What will the next government do to fight recession?

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The Canadian economy slowed to a crawl and then stopped. Economists call six months of no growth a recession. Statistics Canada made it official last week. What the numbers do not reveal is the personal dramas, individual hardships, and pain inflicted on people: an economy in recession creates growing unemployment.

In the early days of an election campaign the bad news gives party leaders an opportunity to explain what they would do to get Canada moving again. By election day, parties can expect millions of voters to be paying attention to what governments plan to do to create jobs and secure employment.

Conservatives and Stephen Harper have a simple economic message: low taxes and small government mean more money in people's pockets, and deliver prosperity. Since nothing was supposed to go wrong, Conservatives answer questions about how did Canada get into a recession by denying the economy is doing badly. The figure for June, the latest month, looks promising, Stephen Harper told reporters. One month is never convincing evidence, but ideology drives the Harper Cons, who are not going to change course. The Conservative answer to what to do about the recession is not to elect the NDP or the Liberals, and let Stephen Harper continue to run things.

The Liberals have a plan with a monstrous flaw. Justin Trudeau has the right idea, wanting to expand the economy in a downturn with investments in public infrastructure. The serious problem is that the Liberals support public-private partnerships (P3s) as the vehicle for public investment. P3s have been subject to intensive research on their performance and suitability. Nothing good has been revealed by these studies, and horror stories of cost over-runs, poor execution and bad management abound.

With corporations sitting on about half a billion dollars in idle cash (dead money, Bank of England Governor Mark Carney called it when he was governor of the Bank of Canada), tapping into P3 guarantees from government looks attractive to CEOs.

Liberal heavy hitter Donald S. Macdonald was the inaugural chair of the Canadian Council for Public-Private Partnerships, which for 20 years has been pushing these deals, and Justin Trudeau is a big fan. The downside of P3s negates the positive idea proposed by the Liberals of using public investment to fight recession.

The NDP plans to expand child care for Canadians, and making it more widely available would help ease some recessionary pain. Using Quebec as a model, the NDP sees the program as a job- and income-creating mechanism. Public investment in child care gives women more choice over balancing family and career, and creates more economic opportunities with benefits for the wider economy.

On the big question of what to do, the NDP has made a big mistake. In building a defence against foreseeable Conservative attacks, amplified by mainstream media -- the NDP as the big spending party -- the Mulcair campaign team came up with a "balance the budget" line to protect themselves that has political economists gagging.

With the Conservatives presiding over a second recession, that should be the storyline. Instead the NDP have got themselves on the wrong page.

Calling for a balanced budget going into a recession is about as smart as what the Liberals did to protect themselves from Conservatives critics when, in clear violation of the Charter of Rights, and against the best legal advice in the country, Justin Trudeau and his party voted with the Conservatives to adopt Bill C-51 and set up a secret police. By making the same mistake on the recession that the Liberals made backing C-51, and for the same reason -- fear of criticism -- the NDP have brought the Liberals back into contention for left-of-centre support.

When money flows into the private sector of the Canadian economy from abroad it is called an international payments surplus. When government spends more in the same private sector than its takes out, it is called a deficit. But in both cases the flow of money into the domestic private sector economy is welcome.

Deficit phobia is promoted by conservatives to keep government small. In times of trouble, only ideologues think deficits are not an effective way to address economic weakness.

Though the Conservatives have done a good job concealing it, over the last two years Canada has been running international current account deficits (not surpluses) that total nearly $100 billion dollars. That outflow of money is a main reason the Canadian economy has stopped growing.

Balancing expenditure budgets when the economy is leaking money abroad only causes more distress.

Devaluation of the Canadian dollar -- the 75-cent Harper dollar -- is a consequence of the outflow of money. Devaluation is the Canadian economic policy that kicks in when all else fails. It happened because the oil price and other commodity prices fell.

With a weakening economy, government expenditures are going to grow, and revenues are going to fall. The only way to balance the budget is to cut current expenditures. Pulling money from a spluttering economy makes things worse, leads to more unemployment, and worsens public finances. And it cannot prevent a deficit. Is this really what the NDP has in mind?

In 2008, as finance critic, Tom Mulcair (along with the Liberals) implored the Conservative government to increase spending and stimulate a weakening economy during Harper's first recession. Faced with a defeat in the House of Commons and the threat of a coalition government, the Harper government complied with the Liberal/NDP proposals.

What the NDP communications team may think is smart politics makes no economic sense. In a rush to fill the space left in the centre by the far-right Conservatives and the centre-right Liberals, the NDP has created a gap between itself and its centre-left supporters.

Counting on economic illiteracy and shaky analogies with provincial finance in the CCF era in Saskatchewan, the NDP campaign has created a real, unnecessary problem for its candidates across the country. The Liberals have a (flawed) plan to deal with the recession by spending more. The NDP and the far-right Conservatives both want to balance the budget.

The number 1 economic issue is jobs and the economy. When the 50 per cent of Canadian voters currently undecided and the two-thirds determined to vote out the Conservatives start to pay attention to the campaign, the NDP plan to fight the recession will need to be more intelligent than what is being offered.

Duncan Cameron is the president of rabble.ca and writes a weekly column on politics and current affairs.

Photo: KMR Photography/flickr

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