October 07, 2008

What's HAPPENING in the Canadian election: Mediascout

Harper Walks Political Tightrope

The prime minister faces a difficult political task. He has spent his entire campaign driving home the point that Canadian economic fundamentals are strong, and Conservatives know tinkering with functioning engines is dangerous. He has been steadfastly against the concept of bailouts to corporations or commercial banks, a point he reinforced again during the debates. And he has contrasted this stay-the-course approach to his opponents’ plans, labeling them as risky and panic-stricken. Until last week, this technique had worked, rewarding him with an upward trajectory in the polls. But now the economy is tanking. The TSX is hitting record lows and the global financial system is crashing as well. The passage of the massive US bailout plan hasn’t reversed the Dow’s downward spiral, and central banks across the globe are now acknowledging more needs to be done. Canada’s big five banks are solidly predicting a recession. As Canadians watch nations throw out lifelines to their sinking economies, Prime Minister Stephen Harper’s message that economic tinkering is unnecessary isn’t getting the traction it once did, and he now finds himself slipping in the polls.

So it is that yesterday Harper began the politically dangerous task of changing his party’s tone on government’s involvement in the economy, while still maintaining his position that bailouts are unnecessary and his opponents’ plans are risky. Deficits were suddenly on the table, and the Conservatives suggested they had “secondary” plans in place to help the economy, without specifying what those plans were. Harper bent and twisted and even paraphrased John Donne (”Look, we’re not an island”) in an effort to describe his willingness to help the economy without appearing to go back on his word. Therein lies Harper’s difficult task — convincing the electorate that any newfound plans he will unveil during the release of his party’s platform today is not an indication he has reversed his position. Difficult, not only due to the political risk inherent in changing a policy position with seven days left in the campaign, but because parts of government beyond his control are already proceeding with intervention measures. The Bank of Canada — arm’s length from the federal government — doubled to $20 billion last Friday the liquidity it has made available to struggling Canadian banks through money it obtained from the US Federal Reserve. Central banks around the world now seem to be planning a coordinated global move, and, given the Bank’s arm’s-length operation and Bank Governor Mark Carney’s dire words last week, there exists the very real possibility the BoC will partake. Harper needs to take credit for the Bank’s moves so that it doesn’t appear to be outside of the Tory’s economic strategy, but cannot admit anything the Bank has done amounts to significant economic intervention. A tightrope walk, indeed.

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