Andrew Coyne: The economy is strong, but there are dark clouds opposition leaders should focus on. The government would rather talk about the last four years. The opposition would be doing the country a service by talking about the next 40. Good news for the economy, it is well known, is bad news for opposition parties. If you are a Conservative or New Democrat (or Green, or…), then, the news could not possibly be worse.
A 5.4 per cent unemployment rate, the lowest since at least 1976 (and probably since the 1960s)? Poverty, on Statistics Canada’s Low Income Cut Off measure, at 7.8 per cent, also the lowest since 1976, and maybe ever? Median family incomes, after tax, at an all-time high, up by one-third after inflation since 1997? Woe is us!
Of course, much of this reflects long-term economic trends — 10 years without a recession will do that. But some of the numbers have turned particularly positive on the present government’s watch. The number of those employed up by more than a million since 2015? The number of children in poverty down by nearly a third in just their first two years in office? Great news — unless you’re an opposition MP.
How much of the economic news can fairly be attributed to the government of the day is open to question. The drop in child poverty is almost certainly related to the enriched Canada Child Benefit the Liberals brought in early in their tenure. As for the rest, well, the best you can say is they didn’t actually prevent it.
But as opposition critics are quick to blame every bit of bad economic news on the government, so by the rules of the political game the government gets to claim credit when times are good. Mind you, all of this good economic news has not stopped the Liberals from falling 20 points in the polls over the last two and a half years.
But give it time. By October memories of the SCN-Lavalin affair, which killed off a nascent Liberal recovery, will presumably have faded. At some point you have to think the economy will start to weigh in their favour. Only twice in our history have one-term majority governments been defeated, in 1878 and 1935. In both years, significantly, the economy was in depression.
What’s an opposition leader to do in the face of such rotten (from his perspective) luck? In his recent “vision” speech on the economy, Andrew Scheer attempted to argue the economy was not in as good shape as the facts would suggest, appealing instead to how Canadians “feel” about it. “The economic indicators might say one thing,” he told his Toronto audience, “but the human indicators,” by which he appeared to mean polls, “say something entirely different.”
“Two-thirds of Canadians,” he said, “feel (they) can’t pay their bills,” as if it were a mere footnote that, objectively, most of them can. “Everything keeps getting more expensive,” he complained, “but earnings aren’t keeping up.” Well, not quite: median hourly wages are up by about nine per cent since October 2015; consumer prices are up seven per cent. That’s not great, but it’s not necessarily the stuff of election defeats, either.
Still, there are some genuinely cloudy linings to go with all the silver, if opposition politicians are willing to look. The latest employment numbers out of the United States are far less positive, raising the chances of a recession that would surely spill over into Canada. The NAFTA deal is no sure thing, even now, with Donald Trump’s sudden threat to impose tariffs on Mexican imports.
Here at home, uncertainty over pipelines and other energy projects and the loss of Canada’s corporate tax rate advantage have made for a weak investment climate. Growth all but stalled in the fourth quarter of 2018, and is now projected at just 1.3 per cent after inflation for 2019. That’s not the bad news, however. The bad news is that the economy is not expected to grow much faster for years, indeed decades after that.
And that’s the point. Our current prosperity, while real, is blinding us to the quite severe economic challenge facing us in the longer term. The name of that challenge: population aging. The story is familiar enough. With the baby boomers reaching retirement age, more workers are leaving the work force than entering it.
Already we are at 17 per cent of the population over the age of 65. By 2035 that will have hit 25 per cent. Where not long ago there were five workers for every retiree, by then the ratio will have fallen nearer to 2:1. The fiscal implications are grim, especially for the provinces — most of the projected increase in costs will be for health care — and especially for those provinces, such as Newfoundland and New Brunswick, with disproportionately elderly populations.
As it is, the Parliamentary Budget Office projects some of the provinces will be facing debt-to-GDP ratios in excess of 100 per cent by 2042, 200 per cent by 2067. What happens when their young people, looking ahead to the massive tax hikes these imply, decamp, accelerating the debt spiral?
There’s only one way to avoid this fate: to put productivity on a permanently higher growth track, with a view to ensuring the next generation or two are so much wealthier than we are that they can afford to pay the crippling costs of our health care. That means getting started now, in order to harness the arithmetic of compounding to the cause.
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