Haldimand "Federal Election 2008 Harper Reminds Canadians of Three Major Differences between Canada and the US."
Harper seeks to calm market worries
Conservatives also offer sweetener on child care program
Globe and Mail Update with Canadian Press
October 6, 2008 at 8:21 PM EDT
LAVAL, Que. — Conservative Leader Stephen Harper walked a fine line Monday evening in the wake of plunging markets: reaching out to reassure spooked investors but at the same time warning them off voting for rival parties –saying they can expect more turmoil if his opponents win.
Appearing on the Business News Network, he said he doesn't see any deficit in the near future, but his comments stopped short of ruling out the longer-term potential to slide into the red.
“There's certainly nothing today that says we should go into deficit,” Mr. Harper said in an interview on BNN after being asked whether a deficit could be an option “in the near future.”
Mr. Harper said that “nothing on the horizon – notwithstanding the storm clouds and they are significant – indicates to me that we should immediately go into deficit.”
Conservative Leader Stephen Harper receives a high-five during a campaign stop at a day-care in Ottawa on Oct. 6, 2008. Canadians will head to the polls in a federal election on October 14.
Conservative staff rejected the suggestion he was leaving open the door for a deficit further down the road, though, noting Mr. Harper also said “we're certainly not going to embark on deficits.”
The Conservative Leader reminded Canadians of three differences between this country and the U.S. today. He noted that the federal government is running balanced budgets, that Canada's banking system is not in crisis like its counterpart in the United States and that the housing lending sector is also relatively unscathed.
“I think we do need to remind them of some of the differences with the U.S. We are not in deficit. We don't have a mortgage crisis or banking crisis as they do in the United States. We've actually been so far this year creating jobs,” he said.
But Mr. Harper then quickly went on the partisan offensive. At a Laval, Que., rally Monday night, he warned a Tory crowd that electing rivals such as the Liberals with their proposed carbon tax would only deepen market instability.
“Today we have seen more instability in the stock market. We have seen stocks tumble, especially in the commodity and energy sectors,” he told the Montreal rally.
“What I worry is this is just the tip of the iceberg if we get a carbon tax on energy or the tax increases the Opposition wants to impose on our economy to pay for spending promises we cannot afford, Mr. Harper said.
Mr. Harper's statements followed a news release from federal Finance Minister Jim Flaherty which also sought to calm Canadian investors, who saw their investments plummet again Monday.
The message from the Tory Finance Minister was that Canada's banks are far sturdier than the U.S. banking system.
“Canada's financial system has handled the persistent global market turmoil very well. Canada's banks and other financial institutions are sound and well-capitalized, and are less leveraged than their international peers,” Mr. Flaherty said.
“Canada's mortgage system is sound. The Canadian housing finance market does not have a large sub-prime component and has not witnessed the proliferation of products and marketing practices that have led to the serious problems being experienced in the United States. Canadian households have smaller mortgages relative to both the value of their homes and to their disposable incomes than U.S. households,” he said.
“According to the International Monetary Fund, the rise in Canadian house prices in recent years was fully supported by sound economic factors, such as low interest rates, rising incomes and a growing population.
Separately, the Tories emphatically played down statements made Monday morning by Mr. Harper, in which he spoke of plans to aid banks if the U.S.-led financial meltdown – or efforts to counter it – spill over heavily into this country.
They said he was merely talking about expanded powers granted to the Bank of Canada in the 2008 budget and nothing more. “We have provided more freedom to the Bank of Canada … in Budget ‘08.”
Monday morning, however, Mr. Harper suggested in French that Ottawa had a standby plan in case Canada's credit system encountered trouble.
“We have other plans, other proposals, if we have to help the banking system if there are problems in the rest of the world that affect us,” he told reporters while speaking in French this morning in Ottawa. “But I think we're in a better position than others. I am an optimist, but I think I am also a realist.”
Mr. Harper's comments in English were different, however. When asked about the fact that Group of Seven countries are considering taking co-ordinated and independent action to counter the global credit crunch, the Conservative Leader replied that Ottawa is paying close attention.
“We are also watching to make sure that any actions that are taken [elsewhere] don't have any rebound effects on us, so we are putting some secondary plans in place if that becomes necessary,” he said.
He did not elaborate on these plans, and when pressed by reporters for more details, Conservative Party officials later played down Mr. Harper's comments, saying that there is no bailout in the works.
They clarified that he was referring to the normal conversations about maintaining liquidity in the banking system that take place frequently between Bank of Canada officials and the financial sector.
During the morning press conference held to announce a pledge to sweeten child care benefits, Mr. Harper repeated his belief that Canada still does not have a crisis in its financial and banking sector.
The main concern right now, he said, is the tightening of credit around the world. Mr. Harper said he would help wherever necessary with co-ordinated action taken by Group of Seven countries to cope with the credit crunch.
But he said he doesn't want to take any actions that leave Canadian taxpayers on the hook.
“Our main advice is obviously to encourage co-ordinated action, to encourage actions that will stabilize the situation without creating a great moral hazard for taxpayers,” he said.
It was a bumpy morning for the Conservative Leader as the election campaign entered its final week.
He was in Nepean, outside Ottawa, announcing a plan to index the Universal Child Care Benefit payout to inflation, meaning it would rise each year to match increases in the prices of key goods in the economy.
The plan would only add an estimate two or three dollars to the $100 monthly cheque that Canadian parents of children under six currently receive.
He also vowed to make the benefit tax-free for single parents who are the sole supporters of their children. Each of the pledges would cost $50-million each for a total price tag of $100-million. Currently the Universal Childcare Benefit costs the treasury $2.4-billion per year.
The news elsewhere, though, was troubling: The Conservative Party was sliding in the polls, stock markets were tumbling in Asia, European countries were declaring recessions, and there was no sign of an economic recovery in the U.S.
Just after he finished his first Monday morning campaign event, the TSX opened with triple-digit losses and continued to fall.
Mr. Harper dismissed some polls that show him losing ground as the campaign enters its final stretch. It's the same late-game problem that's plagued the Tories in two previous election races. “I said at the beginning of this campaign that it will be difficult. We are in a period of economic uncertainty.”
Economists say to truly stimulate the economy, governments have to run deficits so that in effect they're spending more than they're collecting in tax revenue.
But Mr. Harper refused to run a deficit, saying it's a slippery slope.
“My resistance to running a deficit would be that history has shown there are no small deficits,” he told reporters at a campaign stop in Ottawa. “Once governments lose fiscal discipline they lose it entirely.”
The Conservatives are running largely on their record when it comes to the economy, which includes tax cuts that amount to $40-billion per year by 2012 — including faster tax write-offs for machinery— and a $1-billion community adjustment fund for smaller communities as well as a $250-million fund to help automakers.
During the campaign, they have promised approximately $7-billion of spending over a multi-year period, much of it small tax breaks.
Asked to comment on a report from Scotiabank that predicted a recession, Mr. Harper said he remains undaunted and he won't likewise make such a projection.
“Let's be clear: the prime minister of Canada isn't going to go around the country predicting a recession when we're not in a recession now,” he said in Ottawa.
He said his positive outlook is still intact – but tempered it somewhat.
“I remain fundamentally optimistic about the Canadian economy but optimistic as I have said from the beginning within the framework we're now living in – and that is a period of economic uncertainty,” the Tory Leader said.
Asked whether his campaign platform, being released Tuesday, will contain new measures to address growing economic woes, he avoided a direct answer.
“I think that the policies we've put forward this campaign are appropriate for this time,” Mr. Harper said. “We're only making promises that we know we can afford to keep.”
He defended his government's record and said he believes he's done what is necessary to buffer Canada from external economic havoc.
“Look, we're not an island. We can't pretend, and we're not pretending, that we will escape the effects of world developments,” Mr. Harper said. “But we can do is make sure that we're doing the proper things in Canada, to make sure our banking sector is stable. We've done that, we're doing that. To make sure our finances are in good position and we can invest in things that cause long run job creation.”
The Conservative repeated his soft-sell pitch for Canadians to elect a majority Tory government, saying the country will need a steady hand at the helm “We're in a period of real economic uncertainty in the world. It will really matter what kind of Parliament we elect and who is running the government,” he said.