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Business Commentary Scandals are one thing, the government’s management of the economy is another

With the country abuzz over Ottawa’s deepening crisis involving SNC-Lavalin, it’s worth remembering the enduring political axiom so eloquently put into words more than a quarter-century ago by U.S. political strategist James Carville: “It’s the economy, stupid.”

The idea is that, ultimately, voters care above all else about the state of the economy – and, more to the point, their own economic well-being. Manage the economy smoothly, and the electorate can overlook a lot of unsightly warts on your record.

It’s something the federal Liberals might well cling to during these dark days for their government, amid allegations that the Prime Minister’s Office may have sought to interfere with the criminal corruption and fraud prosecution of the Quebec-based construction giant. As they feel the erosion of the country’s confidence in the government’s integrity, its honesty and even its basic staff-management skills, the Liberals may find themselves increasingly inclined to lean on their economic record in this, an election year.

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Surely voters care more about jobs than a few embarrassing political missteps, right? After all, they have before. The Liberals watched Stephen Harper’s Conservatives weather a variety of political shenanigans – Mr. Harper was even found in contempt of Parliament in 2011 – only to be re-elected twice. A relatively healthy economy, favourable tax policies and a commitment to fiscal discipline easily outweighed the list of transgressions the opposition trotted out at election time.

And the Liberals have their own positive economic record to boast. As they’ll tell anyone who asks (and many who don’t), Canada has added almost 900,000 jobs since they were elected in October, 2015; the unemployment rate is at its lowest in more than four decades; and the economy is coming off two years of solid growth – the strongest in the Group of Seven, in fact, over that period.

But the public perception may be much different. On numerous high-profile economic files, this government has repeatedly, and very publicly, looked like a clumsy, inept manager.

It deeply and perhaps irreparably alienated small-business owners with its small-business tax reform proposals, leaving the impression that it believed the country’s entrepreneurs were scammers and tax cheats. It has stumbled around the pipeline issue, leaving uncertainty and resentment among both oil-producing regions and environmental supporters. On carbon taxes, it finds itself at war with the provinces, while facing accusations that it is taxing Canadians out of global competitiveness.

While not all these perceptions are entirely fair, they nevertheless add up to a government that has stumbled in both execution and communication on many of its key economic files. Even its securing of a new North American free-trade agreement, trumpeted as a shining victory by the government, was seen by many as little more than a bearable compromise, narrowly avoiding disaster after seemingly alienating both the U.S. and Mexico at various points.

And the most undeniable criticism of this government’s economic oversight is also the most important one: It has utterly failed to live up to its promises of fiscal management.

Justin Trudeau was elected on a pledge to run modest deficits of “less than $10-billion” for a couple of years, before whittling the deficit down to zero by 2019. Well, it’s 2019 – and the Liberal government has targeted a deficit of $18-billion in the current fiscal year, ending March 31, and almost $20-billion next year. It long ago stopped talking about balancing the budget; now it focuses on slowly reducing the country’s debt-to-GDP ratio.

That this promise was broken will be considered unacceptable by many voters. That it was broken during a period when the Canadian economy was growing at a healthy pace, and continues to be broken even now, when the economy is running close to full capacity, is all but inexplicable. In a time when the government could well afford to trim its deficits and inject less fiscal stimulus into an economy that no longer needed it, it did no such thing – despite promising to do so.

The Liberals can rightly point to some of their strategies – most notably increasing infrastructure investment and boosting immigration levels – as economically astute policies that will pay dividends in economic growth long after this government is gone. They may point to jobs as the proof that they have looked after the middle-class voters they put at the centre of their election promises.

But that may not be enough come voting day. Too many balls have been fumbled for this government to rely on its economic record to carry the next election.

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