The Conservatives, sound finance and the facts of recent history
Associate Professor, Laurentian University
Co-Editor, Review of Keynesian Economics
With the tabling of a new federal budget on April 21, the Conservatives are trying to reinvent themselves as good economic managers, stalwart of sound finance. But after almost nine years in office, the data simply does not confirm this story. Mr. Harperâ€™s more recent optimistic faÃ§ade is a smokescreen that hides a dismal record on the economy.
Despite this fact, Conservatives have nevertheless traditionally portrayed themselves as fiscally-responsible tax cutters, job creators, and engineers of economic growth. At the same time, they have painted Liberals and New Democrats as irresponsible, free-spending parties focused on bankrupting the country. But recent history simply does not support the Conservative claim of good fiscal stewards; if anything it paints them as a fiscally-irresponsible party. In fact, on a number of economic variables, the Conservatives report card is worse: Conservatives have mismanaged both our finances and our economy.
By this, I donâ€™t only mean that they were responsible for a number of annual deficits in their nine-year reign in office. In fact, those deficits were needed and were critical in preventing the economic crisis from deteriorating into a full-fledge depression. But in terms of unemployment, or employment-creation, growth, among other variables, the Conservative record is simply abysmal compared to previous governments.
The implications of the Conservative claim are important. Indeed, with an election mere months away, the Conservatives will try to sell themselves as the better choice among political parties and the one Canadians should choose if they wish to ensure the soundness of Canadaâ€™s finances and economy. They have gone through great length in their last budget to eliminate the deficit under the guise that this was better policy and hence better for the country. Yet, there is growing evidence that this is simply not the case
So what are the facts? Are Conservatives really better economic and fiscal managers?
On job creation, the evidence is clear: unemployment remains stubbornly high today, almost five years after the end of the crisis. In fact, the rate at which jobs are being created slowed down considerably since 2011. Unemployment also remains higher than before the crisis, and in fact remains even higher than when the Conservatives came into office. In January 2006, unemployment was about 6.6%, but it stands at 6.8% now, and is on its way up. And whatever jobs are being created are bad jobs: part-time and self-employed jobs. To say there is an unemployment crisis in Canada is no exaggeration. Yet, to deal with this unemployment crisis, the Conservatives have adopted no policies to encourage job creation.
With respect to economic growth, the evidence is unfortunately no better. The economy has stalled considerably even since the crisis. We are at best hovering at rates of growth that are insufficient to do any good, especially in terms of lowering unemployment. We have settled in a situation of long-term stagnation. Therefore, taking into account their entire tenure in office, the Conservatives have failed at providing sufficient growth stimulus.
To add insult to injury, the latest budget provides zero incentives to stimulate growth. Arbitrary tax cuts, especially when focused upon higher income earners, wonâ€™t contribute to economic growth. Tax cuts are never a good way of stimulating growth, especially when compared to the stimulative government spending. In other words, you get a much bugger bang from government spending, especially when spent on infrastructure, than from tax cuts, arbitrary or not.
Greater space would enable me to consider more economic variables, but the result would be the same.
Many pundits are certainly prepared to defend the governmentâ€™s record. Yet, the onus is on them to show in what way Conservative policies have made things better for all Canadians. I have no doubt some Canadians in the upper-income strata have been made better off. But what about the rest? What about the unemployed? The poor? How about two-income families still struggling to make ends meet? Rather than help those families, the government has voluntarily chosen to introduce a policy of income splitting that has been shown to benefit higher-income families only, who donâ€™t need, but will certainly welcome, the extra savings, which will then be placed in a special â€“ and much expanded â€“ tax-free account.
The best argument I have heard so far in defense of Conservative policies is that the government is in the process of making things better after years of mismanagement. We only have to be patient. One day, we will see. Well, like John Maynard Keynes once famously said, â€˜In the long-run, we are all dead.â€™ What matters to many Canadians is the here and now, and Conservative policies have not delivered, not now, and not since 2006.
There would be a need to compare the Conservative record with that of the Liberals to see if the Harper government is better or worse.Â This would be a worthwhile study.Â Nevertheless, nine years is a sufficient amount of time to pass judgment on the Conservative record so far.
Associate Professor of Economics, Laurentian University
Founding Co-Editor, Review of Keynesian Economics