Politics: It's the Canadian Economy, Stupid

TORONTO, ONTARIO - It can't be a surprise to Stephen Harper. When the Prime Minister requested that the Governor General dissolve the government and call an election on September 7th, he had to see what was coming. A string of disturbing financial news has shifted the campaign to one focused on the Canadian economy--and so far, that appears to be hurting Harper.

For the longest time, the current Canadian election seemed like a "Seinfeld" election, an election about nothing. Nobody saw a compelling reason for calling the election, dismissing the Conservative line that they wanted a renewed mandate. The national polls had been essentially stagnant for weeks, with the Conservatives polling in the upper-30% range, the Liberals in the upper-20% range, the NDP in the upper teens, and the Bloc and the Greens trying to break 10%. While the Liberals and the Greens tended to talk most about the environment, no issue was really catching fire anywhere, except maybe for the current government's arts cuts curtailing their prospects in the province of Quebec.

Yet, the economic situation was building up. While the August employment figures were spun as positive by the government, the unemployment rate stayed at 6.1% and the 15,200 jobs added that month only partially offset the more than 55,000 that had been lost the month before. As the price of oil started to flow downward after a spike caused by Hurricane Ike in mid-September, so did the value of the Canadian dollar. Today, it closed below 90 US cents for the first time since May 2007.

The real damage, though, would come from the United States. As Canadians watched the drama of Congress trying to pass a "rescue" package, stock markets were falling, and the Canadian exchanges went right along for the fall. The most-watched S&P/TSX index, which had been over 15,000 in June, dropped below 10,000 yesterday, and just regained that benchmark today. Canadians have watched the value of stock investments decline by as much as one-third from their peak.

Stephen Harper has tried to campaign as the safe choice for the economic future, that the Conservatives would continue competent management of the economy, whereas all of the left-leaning parties would introduce "risky" environmental measures that would have an unknown impact on the economy. That strategy was largely viewed as credible--and seemed to be working--before the public perceived the economy to be falling apart.

Now, the specter of the Bush administration looms large. As late as July, Secretary of the Treasury Henry Paulsen stated that Fannie Mae and Freddy Mac "remain adequately capitalized." In September, he effectively took them over to prevent their collapse. As late as March, he used the word "fine" in referring to the broader economy. In September, he was asking Congress for $700 billion to restore liquidity. Suddenly, saying everything was fine--even in a country that actually has regulations in place--no longer seemed credible.

The other parties are now portraying Harper as just like Bush, not wanting to take action until there is a crisis. The aura of inaction may have been best symbolized by the first item on This Hour Has 22 Minutes in the 7-October-2008 episode. Harper takes essentially no action as a young supporter faints behind him during an event. Some wags have nicknamed that supporter "Economy."

Now, the race suddenly seems dynamic. Polls show the Conservatives falling in the national polls and the Liberals rising. The NDP also seems to be gaining at the same time--the first time the Liberals and the NDP have both seemed on the rise in this race. Liberal Leader Stéphane Dion started using the line "It's the Economy, Stephen" back on 25-September, echoing the slogan of Bill Clinton's successful 1992 campaign in the United States. Indeed, in the election that had been the "Seinfeld" election, it's now the Canadian economy, stupid.