The worsening economy has put the fibres of Stephen Harper’s blue sweater to the test.
With job losses swelling to 212,000 in the first two months of this year, the recession has begun to cut deep in Canada. Unemployment has spread beyond the most vulnerable industries.
Rising unemployment levels have been accompanied by a spike in EI claims and personal bankruptcies.
Harper must have sympathy for the Canadians he promised to stand up for. His sweater implied that he could relate to your family, and mine.
The stimulus spending announced in the most recent federal budget is expected to protect or create 190,000 jobs over the next two years. But not a penny could be spent until April 1.
The bottom line is Canada’s stimulus package may not be enough.
Additional spending would be tough for the Conservatives to stomach but the middle-income families they claim to represent that have felt the brunt of the recession.
Harper has to a tough choice to make – he can either defend his conservative stripes or he can appeal to public opinion.
The stakes are high because he probably only has one more shot at clinching a majority for the Conservatives.
Harper’s time spent heading the National Citizens Coalition in the late 1990s is perhaps most telling of his belief that big government is dysfunctional.
Ultimately, he has sought to significantly limit the role of government in Canadian society, which translates into lower spending and taxes.
During the last election, the Liberal party painted Harper's conservative views as inconsistent with Canadian values.
But when Harper won a weak minority in the 2006 election, he played to the centre. He needed to discredit the critics who had cautioned that he would take Canada too far to the right.
In order to be competitive with the Liberal party, the Conservatives opted not to make any cuts to spending. But instead of pouring money into national programs, such as public daycare, they issued cheques to Canadians for their child-care and other expenses.
Harper’s team also committed to broad-based tax relief, cutting the GST by two points. The Liberals campaigned on cutting income taxes to accomplish this.
The Conservative party’s policies seemed to signal that the party wasn’t wedded to its ideological stance. If electoral success meant toeing the centre formerly occupied by the Liberals, Harper was game.
Or so it seemed.
Politically, he couldn’t afford to cut social spending in any big way, at least not visibly. But by giving Canadians choice over how to spend their tax dollars, he indirectly limited the role of government.
The GST cut was a politically savvy move. Virtually every Canadian was touched by the tax relief, making it hugely
popular.
But it was also a peculiar move. Most economists agree that cutting income taxes is more efficient than cutting sales taxes – and Harper has a background in economics.
By reducing the GST, the Conservatives instantly slashed $13 billion in annual revenue from the government’s pocketbook.
In effect, the government had fewer resources available to fund social programs because until recently, a balanced budget has been the expectation.
Unfortunately for Harper, however, it was impossible to reconcile massive stimulus spending with his ideological stance.
He doesn’t believe in heavy-handed government intervention, he believes in a fairly pure market.
Harper stalled. He didn’t address the worsening economic environment until he was forced to at the tail end of the election last October.
He told Canadians that our strong fiscal position would spell a shorter and milder recession. A sound banking system and years of balanced budgets would buffer Canada from the most adverse effects of the global economic crisis.
The Conservative government continued to be optimistic even though most economists were predicting tough economic times ahead.
If Harper suggested that the economy was in trouble, Canadians would expect his government to respond.
The Conservatives were able to coast on their rosy outlook until they issued their fall economic statement.
All three opposition parties felt that stimulus funding was necessary.
A coalition of the opposition parties might have defeated the government if the Governor General hadn’t granted Harper’s request to prorogue Parliament.
Incorporating stimulus spending into the January budget was critical to the Conservative government’s mere survival. Harper did the bare minimum required to earn the Liberal Party’s support.
The IMF and OECD, two highly respected international organizations, urged countries to spend at least two per cent of their GDP on stimulus. The Conservative government’s budget hit closer to the one per cent mark.
Harper now finds himself in a tight spot. His traditional supporters feel as though he’s done too much, whereas most others feel as though he hasn’t done enough.
If Harper appeals to his conservative base, he would risk alienating the rest of Canada.
If he listens to Canadians as a whole, he risks being ousted by his own caucus.
His traditional supporters feel especially betrayed by the stimulus package, which from their perspective, contradicts everything the Conservatives profess to stand for.
Harper’s track record suggests that he would find it hard to let go of his conservative ties. Even though he appears to be a pragmatic leader, he has found subtle ways to bend policy to his beliefs.
He may be sporting a soft blue sweater but underneath he’s still wearing a crisp buttoned-up shirt.