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Hill Dispatches: Harper talks pension cuts; economists see sluggish Canadian economy

Stephen Harper took aim at some of his "complacent" colleagues meeting at Davos for taking their prosperity as a given and focusing too much on "entitlements and services" that they cannot afford.

But he also fired a few shots across the bow at complacent Canadians who might have thought he meant it when he said cuts to programs such as pensions were not on his agenda.

"We have already taken steps to limit the growth of our health-care spending," Harper told the blue ribbon crowd gathered at Davos. "We must do the same for our retirement income system."

Since the Canada Pension Plan is, apparently, "fully funded," Harper promised to go after the "rest" of the pension system, which means, in effect, old age security (OAS) and the guaranteed income supplement (GIS).

In other words, the Conservatives will be targeting the poorest and most defenceless senior citizens.

"Easy choices now mean fewer choices later"

It is all about tough choices, you see.

"Western nations," the Prime Minister intoned, "Face a choice of whether to create the conditions for growth and prosperity, or to risk long-term economic decline... And, as we all know, both from the global crises of the past few years and from past experience in our own countries, easy choices now mean fewer choices later."

So the focus of his government, Harper told the folks at Davos, will be on increasing energy exports, bringing immigration in line with labour market needs, doing some unspecified things about productivity, science, technology and innovation, and pursuing a balanced budget.

And just to underscore the point, while the Prime Minister was wagging his finger at his elite Davos audience, his Treasury Board President, Tony Clement, was ominously promising that the public service cuts coming soon would be of a magnitude of $4 billion to $8 billion -- much broader and deeper than previously indicated.

Crime and gun bills were just prologue to the tough, hard Harper

It seems like the "Mr. Nice Guy" of the 2009-2010 economic-action-plan stimulus program is now forever gone.

Dr. Jekyll is dead!

Welcome Mr. Hyde!

The new, tougher Harper government personality announced its arrival this past fall with the gun and omnibus crime legislation, and the attempt to do away with the Wheat Board.

But that was just the prologue. Now we're getting into the main part of the drama.

As the Prime Minister put it in Davos: "In the months to come, our Government will undertake major transformations to position Canada for growth over the next generation."

Just watch him!

A very different view of Canada's economic prospects

While all this was happening, the Canadian Centre for Policy Alternatives had brought together a group of economists on Parliament Hill who, in general, presented a very different view.

They did not all agree with each other, and more than one had some good things to say about the economic policies of the current government, especially the stimulus program, which got generally high marks all around.

Patti Croft , who comes from the corporate world, and generally approves of the thrust of the government's fiscal policy, was nonetheless much less bullish than the Prime Minister about Canada's economic prospects for the near and medium-term future.

"I think for the first time in years we're going to see U.S. growth outstrip Canadian," she said, and added that she is very worried about the high level of consumer debt in Canada and the housing price bubble in major cities such as Toronto.

Jim Stanford of the Canadian Automobile Workers (CAW) and Mario Seccareccia of the University of Ottawa agreed that the so-called fiscal deficit is not the real economic challenge facing Canada.

That challenge is, rather, the "under-utilization of human potential"; the "output gap" between the actual GDP and potential GDP if the workforce were fully engaged.

Stanford characterized the recovery in Canada as "mediocre" and said that despite the Prime Minister's braggadocio, a number of countries such as Germany, South Korea and Australia have outperformed Canada on job creation.

Fiscal stimulus is over; nothing to replace it

There was a significant degree of consensus on one fact. Most agreed that despite Canada's relatively sound banking system (thanks to tight government regulation) and the beneficial effects of the 2009-2010 stimulus program, the country faces rough currents in the months and even years ahead.

As one economist put it, monetary response did not "take over" when fiscal stimulus ended, and the private sector is not doing what it should -- investing to create jobs.

Plus, one of the weakest links in the Canadian economy is consumer demand, and that demand will likely grow weaker when government cutbacks bring on thousands of job losses and pensioners find their income slashed.

The optimistic view is that exports, especially of energy and other commodities, will rescue the Canadian economy, even if there are some harsh adjustments for many.

The other view is that an austerity program at this time will be just the medicine a sluggish Canadian economy does not need, and will result in a significant economic slowdown that will hurt the weakest and vulnerable the most -- as such occurrences almost always do.

Harper of course can take something resembling a long-term perspective. The next election is something like four years away. There is lots of time to "undertake major transformations" until then -- and damn the torpedoes!

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