Global economic shivers may shift vote in Canada

10/12/2008

OTTAWA When Canada s election campaign began a month ago, the leading issues were the environment, health care, and the quality of its leadership.

In the early weeks, that is what preoccupied the governing Conservatives and the four parties trying to dislodge them. When the stock market crashed, however, the tone of the race changed and so has the prospective outcome.

As the credit crisis has reshaped the presidential race in the United States, it has done much the same in Canada. While the Conservatives are still favored to win re-election tomorrow, their support has eroded and their hope of winning a majority of the 308 seats in Parliament has receded.

Suddenly, it is all about the economy. Driven by oil and gas, coal, potash, and iron ore and other natural resources, Canada has enjoyed a long season of prosperity. It has had years of growth (2.7 percent in 2007), relatively low unemployment, a strong dollar, swelling surpluses, and falling debt.

The government boasts that Canada s economy is the strongest among the Group of Eight major industrialized democracies.

But the prosperity is uneven. In resource-rich Alberta, Saskatchewan, and Newfoundland, the energy bonanza has brought skyrocketing house prices and a labor shortage. But in Quebec and Ontario, the country s populous industrial heartland, a high dollar and high oil prices have hurt manufacturing, especially in the automotive sector.

Three-quarters of the country s exports go to the United States. When it sneezes, Canada catches cold.

With the United States in recession, economists predict Canada will follow. They expect it to be less severe north of the border, but critics of Prime Minister Stephen Harper, himself an economist, say he has been paralyzed by the sudden reversal of fortune.

Remember, Canada is not the United States, Mr. Harper said a week ago in a statement that evoked the Republican presidential nominee, Sen. John McCain. The fundamentals of the Canadian economy are sound.

Since the markets began falling in Canada, the race has tightened. The Liberals, who were in a distant second place, are now within 5 percentage points. They are unlikely to win, but their resurgence could deny the Conservatives the majority government it was seeking when it called the election.

In the final days of the campaign, Liberal leader Stephane Dion has been attacking the Conservatives for economic mismanagement. He says Canada has the worst growth among industrialized nations and has squandered its large budgetary surplus. He reminds Canadians that when the Liberals were defeated in January, 2006, after 13 years in office, the annual surplus was $12 billion (Canadian).

Since then, the Conservatives have cut the national sales tax as well as income taxes, depriving Ottawa of billions of revenue. The surplus is now $2 billion (Canadian), and critics warn that Canada may run a deficit for the first time in a decade.

The re-emergence of the economy has been a godsend to Mr. Dion, who began the campaign talking about the environment. The Liberals propose a comprehensive platform called the Green Shift with a $15 billion (Canadian) carbon tax offset by income tax cuts. They also propose allowances for investing in green technology and grants to make homes energy-efficient.

But Mr. Dion, who won his party s leadership as an activist environmentalist, had trouble selling a carbon tax to skeptical Canadians. His halting English hasn t helped, and his support plunged.

The Conservatives have called the Green Shift a tax grab. They have abandoned Canada s commitment to the Kyoto Accord, promising instead to cut Canada s greenhouse gases by 20 percent over 2006 levels by 2020. They also offer incentives to invest in renewable energy.

Now, though, the environment has disappeared as an issue. So have other issues, such as the perennial one of improving Canada s universal health care. Both the Liberals and the Conservatives promise incentives to train more doctors and nurses Canada has a shortage and to encourage them to settle in rural and northern Canada.

Another issue is families. The Conservatives are promising income splitting and a bigger child tax credit; the Liberals promise a $1.5 billion national child-care plan, as well as child tax credit.

In a political system in which the Liberals and Conservatives find success in the center, which is more liberal than the United States, their ideas are not radically different. But the New Democrats, a left-of-center party, and the Bloc Quebecois, the secessionist party running only in Quebec, are closer to European social democracy.

The Green Party, which never has won a seat but is arguing that it is not a one-issue party. It may be a spoiler, drawing votes from the Liberals and New Democrats.

Foreign policy is not an issue in the campaign, which isn t unusual.

What is different this time is that Canada has more than 3,000 soldiers deployed in Afghanistan, where it has lost almost 100 of them.

While the other three parties want to withdraw or change the mission, the Liberals and Conservatives have agreed to extend it to 2011. This means the Liberals have not been able to use the war against the Conservatives in Quebec, where the war is unpopular.

The immediate beneficiary seems to be the Bloc Quebecois, which has enjoyed a resurgence of popularity, denying the Conservatives the breakthrough they imagined in the province.

Andrew Cohen is an author, professor, and syndicated columnist in Canada.