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It’s officially five months now – five consecutive months (January through May) during which the Canadian economy got smaller and smaller. The figures for May were published this morning by Statistics Canada.
They showed our Gross Domestic Product (GDP) shrank by 0.2% overall, due to declining economic activity in a broad sweep of sectors – led by manufacturing, oil and gas extraction, mining, utilities, wholesale trade, education, health and public administration, finance and insurance, professional services, transportation and warehousing.
One more dismal month like that and Canada will once again have passed the economists’ threshold for declaring another recession – i.e., two straight calendar quarters (6 months) of “negative growth”.
The on-going downturn in energy-related industries was expected with oil prices only about half of what they were a year ago, but the larger shrinkage in manufacturing signals a deeper malaise. While oil and gas extraction declined by 1% in May, manufacturing dropped by 1.7%.
For months, the Harper government and its promoters have been promising that energy sector troubles would be offset by growth in manufacturing and exports. Lower fuel costs, a slumping dollar and growing demand in the United States were going to be the salvation – or so the Conservatives said. But apparently not.
At the same time, the Canadian Federation of Independent Business reported this morning that the mood among small business operators across the country is more pessimistic now than at any time since the last recession in 2008-09. The CFIB said, “Canada’s economy still appears adrift.”
Trying to make a silk purse out of a sow’s ear, Stephen Harper gave a series of interviews this week suggesting his economic woes are only “transitory” because the oil and gas sector will soon recover. But the oil price is running below the assumptions he made in his April budget and it shows signs of going lower before any real recovery.
He also said record high levels of consumer debt are a sign of confidence, just as independent surveys were released showing economic sentiment among Canadians is at a two-year low.
These vacuous comments from Mr. Harper are reminiscent of his deceitful remarks in the fall of 2008 when he denied Canada would fall into recession and projected five more surplus budgets. It was all as phoney as a three-dollar bill – to hide the truth on the eve of an election. And again now.
While Mr. Harper spins his nonsense and does nothing to contribute to better economic growth, the Bank of Canada says the economy is “atrocious” and is using the only tool at its disposal to try to trigger some better activity – it has twice this year slashed interest rates.
But such monetary policy is a blunt instrument. With rates already as low as they are, there is not much room to move. As well, the commercial banks hoard some of the benefit, not passing it all along to consumers. And to the extent consumers are lured by lower rates to borrow more, their personal debt ratios get worse.
In the face of all this difficulty, Mr. Harper retreats to his boast about balancing the federal budget in 2015. But even that has evaporated.
Beyond his excessively rosy assumptions about growth, Mr. Harper raised payroll taxes, cut services, sold-off assets at firesale prices, burned through two-thirds of the contingency reserve, clawed back benefits from Veterans, slashed the Mounties, national security and public safety, punched a big hole in community infrastructure, and undermined future support for healthcare and old age pensions …
And still Mr. Harper failed to balance his books – for the 8th consecutive time!
With a rash of bad news about the Canadian economy falling into a second recession and Stephen Harper’s deficit not in fact being eliminated, and with Senator Mike Duffy’s criminal trial on 31 charges of fraud, bribery and breach of trust resuming in a couple of weeks – it was entirely predictable that Mr. Harper would try some stunt to divert attention.
So last Friday, he trotted out the notion that he has placed a moratorium on any new appointments to the Senate. Vacancies will continue to accumulate. The Senate will eventually become dysfunctional. And somehow, he says, that will force the Premiers to come up with some plan to either fix it or abolish it.
The goofiness of this idea prompted a quick chorus of critical commentaries.
Many experts noted that Mr. Harper’s “plan” was unprincipled and likely unconstitutional, just like all of his previous schemes to deal with the Senate. Some reminded us that Mr. Harper already made that solemn promise not to appoint Senators, only to violate that pledge and appoint 59 of them (the largest number in history, including the biggest ethical culprits).
And far from putting pressure on the Premiers, Mr. Harper’s abandonment of his duty to deal with vacancies would first and primarily affect the federal government, because no federal legislation whatsoever can be enacted without passage through the Senate.
That’s where this pointless diversion should end. Stephen Harper would like nothing better than to see Canadians race down some silly rabbit-hole of all-absorbing constitutional debates about the Senate.
So preoccupied, we might not focus as much on the looming court testimony of Mr. Harper’s former Chief-of-Staff – about his secret $90,000 payment to Senator Duffy, the meddling of the Prime Minister’s Office in a forensic audit, and the plans to cover it up.
Far from being distracted, we should find out why Mr. Harper famously described Mike Duffy as the best Senate appointment he ever made. What criteria informed that judgment? And how could this serious scandal consume the full attention of a vast number of people in Mr. Harper’s office and inner-circle for months on end, right under his nose, and he didn’t notice or bother to inquire?
And most importantly, the economy needs Canadians’ undiluted attention.
The country has just suffered through a second recession on Mr. Harper’s watch. The economy is severely under-performing. The growth rate is the worst in 80 years.
Business investment is down. This government has recorded more than 50 months of chronic trade deficits, including every month so far this year and the biggest shortfalls in history.
Employment is weak. Job quality is low. Incomes are stagnant. Household debt is near record highs. The future for young Canadians is more clouded than ever.
Mr. Harper proclaimed a surplus federal budget in 2015, but that’s turning into fiction. To concoct his so-called surplus, he assumed an annual economic growth rate of 2%, but the Bank of Canada says we’ll be lucky to reach half that. And the Parliamentary Budget Officer says that with growth cut in half, the government must be running a deficit, not a surplus.
Canadians cannot afford to be diverted down Mr. Harper’s rabbit-holes – not when the ethical conduct of his government is in tatters, and our growth-less economy teeters on the edge of recession.
One repulsive Conservative attack-ad running on television these days talks about Canada’s 2008 recession.
If you recall, that was just the first recession over which Stephen Harper has presided – we’re now suffering through his second. What a glorious record, as he stumbles from one economic bungle to another!
In this television ad, a paid actor reads through a Conservative script suggesting that no one saw the 2008 recession coming. That is a barefaced lie. Just about everyone in the western world could tell the economy was turning downward – everyone, apparently, except the Conservatives.
Were they that incompetent, or did they deliberately hide the truth?
For several years, officials in Canada’s Finance department had worried about fundamental weaknesses in the US housing market and in the American banking system which posed serious downside risks to global economic stability. They urged successive Finance Ministers (including me) to be particularly prudent in financial management and budget-making. There was a high-risk bubble that was about to burst.
Ignoring all the warnings in that period between when they took power (February, 2006) and when the recession arrived (Fall, 2008), the Harper regime overspent by three-times the rate of inflation. They mangled the federal tax base. They eliminated all the contingency reserves and prudence factors from the budget-making process. And they put Canada back on the cusp of a deficit once again.
In effect, the Conservatives inherited one of the strongest fiscal and economic situations in the western world, and in less than three years, they blew it – BEFORE there was any recession to blame.
The recession made things worse, but it was Mr. Harper all on his own who made Canada vulnerable.
All through his reckless profligacy, Mr. Harper claimed a recession was unlikely. He promised we would all enjoy “good buying opportunities”. He pledged never to run a deficit. In fact he explicitly projected five surplus budgets. And he was completely wrong.
Why? It was all contrived to let him sneak past Election Day in the fall of 2008.
And now, as Yogi Berra might say, it’s “deja-vu all over again”. Mr. Harper is in abject denial about another recession, and about the hard reality that, on his watch, the economy is a “serial disappointment”.
He has the worst growth record of any Prime Minister since R.B. Bennett in the 1930’s. He failed to lead this country to full recovery from that first recession in 2008 before the second one hit in 2015. He has run up $157-billion in new Harper debt – so far. His deficits continue. The federal books are not yet balanced in 2015. This will be the 8th consecutive Harper deficit.
To try to divert attention from their economic incompetence, the Conservatives have hired an actor to tell lies in a television attack-ad. But the real “bad actor” is Mr. Harper himself.
As published in the Toronto Star http://www.thestar.com/opinion/commentary/2015/07/20/more-of-same-from-harper-wont-end-economic-woes.html While using careful language, Bank of Canada Governor Stephen Poloz confirmed last week what most Canadians could already […]
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