If we learned anything from this otherwise pretty fruitless federal election, it’s that Canada’s major political parties have essentially reached a broad consensus on economic policy. Voters were asked to make a choice not of philosophy or substance – which differed remarkably little – but rather of management style.
In that respect, the outcome underlines that Canadians don’t quite trust the Liberals to manage the fiscal and economic store without supervision. Justin Trudeau and his colleagues now have to deal with the implied short leash that the electorate has clipped to their collar.
As we face another minority Parliament, we can, perhaps, take solace that on the country’s biggest economic files, the three big national parties are essentially on the same page. Everyone agrees that we need a price on carbon. Everyone sees affordable child care as an economic imperative. Everyone has embraced expansionary fiscal policy, and the deficits that will come with it, for the next several years.
Yes, the details of the parties’ respective policy approaches differ, in some cases considerably. But on the principles themselves, there are no major economic files on which the parties lack common ground. Economic policy looks unlikely to be a major stumbling block to governing with a minority for the Liberals.
But the lack of traction for the Liberals at the polls – particularly after 18 months of a pandemic in which their actions to safeguard the economy have, on the whole, been widely supported – strongly suggests that the electorate has reservations. If it’s not about the economic policy direction, the obvious conclusion is that it’s about the Liberals themselves.
The Conservatives and NDP argued relentlessly throughout the campaign that the Liberals have mismanaged elements of their economic plan, to the national detriment. The return of another minority mandate suggests that many voters agreed.
In light of those results, Mr. Trudeau and his team must now ask themselves if their opponents have a valid point. If the Liberals’ first term in office was about big ideas, and its second term was about crisis management, perhaps the message from the voters is that the third term must be about execution.
In terms of the economic plan, that means, first and foremost, getting the COVID-19 pandemic in the rear-view mirror. The Liberals succeeded in convincing Canadians that they were the best party to finish that job; now they have to live up to that promise, and fast. This remains the government’s top economic priority; the broader economic plan cannot succeed as long as the pandemic stands in its way.
The Liberals also have to come to grips with the obvious unease with elevated inflation, an issue that clearly hit home with many voters. They must ask themselves hard questions about the degree to which their policies and fiscal management are contributing to the problem.
While the deep distortions of the pandemic may be the root cause of these unusual inflationary pressures, there is a legitimate concern that overstimulative government spending and rising federal debt could turn a temporary spike into a more lasting and pervasive problem. Voters did not easily shrug this worry off, nor should this government.
Specifically, the government needs to get more serious about spelling out specific, transparent anchors for removing fiscal stimulus as the recovery advances. It also has an immediate opportunity, in this fall’s five-year renewal of the Bank of Canada’s agreement with the federal government on its monetary policy mandate, to reinforce the bank’s core objective of maintaining low, stable and predictable inflation.
There are other elements of the Liberals’ economic plan for which the execution has become everything. On child care, it still has five more provinces and territories to sign onto its $10-a-day national daycare plan, negotiations that can’t be allowed to drag on just because the party no longer has the motivation of an election spurring it forward. On infrastructure, the Liberal government has to get better at putting to work its tens of billions of dollars in already committed infrastructure spending in service of a strong recovery, rather than sitting unspent in bureaucratic limbo. On climate change, the government must continue to move forward, while measuring the impact of its actions on emissions and economic players, and keeping an open mind to innovative solutions from across the political aisle.
None of this will be easy, especially stickhandling through a minority Parliament with a plurality of views and priorities that must be heard. But again, the gaps aren’t wide ones; a government willing to work with its opponents can succeed in achieving these essentially common economic goals. And, as the voters have signalled, this is how they expect the country to move forward. We’ve entered an era of co-operative skepticism; this version of the Liberal government is going to have to learn to work with it.
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