The Political Crisis Almost Eclipses the Economic Crisis

CCA Bul­letin 50/08

Decem­ber 8, 2008

Just the Facts

Cana­di­ans wit­nessed high polit­i­cal drama this past week as the gov­ern­ment was chal­lenged with a pos­si­ble suc­cess­ful non-confidence vote on the Eco­nomic Update deliv­ered the pre­ced­ing week by the Min­is­ter of Finance, the Hon. James Fla­herty. The cre­ation of a coali­tion by the Lib­eral and New Demo­c­rat par­ties, sup­ported by the Bloc Québé­cois, threat­ened to defeat the gov­ern­ment on Decem­ber 8, 2008. The polit­i­cal cri­sis has been fore­stalled for the time being by the pro­ro­ga­tion by the Gov­er­nor Gen­eral of the first ses­sion of Par­lia­ment after a mere two weeks of business.

What does this mean for the busi­ness of gov­ern­ment? The Prime Min­is­ter has now promised that Par­lia­ment will recon­vene on Jan­u­ary 26, 2009 and a new fed­eral bud­get replete with stim­u­lant mea­sures will be deliv­ered on Jan­u­ary 27, 2009. In the mean­time, Cab­i­net retains its full pow­ers to make appoint­ments and to deal with the day to day busi­ness of run­ning the gov­ern­ment. The main impact of the cri­sis for the arts and cul­ture sec­tor is that since there was insuf­fi­cient time for the gov­ern­ment to place leg­is­la­tion on the Order Paper, revi­sions to the Copy­right Act are once again in limbo.

The Coali­tion and the arts and cul­ture sector

On Decem­ber 1, 2008, Lib­eral Leader Stéphane Dion, New Demo­c­rat Leader Jack Lay­ton, and Bloc Québé­cois Leader Gilles Duceppe announced that an agree­ment had been reached among the three oppo­si­tion par­ties to sup­port a coop­er­a­tive gov­ern­ment to address the impact of the global eco­nomic cri­sis on Canadians.

The result­ing pol­icy accord includes a pro­posal “…to pro­vide active stim­u­lus for the econ­omy over the next two years, with a shared com­mit­ment to return to sur­plus within four years” main­tain­ing that the neces­sity to stim­u­late the econ­omy “is con­sis­tent with the under­stand­ings arrived at by all nations in the G20”.

While arts and cul­ture did not fig­ure widely in the pro­posal, the fact that the sec­tor was men­tioned at all in the brief four-page doc­u­ment is of some sig­nif­i­cance.  The fol­low­ing sec­tions are par­tic­u­larly note­wor­thy for the sector:

• Sup­port for cul­ture, includ­ing the can­cel­la­tion of bud­get cuts announced by the Con­ser­v­a­tive government;
• Accel­er­at­ing exist­ing infra­struc­ture fund­ing and sub­stan­tial new invest­ments, includ­ing munic­i­pal and inter­gov­ern­men­tal projects;
• Ensur­ing that the fed­eral gov­ern­ment has the appro­pri­ate pro­grams in place to assist those most affected by the eco­nomic cri­sis so that all cit­i­zens will be in a posi­tion to fully par­tic­i­pate in the eco­nomic recov­ery to follow;
• Facil­i­tate skills train­ing to help ensure Cana­dian work­ers are prop­erly equipped to keep pace with the rapidly chang­ing econ­omy, while respect­ing provin­cial juris­dic­tion and exist­ing agreements.

The CCA has already iden­ti­fied three of the four coali­tion pro­pos­als as pos­si­ble ele­ments of stim­u­lus package.

Tell Me More about the eco­nomic cri­sis

Any attempt to read the tea leaves regard­ing the Cana­dian econ­omy is a con­fus­ing chal­lenge. In the past few weeks, three dif­fer­ent assess­ments of where the econ­omy is headed have been released by three dif­fer­ent sources with three dif­fer­ent perspectives!

The Min­is­ter of Finance, the Hon. James Fla­herty deliv­ered the annual Eco­nomic Update in the House of Com­mons on Novem­ber 27, 2008. This state­ment joins that of the Par­lia­men­tary Bud­get Offi­cer and another by the Cana­dian Cen­tre for Pol­icy Alter­na­tives, each of which has deliv­ered prog­nos­ti­ca­tions on the per­for­mance of the Cana­dian economy.

The Update includes few mea­sures to stim­u­late the econ­omy but most sur­pris­ingly of all, Min­is­ter Fla­herty is pro­ject­ing a bal­anced bud­get for this and fol­low­ing years, with a mod­est sur­plus of 800 mil­lion dol­lars at the end of the cur­rent fis­cal year. Hoever, this con­fi­dent pro­jec­tion has not stopped the Prime Minister’s talk of the like­li­hood of a deficit in the cur­rent fis­cal year.

The Par­lia­men­tary Bud­get Offi­cer is a posi­tion cre­ated by the Con­ser­v­a­tive gov­ern­ment to ensure that Cana­di­ans could have access to a fact-based assess­ment of bud­getary issues free from polit­i­cal col­oration or inter­pre­ta­tion. The Par­lia­men­tary Bud­get Officer’s Eco­nomic and Fis­cal Assess­ment projects a bal­anced bud­get for 2008-09 but deficits in 2009-10 and 2010-11. These con­clu­sions are based on a num­ber of fac­tors such as real growth in the Gross Domes­tic Prod­uct, decline in Cana­dian exports and Amer­i­can domes­tic demand, the rever­sal of com­mod­ity prices and a slow­ing in the growth of employment.

The Cen­tre for Pol­icy Alter­na­tives’ Alter­na­tive Fis­cal and Eco­nomic Report shares the Prime Minister’s view about the like­li­hood of a deficit, includ­ing clos­ing 2008-09 in the red. They see this trend esca­lat­ing from a mod­est deficit at the end of 2008-09 to a 31 bil­lion dol­lar deficit by 2010-11. The Cen­tre has also devel­oped four dif­fer­ent sce­nar­ios on which its cal­cu­la­tions are based: a slow­down, a minor reces­sion, a reces­sion and a major recession.

It was widely expected that the Min­is­ter of Finance would announce spend­ing ini­tia­tives to bol­ster the lack­lus­ter econ­omy. The Min­is­ter of Finance did announce a pro­gram of restraint and spend­ing cuts fol­low­ing a com­pre­hen­sive review, some fis­cal mea­sures to shore up lend­ing insti­tu­tions’ access to credit, and changes to the rules regard­ing Reg­is­tered Retire­ment Income Funds.The lack of stim­uli to the econ­omy drew fire from the Oppo­si­tion but it was the elim­i­na­tion of the sub­si­dies to the polit­i­cal par­ties that hard­ened its resolve. Since 1998, each polit­i­cal party receives a pay­ment for every vote received in the last gen­eral elec­tion. These funds are used for party oper­a­tions, research, and other polit­i­cal activ­i­ties. Min­is­ter Fla­herty announced that the gov­ern­ment would intro­duce leg­is­la­tion to bring this prac­tice to end on April 1, 2009.

Since the Eco­nomic Update and faced with the revolt of the Oppo­si­tion, the gov­ern­ment has backed down and sim­ply indi­cated that it will cap the sub­sidy after April 1, 2009 rather than elim­i­nate it. This news did lit­tle to assuage the anger of the oppo­si­tion par­ties. The gov­ern­ment has also promised a new fed­eral bud­get on Jan­u­ary 27, 2009 in response to the saber rat­tling by the oppo­si­tion parties.

Pro­rogu­ing the first ses­sion of the 40th Par­lia­ment has bought the gov­ern­ment some breath­ing room. Cana­di­ans can expect to see the drama unfold once again as the 2009-10 fed­eral bud­get comes to a vote when Par­lia­ment recon­venes. A defeat of the gov­ern­ment on the bud­get could once again trig­ger more drama on Par­lia­ment Hill and maybe another election.

The CCA con­tin­ues to develop ideas for the con­sid­er­a­tion of the Min­is­ter that use the arts and cul­ture sec­tor as key play­ers in the advance­ment of the cre­ative econ­omy. These ideas will be the basis of a brief to the Min­is­ter which will be deliv­ered before Christ­mas 2008.

What Can I Do?

The CCA is very inter­ested in hear­ing any idea you or your orga­ni­za­tion may have about mea­sures that can be used to stim­u­late the econ­omy through the efforts of the arts and cul­ture sec­tor. If you have sug­ges­tions, please send them to the CCA by Decem­ber 15 at the lat­est, for pos­si­ble inclu­sion in the pre-holiday sub­mis­sion on eco­nomic stim­uli and the arts and cul­ture sec­tor. You can also write directly to the Min­is­ter of Finance: The Hon. James Fla­herty, House of Com­mons, Ottawa, Ontario KIA OA6.