Stephen Harper’s fiscal strategy is being undermined by an economic nightmare. This one isn’t coming out of the eurozone or the United States. No, this time it’s the prime minister’s own policies that are the nightmare.
True, Canada rode out the 2008 financial meltdown better than most. Our prime minister was quick to take credit for that, but the credit should have gone to the previous administration for rejecting the banking industry’s demands for deregulation. Ironically, had Harper’s party succeeded in persuading the government of the day to accede in the banks’ demands, he would have had a much rougher ride.
He was lucky – lucky that our banks were regulated and unable to join in the high-risk global derivatives market, lucky that he had inherited large surpluses. Even before the financial crisis hit, Harper shifted our budget from surplus to deficit. That’s bound to happen if you slash revenues while spending more. Our first quarter in deficit arrived before we had spent a single cent in stimulus investments in response to the recession.
While the media, pundits and politicians focus on the relatively minor question of whether we’ll have a small surplus or small budgetary deficit this year, they’re ignoring the problem of the national debt. Stephen Harper – a person who likes to call himself a fiscal conservative – has increased the national debt to its highest level ever – over $600 billion.
Twenty-four per cent of that debt was accumulated by Stephen Harper as he borrowed money to give out economically foolish boutique tax cuts. It’s one thing to bribe voters with their own money. It’s a step beyond shameless to borrow money to do it. The interest payments on the debt will cost Canadians $29 billion this year alone.
One might imagine that Harper’s high-spending ways would come to an end in tough times. Not so: The current federal civil service is larger than it’s ever been before. While spending on environmental science and support for veterans was slashed, more bureaucrats were hired to audit environmental groups, to work in Corrections Canada and Canadian Border Services. One big growth area in federal employment has been in information officers; their numbers are up by 15 per cent as they work to control – and limit – our access to government information.
Since Harper became prime minister, productivity has fallen, innovation has grown stagnant and our exports have tilted back to what previous industrial strategies sought to avoid. For years, successive governments sought to move us away from relying on raw resource exports, to create wealth through value-added production. To use a Conservative-branded turn of phrase, Harper’s “laser-like focus” on putting all our eggs in the bitumen basket did not include processing the bitumen before shipping it out.
And now, it seems, his luck has run out. Maybe he didn’t see Saudi Arabia coming. But the OPEC oil shock of the early ’70’s was not that long ago. Of all global commodities, oil is the one that is most open to manipulation, creates the most security threats and launches the most wars.
Anyone who understands economics knows that an economy is more resilient to nasty shocks when it is diversified. Truth is, Canada was never all that dependent on the oil sands, which amount to only two per cent of GDP. It’s not that large a contributor to our national revenue. And many sectors of the Canadian economy will benefit from the lower dollar.
If I were prime minister right now, I would be finding every policy tool available to give those sectors that benefit from an 80 cent dollar some rapid ramping-up to expand their workforces. One prime example is tourism. For some inexplicable reason, Harper appears to hate tourism. Policy after policy has hurt the sector – from eliminating the GST-HST rebate for foreign visitors (a cheap goodwill gesture), to added visa requirements, to slashing the budget for tourism ads, to undermining seasonal employment through the EI system.
Over the last few years, not one penny was spent in the U.S. market to promote Canada as a dream vacation. Where ten years ago Canada was in the top seven for world tourism destinations, we’re now 18th.
The only spectacular photographs of Canadian wilderness paid for by the Government of Canada in the U.S. were used to promote the Keystone pipeline. Just one Keystone ad in the New Yorker last year cost over $200,000. Still, tourism employs over 600,000 Canadians and contributes over $30 billion to our economy.
It was announced recently that Harper is prepared to spend over $20 million for a major ad campaign targeting Europe, the U.S. and Asia. The international PR firm FleishmanHillard has won the contract. And the ads will promote the oil sands.
When will someone stand up to say “the economist is naked?”