.’ So right now, we worry about the short term. We are worried about the short term, and we’ve got to get things right now.”

Ian Brodie, former chief of staff to Stephen Harper, March 2009. “Despite economic evidence to the contrary, in my view the GST cut worked … It worked in the sense that by the end of the ’05-’06 campaign, voters identified the Conservative party as the party of lower taxes. It worked in the sense that it helped us to win.”

The Canadian Association for Business Economists, August 2010. The Canadian Association for Business Economics says a poll suggests 74 per cent of its members think it’s bad policy to replace the obligatory long census with a voluntary survey. Seventy-one per cent anticipate the quality of data obtained from a voluntary survey will be poorer than that collected from the compulsory census. And 76 per cent believe the change will negatively affect the analysis done by their group or organization.

Stephen Harper, yesterday. “On the other hand, when things change as rapidly as they do, you can’t be locked in to the same answer in every situation. Obviously, the last two years required us, my judgment as an economist, required us to on a temporary basis spend an enormous amount of money and run a significant deficit. I think we were in the unusual situation where that’s actually the ideal economic policy.”

Tags: Budget, census, deficit, economy, GST, Ian Brodie, recession, Stephen Harper

More by Aaron Wherry

ZestyMordant

Why limit yourself to taking a principled stand when you can take several contradictory ones at once?
Emily

Harper isn't an economist, although he promotes himself as such.

He is, however, a weathervane. Always pointed to votes.

tedbetts

Harper isn't an economist, although he plays one on TV.

Emily

Heh! Perfect!

Bob

yawn…

Jan

Try an iron supplement. It will pick up right up.

Fido

It IS reasonable to change policies as circumstances change, so Harper's statement yesterday is not controversial. On the issue of economics, though, I would question Harper's motives and longer-term view. We are tending, under Harper to move to a stance that emulates policies tried in the U.S. without a lot of benefit to the larger population. Paul Krugman wrote a blog post three days ago that talks to this issue. Here's a quote:

"So economics is not a morality play; the social and economic order we have doesn’t represent the playing out of some kind of deep moral principles."

– http://krugman.blogs.nytimes.com/2011/01/10/econo…

I'll wager that part of the reason those who did not vote for Harper have a sense that, under his regime given a majority, he will steer us to a place we do not want to be.

tedbetts

But what if your policy, the one you advocated and got elected on, was about staying the course during hard economic times? What if you actually wrote your economic master's thesis, the very basis of your claim to be an economist, on saying that even – maybe especially – during economic downturns, you need to avoid government economic stimulus and creating or enlarging deficits?

I would definitely question Say Anything Steve's motives. It was all and entirely about saving his own bacon.

Orson Bean

Yes, and I think this is all because one of the main lessons that Harper took away from sitting on opposition benches as a Reform MP is this: in Canadian politics, adhering to fixed ideological principles is for losers. Over the long term, by and large the winners tend to be adaptable chameleons.
burlivespipe

You must have skipped a page of the Stephen Harper handbook; the one that said "plagarize when necessary, but not necessarily plagarize. And keep a scapegoat handy at all hours."

Thwim

A sense?

"When we come back with a majority, then all bets are off." – Gerry Ritz, (then) Minister of Agriculture

tedbetts

I think that if he won a majority (or had had a majority the last few years) Harper would act pretty much the same on the big matters. In fact, part of me wants him to win a majority so that he caucus would then implode a la Diefenbaker and it will once and for all shut up all the sycophants who think he's only become an anti-conservative because of the minority Parliament.

Blue

….so you would like to see Harper with a majority after the next election, your Liberals would be humiliated but you would still be a winner because you would sit back and wait, and wait, and wait for that Conservative majority to make a mistake ( like a wafer mistake ) and then you would rub your hands in glee……….hmmm— interesting spin ted.

tedbetts

Not a mistake.

LIke Dief, the caucus would explode and implode at the same time.

Harper would continue to govern as he does: biggest spender, no care about deficits or the economy, pitting Canadians against each other, mounting corruption and unethical conduct, even more undemocratic behaviour.

Meanwhile his caucus who, like Ritz believe that there was in fact a hidden agenda, get increasingly frustrated as Harper refuses to act like the conservative they thought he was, the one he was before becoming PM and the biggest spending PM in history. Nothing on spending cuts, no rollback on equal marriage, nothing on abortion, more equalization payments, no private healthcare, nothing to roll back gun control. He would have some successes because of his majority like the gun registry but those things he's already taken a position on.

Eventually they split like under his mirror image, Brian Mulroney.
burlivespipe

His caucus is so intensely whipped, they've neutered their instinctive populist instincts unless they are veering into another area, like provincial politics. See looney Cummins, who just the other day began touting vigorously the importance of a BC Conservative party, despite all evidence pointing to its eventual result of an NdP gov't (of which i will personally support)… Delusional and el cid-like, these tiny generals with eunch-ized souls have invested all on Harper and will continue to run around and blindly cheer until the sun sets on the 'brilliant tactician' but lame economist leader.
Jan

Speaking of looney. did you notice Darrel (you don't have the gonads) Stinson and Randy White are involved in the B.C. Consertives party. What could possibly go wrong there? God, just when you think you've gotten rid of these idiots – they're back!!!
Blue

As long as Libs and dippers have you and burl representing them there will be plenty of support for Cummins and White and Stinson. from the good people of B.C.
Jan

Hey, the Conservative spokesperson has called Reformers 'angry rednecks'. How's that for support? All you need now is Doug Christie to complete the set.
Blue

Good luck in your wait for Armageddon ted.
I think you will see a Harper majority gov`t like other majority gov`ts—–there will be some disagreements, some egos will be hurt, bur overall there will be unity behind the leader who got them there.
tedbetts

Fortunately, we won't ever find out. Harper is further away from a majority than he has ever been and keeps pushing further away as he shows himself to be so disconnected with the priorities of and lives of ordinary Canadians.

But it would be interesting to watch unfold. So many sycophants and supporters still cling to the belief that Harper is a conservative and not a partisan opportunist who will say and do anything to get and keep power. As we have seen time and time again, as we've directly from former Chiefs of Staff to Harper (like Brodie and Flanagan): politics trumps policy and principle, if policy and principle ever even enter into any kind of consideration. They make so many excuses for their support, the biggest being that "the minority government made him do it" which are so transparently, objectively and obviously self-serving inventions.

anon

Whats the big deal, it's politics. PM Chretien said the GST was wrong for Canada, he never got rid of it. PM Chretien was PM for years, until one of his own had him whacked.

Emily

Ping

http://intensedebate.com/people/Ottawa_Centrist Ottawa_Centrist

Listen, obviously, the truth is, of course, everyone agrees that the government is implored to consider all options. With this in mind, they have but one course. They have chosen the right course for the right situation. As the facts on the ground change, the truth is, they must obviously shift priorities to adapt. And that is what they have done. That is what they always have done. It is the right thing to do and anyone who says different is wrong. Canadians do the right thing.

COALITION! *BOOGA BOOGA*
Kyle

You should read his Master's thesis. Mr. Harper clearly uses what he learned in school to perform his current job. For example:

"Political success consists in a party gaining a temporary monopoly contract to govern by offering competing sets of outputs (public goods) and prices (taxes) in exchange for votes. Politicians will want to provide as many goods at as low a price as possible. Deficits may help them to do this. At the same time, voters may be willing to support such programs because the benefits are direct and sector-specific, while the costs are uncertain and spread. Thus they may not see or appreciate the relation between their own 'marginal' expenditure behavior and the 'total' taxation burden."

So… When Mr. Harper was an economics student he thought voters were too dumb to understand the negative consequences of running a deficit and tend to simply drool over nice spending announcements. Now that he's Prime Minister… he's running the biggest deficit ever.
Crit_Reasoning

Here's one Wherry could add to the list (Layton, Dion and various bloggers had a lot of fun with it at the time):

Stephen Harper, October 7, 2008: "I think there's probably some great buying opportunities emerging in the stock market as a consequence of all this panic"

S&P/TSE Composite Index close, October 7, 2008: 9,829
S&P/TSE Composite Index close, January 12, 2011: 13,460 (36.9% higher)

Emily

Over time the stock market goes both up and down….so you can be entirely right about it, or entirely wrong. It all depends on the date you choose to look at it.

hollinm

How insightful.

Emily

It's not remotely insightful. It's what the market does.

hollinm

I was being sarcastic Emily. Sorry you missed it. Do you think you are talking to a bunch of kids? Now I know you are a Liberal for sure.
Emily

Yes actually, I AM talking to a bunch of kids. That's why I simplify things.

See…just because you disagree with someone doesn't mean they're Liberal….that's a kid's logic.

Be_rad

Hey CR, I would have, but I first acted on his opinion that there would be no collapse and stayed in the market. I was too broke to use his next prediction to buy and I was a little leery of the value of his advice so soon after such a significant miss. Dan Gardner is talking alot lately about this phenomenon of only remembering the predictions a prognosticator gets right and forgetting their failures.

psiclone

I was very lucky and the moment I heard Harper say those magic words I realized he was right so I started cashing out bonds and T-Bills and have spent the last few years going crazy buying canadian equities – IF I TOLD YOU how much money I have made you would NOT believe me. Yeah Team Harper as I am officially out of any debt right now and my RRSP has increased so much in value since the crash that I am near maxing it out and now switching to TFSA's – which it truns out is another harper idea – so the rest of you harper haters keep up the good work because you are leaving the field to me :)

Mike T.

IF I TOLD YOU how much money I have made you would NOT believe me

***

There is little chance of people believing you are seriosu about ANYTHING you say.
Jan

Give us a few of your stock winners, Psiclone.

Leo

Canadian Income Trusts that have now coverted to corporations and are pay out more in dividends than October 2006.

McC_

your RRSP doesn't max out when it increases in value. You can max out your contributions to your RRSP year over year, but the value of your RRSP itself is free to grow or shrink without limits.

Crit_Reasoning

Did you seriously act on the PM's opinion in September 2008? That's why you stayed in the market?

In September 2008, no leader in the Western world successfully predicted the magnitude of the financial crisis. You can actually follow what world leaders and various authorities were saying back then, and most of them were uttering vaguely reassuring platitudes, just like ours was. As late as November 3, 2008, the European Commission at Brussels forecast 0.1% GDP growth, completely missing the extent of the catastrophe. On November 6, the IMF predicted a mild recession (-0.3% growth in 2009).

I don't think anyone expects our political leaders to be psychics. Harper was wrong in September, but so was almost everyone else. And he was right in saying that Canada's strong fundamentals made it well-equipped to weather the storm, because that's exactly what happened. Canada's economy performed better than any other economy in the G8.

As for the "buying opportunity" prediction, Harper doesn't deserve any credit for being a successful prognosticator, because anyone with a lick of common sense could have predicted the same thing. Barring total economic collapse (the Worst Depression Ever scenario) it was inevitable that the stock market would eventually bounce back to pre-recession levels and then some. It was just a question of timing.

Emily

I assume he's joking. However a lot of people were issuing dire warnings about the situation. The politicians simply weren't listening.

Just as they're not listening now.
tedbetts

"Vague reassuring platitudes"? Like, we won't have a recession or deficit?

Meanwhile, most economists and financial advisors were predicting a recession. The former Chairman of the US Federal Reserve was predicting a depression. Conservative commenters made a running joke about how the media and economists were only predicting disaster because Bush was President.

[youtube vkk_OR6Dqt8&feature=player_embedded http://www.youtube.com/watch?v=vkk_OR6Dqt8&feature=player_embedded youtube]

Crit_Reasoning

Ted, check out this article to get a sense of the very real debate among Canadian economists about Canada's economic performance and prospects leading up to the mid-September stock market shocks, which were triggered by turmoil in the US financial markets:
http://www.cp24.com/servlet/an/local/CTVNews/2008…
tedbetts

Thanks for the link CR. It proves what I said and proves Harper and Flaherty were outright, bald faced lying.

They did not say there was a mixed opinion. They said that no one was predicting a recession. Complete BS.

As the article points out, we were only technically not in a recession and "the Canadian economy contracted in the first half of 2008" and "more importantly it deteriorated at a faster pace than the Bank of Canada had expected" and ""Every single category of business declined and detracted from growth… residential structures, non-residential structures, business machinery and equipment… and this is the among the weakest pace of consumer spending we've had in years."

The fact that the only ones claiming there was not a recession – and the article was in August of 2008 – were Conservatives and those making technical arguments based on criteria that is not normally used to assess whether we are in or out of a recession.

In fact, that article makes it clear that we already were in a recession in a much stronger way than I remembered, so thanks for the link.

Say Anything Steve will say anything and do anything to get into and keep power. The entire 2008 election is the prime example of that.

Be_rad

Nah, just fanning your flippers. What I really thought was, he's lying. He lied because it was an election campaign and he couldn't risk the truth. And we wouldn't have liked the truth, even though we knew it was the truth. What does it say about us that the forgoing sentence makes sense?

tedbetts

Problem is, CR, he was saying that in response to a question about Canadians concerned about their jobs and savings. He responded by saying Canadians aren't worried about their jobs or savings and that there are great buying opportunities out there.

Crit_Reasoning

Problem is, CR, he was saying that in response to a question about Canadians concerned about their jobs and savings.

Really, Ted? Do you have the transcript of that press conference? I'd have thought it was in response to a question about the 400 point TSX drop that happened that day:

I’m not the most emotionally expressive guy, but I understand, I understand in my own family, that people are pretty shocked by developments in the stock market,” he told reporters in Toronto.

“Look,” he went on, “the main thing the government has to do in a time like this is not panic. A lot of people out there are panicking. I think there are probably some great buying opportunities emerging on the stock market as a consequence of all this panic.”

http://www2.macleans.ca/2008/10/07/broker-in-chie…

tedbetts

Yes, really. Unless I'm conflating two circumstances in which he said the same thing. Which is certainly possible.

It was in response to a question about the stock market dropping. It was an interview with Peter Mansbridge and not a press conference. Mansbridge asked Harper about Canadians who are worried about their jobs and their savings. Harper obnoxiously said that Canadians were not worried about their jobs or their savings, and in fact there were good buying opportunities.

It was actually one of those moments that made my jaw drop with that kind of dismissive arrogance.

It was also what made ultimately realize that Dion was a disaster. Here was a prime goof-up, a perfect example of not just Harper's fundamental arrogance but also of his very real and very great disconnect with the lives of ordinary Canadians. It showed the great gulf between a career politician who never had a real job and the stresses and turmoils of working Canadians with no say over their immediate future because of forces larger than them. Dion blew it for me there not because he failed to convince Canadians of this fundamental reality of our Prime Minister but because he didn't even try. He was both incapable of recognizing it and of doing anything about it.

danby

Honest question CR: Did Mr Harper's words inspire you to take advantage of this buying opportunity?

AT1

Seriously Wherry? So Harper has changed tack in the face of a changing economic environment.

I recall the Liberals having taken a variety of positions on economic issues: free trade, GST, corporate taxes. In fact, they are currently proposing to vote against budget if it doesn't reverse course on a position they held not so long ago and voted for. Not worth mentioning I suppose.

All of these positions can be supported if some context is provided. Shame, that a Maclean's journalist can't be bothered to do so.

evenflow

I really think you missed the point!

hollinm

Not at all. He was right on the money. You just don't want to acknowledge he was right.

hollinm

You know sh.t happens. Both opposition parties said no coalition and viola six weeks after the election we have a coalition.
The fact is no government in the world anticipated the train wreck that was about to befall the world economy.

Emily

Others did, including economists, and they all sounded the warning.

Politicians didn't listen. Including one that claims to BE an economist

Orson Bean

So if a Canadian politician DID "listen" to those dire warnings, what do you think such a politician could have done, or should have done? Do you actually think that there was anything that a Canadian politician could have done in order to stop, or significantly ameliorate, the train wreck that was about to befall the world economy?

Emily

So Harp and the gang are powerless? Why do we even have a govt then?

The warnings were sounded long before the 'crisis' hit….when there was plenty of time to take steps to fix things….but Harp didn't even see it coming…and did all the worst possible things in the face of it.

Orson Bean

Thanks for not answering my question. In fact, you answered my question with a question. Sort of like certain people do in . . . Question Period.
Orson Bean

I note, though, that you did refer to "tak[ing] steps to fix things". So do tell: what steps could have been taken by a Canadian government at the time to "fix things"? Your language suggests that there is something that a Canadian government could have done, presumably in mid-2008 or so, to "fix" things such that we would not have had a recession. Is that what you are saying?
Emily

I answered your question….in fact your second post comments on my answer.

Harper inherited a suplus….it should have been tucked away for a rainy day….because there is ALWAYS a rainy day.

Harp should never have pis*ed it away in dozens of tiny giveaways….it was small-time pointless vote-buying without contributing anything to the country.

Harp should never have lowered the GST….it cut govt revenues off at the knees, and caused a structural deficit before the 'recession' even began!

The 'stimulus' never needed to be borrowed money….we should have had it in the rainy day fund….and it could have been better spent to actually create jobs….something it didn't do in spite of all the signage.

Major investment should have been made in a re-training program…something we were promised with free trade, but it never materialized. We wouldn't have the unemployment level we do now if people were able to retrain.

And now….$21B on a fighter plane??

Insanity.
Orson Bean

I agree with some of the stuff you say there — the unnecessary spending, the cheap retail politics — plus I'm repeatedly on record here as opposing the GST cut. On the other hand, those points don't really go to the matter that thought you were getting at — whether or not this or any other government could have actually avoided a recession, or substantially lessened its severity in an anticipatory, proactive way. For instance, I of course agree with you that we'd be in better fiscal shape had we not spent so irresponsibly and kept the GST at 7%, but it doesn't necessarily follow that the recession would have been any less severe as a result. And of course the main anti-recessionary tool aside from fiscal stimulus has been a monetary one (i.e., quantitative easing and interest rate cutting), and you don't even mention that.
Emily

The global financial crisis isn't a recession. We had a minor recession as a side effect but that's been over for more than a year, both here and in the US. The global financial crisis isn't remotely over.

We have 200 [more or less] countries, with 200 different economies, all different currencies, all globalizing….different regulations, different products, different ways of doing things….all trying to trade. Result: massive collision.

And at the same time, we are moving to the knowledge economy….the industrial age is over here….and we all have to take a step up. Agricultural economies have to move to industry [which for them will be very short-lived] and industrial economies like ours have to move to the knowledge one.

Two huge changes coming at once….and we are still going by rules and structures from the WWII era.

Basel III is an attempt to address that, but it falls far short of what is needed….and is much too slow.

hollinm

You of course knew exactly what was going to happen but unfortunately they didn't listen. Right Emily? Sarcasm intended.

Emily

I and many other people. It made the headlines you know. Did you miss all that?

gottabesaid

Couple of things…

I get that circumstances change and you've got to roll with the punches, adjust policies, maybe even reverse policies. Fair enough. What sticks in my craw, however, is how during the economic update, the government said we were going to run a surplus. And, in a matter of a few short months, boom, biggest deficit ever. In fact, Nov. was the 'we're going to run a surplus' economic update, and in Dec. it was 'we're obviously going to run a deficit.' How the hell can you be SO far off? Was Flaherty lying, or was he really and honestly that much in the dark? Either way, it didn't instill confidence.

Another interesting observation — though not applicable to just the Conservative government — when the economy goes in the toilet, the government (conveniently) says 'there was nothing we could do.' But when the economy rebounds, the government says, 'See! We fixed everything! Give us the credit!'

Leo

Might I suggest that it was a combination of "being in the dark" and a necessary "white lie". In the fall of 2008 banks were failing and bank runs were happening in the UK and US. Once Lehmans failed all bets were off. It really was a crisis. Would it have made things better to have our government say "OMG the sky is falling and we haven't a clue what to do"?

gottabesaid

Appreciated, but that wasn't really my point. I'm talking about the deficit in particular, not the economic crisis as a whole. I don't think the government saying we would be running a deficit would have caused the crisis to get worse — in fact, many were shocked that the government didn't say we would be going into deficit.

Leo

JMHO but governments were shocked how quickly they were going into deficit. The 'white lie' is the managing of sentiment. The old 'stay the course' as you scramble to deal with each new problem.

Emily

He was… and still is….in the dark.

You realize his only plan for paying off the deficit and having a recovery is just waiting it out for another boom ….through the magic of the market?

You have to click your heels, throw the magic fairy dust…and BELIEVE!
hollinm

We could go through every government, provincial, federal and municipal and see where politicians say one thing and then do the exact opposite. That is nothing new but to try to hoist Harper on his petard because he has had to change with the circumstances that confronted him in 08 and 09 is disingenous.
The government had said the Economic Update would not be a budget and you will recall that the economic circumstances were deteriorating rapidly and nobody had a handle on the numbers.
However, after the attempted coalition Harper knew he had to do something not only to save his government but to react to the rapidly deteriorating circumstances. Remember the coalition was I think forecasting a deficit of $30 billion.
I agree that the government of the day tries to lay the blame elsewhere. That is politics. However, in this instance I think you will agree that our fundamentals were good and there was no reason for a recession in Canada. The global economy had a different idea.
If they are going to take the crap when the thing falls apart it is only right that they claim the glory when it gets better. That's the way if works.

Hank

Bottom line: I want to live in a country that is socially progressive and fiscally prudent. The conservatives have proven to be neither. Can anybody offer this?

Emily

Hey, I'm still looking for a country that's 23° all year round.
Thwim

If you must look to a party, you may want to look to the NDP for this. Contrary to the common assumption, NDP, at least provincially, were running quite a few balanced budgets. The difference is that instead of paying for their programs from the middle class, they tax the corporations and the upper class more.

Personally though, I preferred the Greens for this when they were under Harris. Under May they've taken a turn toward being far less fiscally prudent than I care for.

Orson Bean

"NDP, at least provincially, were running quite a few balanced budgets"

You're funny. Apparently you haven't heard of these two provinces called BC and Ontario. They had NDP governments. And their budgets were very effing far from "balanced".

Yeesh.

Thwim

And if there were only 2 provinces in Canada, you might have a point…

as it is..

Leo

Adapt or fail, adapt or fail……

"as I say you know where you want to go but you have to adapt yourself to the changing circumstances and you have to make political compromises sometimes, but you have to ask yourself if the compromises are good or are they bad. And so far I think we’ve done a lot of things where we’ve made some compromises but in the vast majority of cases we’ve done them for the right reasons and they’ve worked out " http://news.nationalpost.com/2011/01/12/interview…