Michael Ignatieff should be careful about the questions he asks
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by L. IAN MacDONALD
The Gazette, Monday, January 17, 2011
Coming up on the fifth anniversary of the Harper government's election, Michael Ignatieff launched his January swing by trying to frame a new ballot question: "Are you better off than you were five years ago?"
This question was famously asked by Ronald Reagan in the 1980 U.S. presidential campaign, when his opponent was Jimmy Carter. Inflation was at 13.5 per cent, the main reason interest rates were off the charts. A home mortgage in the U.S. was then 13.9 per cent. Unemployment was on the rise, from 5.8 per cent in 1979 to 7.2 per cent in 1980. And in the presidential campaign cycle of 1979-80, the U.S. economy was in a recession, with negative growth of 0.2 per cent. To make matters worse, there was the spectacle of America held hostage at its embassy in Tehran.
So when Reagan asked Americans, "Are you better off than you were four years ago?" the answer was a resounding no. He was also a superlative communicator. "A recession," he said, "is when your neighbour loses his job. A depression is when you lose yours. A recovery is when Jimmy Carter loses his."
Ignatieff is no Ronald Reagan, but leaving that aside, his question needs context.
For example, the Wall Street Journal recently ran a comparative chart on its front page on the Canadian and U.S. housing sectors. Between 2005 and 2010, the price of housing in six major Canadian cities increased by 44 per cent. Over the same period, the home index in the U.S. fell by 18 per cent, and is projected by the New York Times to fall a further five per cent this year. Six million American families have lost their homes. Noted the Journal: "One difference: Canada never embraced sub-prime mortgages."
Canada has done much better than the U.S. in two other key measurements -fiscal frameworks and the health of our financial-services industry, rated the best in the world by the World Economic Forum for the last three years. While Wall St. needed a $700-billion bailout from Washington to get through the 2008-09 financial crisis, Canadian banks never drew down a nickel of $150 billion of standby credit in the 2009 budget. And while U.S. banks have shrunk in both market capitalization and asset value, four of the Big Five Canadian banks now rank in the Top 10 in North America.
The fiscal framework is another story. Harper came to office in a time of plenty, of the fiscal dividend inherited from sound Liberal stewardship of the economy. So solid were the country's books that the Conservatives were able to pay down the federal debt, reduce taxes, increase spending by twice the growth rate of the economy, and run three consecutive surpluses.
And then came the Great Recession of 2008-09, the direct consequence of the financial crisis. How we've come through it is a Canadian success story, especially when compared with the U.S. and our other G7 partners. The current deficit for the year ending March 31 is $44 billion (not $56 billion as Ignatieff puts it; that was last year's number). That's three per cent of GDP, on its way to balance by 2015, while our federal debt is only 31 per cent of GDP, lowest in the G7. By contrast, the U.S. deficit of $1.4 trillion is 10 per cent of GDP and the U.S. federal debt will exceed 100 per cent of GDP by next year.
When Stephen Harper came into government five years ago, inflation stood at 2.2 per cent, compared with 1.7 per cent today. Unemployment was 6.6 per cent in January 2006 and is 7.6 per cent today. Home mortgage rates were about six per cent then and are 5.6 per cent now. The economy was growing at 3.9 per cent then, and grew at three per cent in 2010. The employment rate in Canada was 62.7 per cent then and was 61.7 per cent in 2010. Interestingly, the U. S employment rate was also 62.7 per cent in 2005, but fell to 58.5 per cent in 2010. (These figures are provided by economist Jeremy Leonard of the Institute for Research on Public Policy.)
Ask a question and you get an answer, though not necessarily the one you want.