Harper speaks the truth

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National Post, Monday, March 16, 2009

The primary role and responsibility of political leadership in times such as these is to create a climate of confidence that hastens economic recovery.

In that sense, Stephen Harper was just doing his job the other day when he went to Brampton, Ont., and delivered the upbeat message that, relative to other industrialized economies, Canada is a shelter in the economic storm, well positioned on fundamentals for a recovery.

There was nothing particularly memorable about the PM's speech, either in terms of rhetoric or analysis, other than this single observation: "If ever there was a time to put away that legendary Canadian modesty, it is now."

This will not go down in history with "we have nothing to fear but fear itself." The rest of the PM's Brampton address was entirely unremarkable. It could easily have been written over at the Finance Ministry as a set of talking points for MPs.

But opposition leaders and commentators pounced on Harper, accusing him of spreading optimism and talking up the economy. It seemed as if he was expected to spread economic gloom -- something he mistakenly did a few days before Christmas, at the height of the retail shopping season, when he mused about the possibility of a Depression.

"He's on a Conservtive planet in outer space," said Liberal Leader Michael Ignatieff, adding, "Canadians want their Prime Minister to tell them the truth, and I think he's being economical with the truth." In other words, he's lying.

Just what did Harper say to cause such a flap?

This: "The American economy has been hit twice as hard as Canada. The same is true for Europe. The Japanese have been hit four times as hard."

Well, it's a fact. In the fourth quarter of last year the Canadian economy shrank by 3.4%, while the U. S. economy contracted by 6.2%, European output fell by 5.9% and Japan's fell by 12.7%. Relative to all other G7 countries, Canada has been spared the worst of what Harper and Finance

Minister Jim Flaherty have called "a synchronized global recession."

What else?

"We will not turn the corner on this global recession until the American financial sector is fixed." This sounds like a perfectly sensible dose of realism. So far, the Obama administration has proposed US$1-trillion to nationalize Wall Street on top of the US$700-billion thrown at the problem by the Bush administration. That's US$1.7-trillion and counting.

It is worth noting that the Flaherty budget contains $200-billion in stand-by credit provisions for Canadian banks, which have not accessed a nickel of it. All of the Big Six have reported strong first fiscal quarters and the banks led this week's bear market rally on the TSX.

Nor did Harper neglect to point out that Canada's banking system is ranked the soundest in the world, with the Swiss ranked 14th and the Americans ranked 41st. And this was last October, just as the bubble was bursting. Would we rather be Iceland, where a banking collapse has left the country with a worthless currency and a debt to GDP ratio of 850%?

The stimulus plan in the budget, said Harper, "will help us to sustain economic activity ... but it cannot fix the problem of the global financial system."

The $40-billion stimulus package over the next two years is the main reason Ottawa will incur a $64-billion deficit over the period, but next year's deficit of $34-billion will only amount to 2% of GDP. This is in line with Canada's commitment to 2% of GDP in stimulus at last November's Washington summit.

By comparison, the U. S. deficit this year is looking like $1.75-trillion, more than the entire output of Canada. It is more than 12% of U. S. GDP. Truly breathtaking.

Canada's deficit is both necessary and sustainable, except to the true believers on the right. They don't understand the difference between a movement conservative and the Conservative movement.

It is precisely the difference between Barry Goldwater and Ronald Reagan. It is equally the difference between Stephen Harper, head of the National Citizens' Coalition, and Stephen Harper, Prime Minister.

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