The hits just keep on comin' : Canadian carmakers to lose $1.7 B this year

This just in:

Canada’s auto manufacturing sector is expected lose money for the third consecutive year in 2008, with losses ballooning to $1.7 billion this year, according to the Conference Board’s Canadian Industrial Outlook: Canada’s Motor Vehicle Manufacturing Industry.

“Canadian auto manufacturers remain caught in a maelstrom of cyclical and structural industry changes, a trend that is unlikely to improve until at least 2010,” said Sabrina Browarski, Economist.

A "pragmatic" prime minister modifies a bedrock political principle

APEC Family photo

[Versions of this story appeared in today's Vancouver Sun , Victoria Times-Colonist, the Saskatoon Star-Phoenix, Edmonton Journal, the Nanaimo Daily News, and online at National Post]]

LIMA, Peru – On February 24, 1998, Paul Martin, then the country's finance minister, rose triumphantly in the House of Commons to deliver the budget speech.

“What I am about to say is something no Canadian government has been able to say for almost 50 years,” he said. “We will balance the budget next year. We will balance the budget the year after that. And, Mr. Speaker, we will balance the budget this year.”

When Jean Chretien's government delivered its first budget in 1994, the deficit had swelled to $45-billion. And it would not be until Chretien's second mandate, in Martin's 1998-1999 budget, that the deficit would be eliminated.

“Never again will we allow the spectre of overspending to haunt this land,” Martin said in that speech. “Canadians have paid to see the movie ‘The Deficit'. They don't want to pay to see the sequel.”

Now, just over a decade later, Prime Minister Stephen Harper is bracing Canadians to watch that sequel.

It's a remarkable turn for Harper who has fought against deficits and in favour of balanced budgets his entire political life. Indeed, he and other former Progressive Conservatives left the the party of Brian Mulroney in the early 1990s partly because of their disgust in his inability to rein in government spending and tackle the deficit.

“The government of Canada today is in surplus,” Harper said Sunday, at the conclusion of the summit. “The goverment of Canada today is not planning a deficit. But if the government of Canada decides … that we do have to engage in fiscal stimulus, that government spending is essential not just to shore up economic activity but investment markets, that would be the occasion we would go into what would be called a cyclical or a short-term deficit.

“But we would only do that if we can assure ourselves that we can do that while preserving a structural surplus, that any return to a normal level of economic growth will immediately take us out of deficit. And that's the only condition under which we would consider that set of actions.”

Still, explaining the fine points of structural deficits and structural surpluses to an electorate presents a considerable political challenge. Just six weeks ago, during the recent election campaign, Harper was promising he would never go into deficit.

“In terms of the education job, I think we've done a good job at educating the public to the view that deficits are generally bad,” Harper said Sunday. “We now may be in a period where we have to educate the public to a somewhat less simplistic view. There are occasions where deficits are not only not necessarily bad, they are essential.”

Throughout his political career — as Preston Manning's chief policy advisor, to the political battles he fought to unite the right and win the leadership of the new Conservative Party of Canada, and finally in three federal elections he has fought as his party's leader — maintaining a balanced budget has been a core, bedrock commitment. It has never come with an asterisk beside it, denoting that there would be some conditions under which the Stephen Harper of five or 10 years ago — or even six weeks ago — would countenance a deficit.

“I began my political career, about 20 years ago now, in a fledgling new political party, in part to campaign for the necessity of fixing that structural deficit,” Harper acknowledged in a speech here Saturday.

But Harper is now the steward of a Canadian economy facing a crisis potentially as dangerous as Progressive Conservative prime minister R.B. Bennett did when he won office on July 28, 1930, just at the beginning of the long, painful decade of the Great Depression.

“We are talking here about the development of economic conditions around the world that we have not seen in over 70 years. We have not seen this kind of quick slowing of economic growth with widespread deflationary pressures … any time in the post-war period,” Harper said Sunday. “We have to be pragmatic and not ideological when we find ourselves in situations that are unusual.”

Bennett, who coincidentally represented a Calgary riding just as Harper does, at first raised tariffs on imports in order to protect Canadian jobs and then would later raise taxes to protect the Canadian treasury.

Harper said those sorts of measures were precisely the wrong initiatives, deepening and lengthening the depression.

APEC, on the weekend, agreed not to bring in any new trade barriers for at least 12 months, a key goal for Harper when he left Ottawa Friday.

The Depression was well underway before Bennett realized he, too, would have to engage in massive public spending. Harper will begin a spending program sooner, so long as he is convinced he will not run what he and other economists call structural deficits.

“In colloquial terms, it means you would not run long-term or repeated deficits,” Harper said Sunday. “What it means technically is that you wouldn't experience a deficit at a normal level of economic growth.”

In Harper's view, the deficits of the Trudeau and Mulroney years should have been avoided because, by and large, those were years of normal and occasionally rapid economic growth.

“It's my view as an economist, that you should run a structural surplus at a normal level of economic growth,” Harper said.

Harper, who has a post-graduate degree in economics and planned to be a professor in the field before entering politics, said that it was even more vital for governments to ramp up spending in times of deflationary pressure. Canada and most developed economies continue to see low to moderate levels of inflation but there is a danger that rapidly declining commodity prices and rapidly rising unemployment could bring about negative inflation or deflation. Most economists believe deflation to be one of the most dangerous threats to any economy.

“And we have to clear about the current situation,” Harper said. “We're not sure we're quite there.”

No deficits ever now "a simplistic view", PM says

From today's Vancouver SunHarper wrestles with deficit optics”:

Just six weeks ago, during the election, Harper was promising he would never go into deficit.

“In terms of the education job, I think we've done a good job at educating the public to the view that deficits are generally bad,” Harper said Sunday. “We now may be in a period where we have to educate the public to a somewhat less simplistic view. There are occasions where deficits are not only not necessarily bad, they are essential.”

[Read the rest of the story]

Deficits and the historical record

Here are some excerpts from then finance minister Paul Martin's budget speech on Feb. 24, 1998:

Paul Martin - 1998

What I am about to say is something no Canadian government has been able to say for almost 50 years.

We will balance the budget next year.

We will balance the budget the year after that.

And, Mr. Speaker, we will balance the budget this year.

Mr. Speaker, it is clear that a new era lies ahead. And because of that, we owe it to Canadians to repeat what our principles will be as we go forward.

First, we will stay the course that brought us here. We will be frugal. The battle to root out waste and inefficiency can never end.

Never again will we allow the spectre of overspending to haunt this land.

Never again will we let old habits return — of defining bigger government as better government, of believing that every problem requires another program.

And never again will we see Canadians undergo round after round of painful cuts in order to dig us out of yet another hole.

Canadians have paid to see the movie ‘The Deficit'. They don't want to pay to see the sequel.

Today, in Lima, Peru, Prime Minister Stephen Harper told the world that the sequel is comin' to town next spring:

Stephen Harper - Lima … We did agree at the G20 last week that additional fiscal stimuls should be used to sustain global demand if monetary policy continues to prove to be inadequate.

These are, of course, the classic circumstances under which budgetary deficts are essential.

I say this with some reluctance, in fact, some great reluctance.

We in Canada have had bad experience with deficits.

Federally, 27 straight deficits threatened the very stability of our economy. We worked long and hard to get out of it and to educate the public as to why it was bad.

In my own case, I began my political career, about 20 years ago now, in a fledgling new political party, in part to campaign for the necessity of fixing that structural deficit.

So whatever short-term fiscal stimulus or deficit spending our government pursues, we will ensure that Canada does not return to long-term, structural budgetary deficits.

There are, many experts will tell you, good reasons for the government to return to deficits. One of those experts is Harper himself, who holds a masters degree in economics and, as he said in his speech today, was pursuing a career as a university economist studying economic history and macroeconomic theory when the pursuit of that career was interrupted by his current one:

The world is entering an economic period unlike, and potentially as dangerous as, anything we have faced since 1929. … Let us remember what led to the Great Depression.

It was not caused by a stock market crash. That was only the beginning. Policymakers pursued four sets of actions that defined that terrible decade.

They allowed a rapid contraction of the banking system.

They allowed widespread deflation as a consequence.

They undertook to balance the books at all costs — raising taxes and contracting government economic activity at the one time when fiscal stimulus was absolutely essential.

And, finally, they erected protectionist barriers in a short-sighted attempt to preserve jobs.

These are mistakes the government of Canada will not make.

Harper promises "unprecedented fiscal actions" to calm "state of fear"

Filing tonight from The Prince Hotel in Lima Peru:

Prime Minister Stephen Harper, speaking here on the eve of the APEC leaders' summit, said markets “remain in a state of fear” and vowed to take “unprecedented fiscal actions if they are necessary” to stimulate economic growth and ease tightened credit conditions.

Harper was to have a one-on-one meeting with U.S. President George Bush on Saturday morning before giving a speech to CEOs and leaders from the 20 countries that make up the Asia Pacific Economic Cooperation (APEC) forum. He will also have a private meeting with the president of South Korea on Saturday.

Both South Korea and Canada have been trying for nearly a decade to forge a new trade agreement.

Following the G20 leaders summit last weekend in Washington, stock markets in Canada and around the world suffered one of their worst weeks ever.

“The markets remain in a state of fear,” Harper said at a news conference here after he and Colombian President Alvaro Uribe signed a free trade deal between the two countries. “Those fears aren't always rational, but they're very real.”

[Read the rest]

On- or off-the-record with the PMO

Maclean's blogger Aaron Wherry finds the practice, established by PMO communication director Kory Teneycke when he assumed that job in July, of holding periodic off-the-record with senior PMO officials to be odd:

For some months now, the Prime Minister’s Office has been conducting periodic briefings for reporters—usually bureau chiefs, but generally one representative from each of the major media outlets. … The topics discussed typically range from the Prime Minister’s itinerary to upcoming government action to the PMO’s spin on whatever happens to be making news at the moment.

There is only one rule at these briefings: the government official conducting the briefing must not be identified by name.

Everyone in the room agrees to this. And, in the myriad reports that follow, any information gleaned subsequently cited to a “senior government source” or some such.

This is now widely accepted practice. But, er, why?…[Read the rest of his post]

If you read the comments section after Aaron's post you will see yours truly chiming in on this issue to note that it is Canwest's policy to get an official on-the-record after these briefings — and in my experience that's never been a problem — and then after my comment Teneycke himself has a thoughtful note on this practice. I reproduce it for you here:

The use of extensive use of unnamed sources is not the most flattering feature of journalism in Canada. However, this is not new or unique to this government, and has very little, if anything at all, to do with briefings held by our office.

Macleans – or any other Canadian media outlet for that matter – would be virtually empty, if they were to remove stories quoting an unnamed source, or written on the basis of information provided on background.

Comparisons to the US approach are out of context. Our executive branch is held accountable by an elected opposition in Question Period, not by the media in a daily briefing. The media have an important role in our system, but it is not the same as in the US.

The purpose of keeping briefings off-the-record is to allow for a more informal exchange of information with the gallery. Often this information is technical and relates to scheduling of events. This is done to assist media in planning where they will need to send satellite trucks, how many reporters should be on-call over a weekend, etc.

As David correctly points out, the opportunity to ask “on-the-record” questions does exist after briefings have concluded. In many cases, however, it is more appropriate for journalists to contact the Minister responsible for “on-the-record” comment. Having PMO answer all questions may be easier for the gallery, but it is not really consistent with our system of government.

As for Macleans participation in future briefings… I have been assured by a “senior Macleans official” that they will continue to attend.

Kory Teneycke
Director of Communication
Office of the Prime Minister

Hey, it's a race again!

A month after the Liberal Party of Canada recorded their lowest popular vote percentage since George Brown lost to Sir John A. Macdonald in 1867, Liberal support is now within the margin of error of Conservative support, says pollster Nik Nanos.

Here's Nik's latest numbers (change since Oct 14 election):

  1. Conservatives: 32% (-6)
  2. Liberals: 30% (+4)
  3. NDP : 20% (+2)
  4. Greens: 10% (+3)
  5. BQ: 9% (-1)

Deficits: For the record

“…The government also said it would not commit to balancing the budget next year, saying that trying to do that at any cost would hurt Canadians more than it might help them. A month ago on the campaign trail, though, Prime Minister Stephen Harper was unequivocal in saying his government would never go into deficit.

“There's nothing on the horizon – notwithstanding the storm clouds, and they are significant – that indicates to me that we should immediately go into deficit,” Harper said on Oct. 6.

But Jean, reading the throne speech with Harper at her side, said, “In a historic global downturn, it would be misguided to commit to a balanced budget in the short term at any cost.”

McCallum seized on that, accusing Harper of lying on the campaign trail and rejecting the government's excuse that a Canadian deficit will have been caused by events outside Canada.

“We are seeing that Mr. Harper was misleading the Canadian people during the election,” McCallum said. “If this is to be a deficit, and it now looks like it will be, it will be a made-in-Canada Conservative deficit. The overspending and the erosion of the tax base and the cutting of the contingency reserve – all of that preceded this economic crisis.”

[Read the whole story]

Inuit women make their mark

CBC News North takes note of the achievements of Nunavut's new premier and Canada's new health minister:

With Eva Aariak set to be sworn in as Nunavut's second premier Wednesday, some in the territory are applauding a year that has seen two Inuit women assume prominent leadership roles at the territorial and federal level.

[Read the rest]

Interprovincial trade barriers: Who's got details?

Here's Charles J. MacMillan (PDF), writing in the latest issue of Policy Options:

Internal political pressure on governments could push premiers and politicians toward more barriers, especially in areas like public procurement, industry subsidies and professional qualifications. (Ontario has more than 20 separate agreements on qualifications for health professionals, reducing the value of credentials received from other provinces.) Most national politicians have little idea how the federal government, using existing clauses in the Constitution on trade and economic matters, could take the provinces to court as a way of removing these nefarious policies, most of which are largely unknown by the public and poorly understood by industry groups. Studies of Canadian productivity and of the lower performance by industries as compared with those in neighbouring American states illustrate that on trade, economies of scale and learning from foreign customers do count. Atlantic Canada illustrates this national challenge, with 11 separate dairy operations across four provinces and a population of only two million, but what shows in small provinces is also the case in big provinces; the only difference is that it isn’t so obvious.

Here's Gov. Gen Michaëlle Jean, reading today's Speech from the Throne:

Better positioning Canada to compete for investment and market opportunities will require action at home. A fragmented regulatory environment for internal trade and commerce has for too long restricted the flow of labour and investment across the country. Our Government will work with the provinces to remove barriers to internal trade, investment and labour mobility by 2010.

Anyone know of an inventory or detailed description of these barriers? I know of a few but if anyone has more details about, for example, dentists licensed by Ontario who can't set up shop in Lethbridge, I'd like to pursue this further.