While only half-way through these elections, they are in a real sense all but over.  Or rather, we know at least one outcome: Stephen Harper’s Conservatives have lost these elections, and they have run out of time to turn things around (at this point, there is not much to turn around). The only remaining mystery for Canadians is to determine who between Thomas Mulcair’s NDP or Justin Trudeau’s Liberals should form the next government.

First, a few words on the Conservatives. Well, it has been an awful campaign and mismanaged from the beginning.  I won’t comment on the Duffy trial, or the admission by Harper-appointed senator, Patrick Brazeau of cocaine possession and assault, or on the trial of former Harper advisor Bruce Carson for influence peddling, or to Harper’s unspeakable reaction to little Alan Kurdi’s body washed up on the beach. Instead, I will only focus my comments on the economy. 

The single biggest mystery of this campaign for me has been to try to understand why Harper would want to campaign on the economy. After all, it’s a real mess, and has been for his entire time in office. Granted there was a crisis of historical proportions in 2007, but in the post-crisis or recovery period, Canada has performed the worst among G7 countries, and that all comes down to the type of economic policies championed by Mr. Harper.

Apart from opening the purse strings during the crisis (as a result of international consensus rather than by his own doing), Harper has pursued a single objective: eliminating the fiscal deficit. The irony of course is that he inherited a surplus from the previous government, which he then proceeded to squander. But his policy at the beginning of the crisis was the right one: he pursued some expansionary fiscal policy at a time when the economy needed it most. But it is his policies post-crisis that are worrisome. Since then, he has pursued a single goal with crazy obsession: eliminating the deficit and posting a balanced budget. But this is just bad economics.

This policy, more than the oil crisis or the problems in Europe or indeed in China, is responsible for the economy’s extremely poor performance today as well as for the recession in the first half of the year. There is no doubt, this is a Harper recession.

A very basic law in economics is that austerity policies depress the economy, and when the economy is in recession, we need to spend more, not less. Pursuing some austere policies when the economy is down is simply the wrong policy and only prolongs the decline.

And now, Harper’s obsession with balanced budgets has come back to haunt him. At first, Harper was proud of his “achievement,” but now it is been revealed that the just announced $1.9 billion surplus in the last fiscal year was really the result of Harper imposing a draconian freeze on spending and indeed forcing government departments not to spend (an astonishing $8.7 billion), rather than the result of an economy on the rebound. Had the government spent its entire budget, we may still be far from a balanced budget, but we may quite possibly have avoided the recession.

Of course, many of us suspected something like that.  As I have said many times before, it simply did not add up.

And that’s the problem with the Conservatives’ insistence of making the economy their own: it simply does not add up. If I were them, it is the one issue I would try to avoid at all costs because no matter where you look, it’s a mess, and a mess of their own doing.

On to the NDP, Mulcair’s embrace of balanced budgets is not only bad economics, but a betrayal of core NDP principles. Mulcair has wrapped himself in the austerity flag for the sake of outflanking Harper on the right and attracting support from soft-Conservatives. He has accepted all the neoconservative rhetoric as well, like deficits being a burden on our children. But there is no reason why this is the case. Deficit spending on infrastructure is an investment is real capital that enhances the welfare of our children.  Unsurprisingly, at the time of writing this, Mulcair has not addressed Harper’s unspent billions. 

Many or most of my NDP friends are furious, but few want to speak out for fear of creating the illusion of dissent. They are committed to the party, as unrecognizable as it may be today. But the rumblings are starting to bubble up to the surface, led recently by Naomi Klein. 

This leaves the Liberals whose leader has been surprising many Canadians. In a way, this is the direct result of the Conservatives’ attack on Trudeau. After telling Canadians that he was “simply not ready,” expectations were set low. When people meet him, however, they end up being pleasantly surprised. But more importantly, his commitment to invest in infrastructure has struck a chord with voters. If Trudeau is able to sell his message, he is the only one fighting for the right economics, and that may carry him to 24 Sussex.

There may be hope that the word deficit is not be a dirty word after all.

Louis-Philippe Rochon

Louis-Philippe Rochon

Louis-Philippe Rochon is an associate professor of economics at Laurentian University, and founding co-editor of the Review of Keynesian Economics. An unrepentant liberal Keynesian, he is an advocate...