Five ways the slowing economy can affect the coming election campaign

Just three months ago, the government’s fall update said the budget would have been balanced this year, if not for new tax breaks, and that it would sail smoothly to a small surplus in 2015-16. But falling oil prices mean the government might have to cut spending to break even. The Conference Board of Canada issued a report Tuesday predicting a $4.3-billion hit to federal revenues in 2015, enough to push the budget to the brink of deficit. Stephen Harper’s Conservatives have staked a lot of political reputation on a balanced budget, but making cuts when the economy is weak is politically risky, too – and it’s unusually hard to predict if the economy will turn ugly or bounce back in coming months.

Political parties expect economic issues to top voters’ concerns in October, but which ones? In the fall, it seemed pocketbook issues, about incomes and making ends meet, were likely to top concerns in many places. Much of the political debate revolve around addressing them, with, for example, the Conservatives emphasizing tax cuts and cheques to parents, and the NDP proposing subsidized daycare. But layoff notices – 18,000 were laid off last week by Suncor and Target – have a way of making people worry about their own jobs. That could make job creation a higher priority for voters. And while Conservatives tend to be rated highly by voters on pocketbook issues, left-leaning parties like the NDP and Liberals often score well on jobs.

Mr. Harper’s Conservatives signalled in October the core of their offer to voters: tax cuts and other breaks. They promised to extend baby-bonus payouts to parents of kids over six, and provide big income-splitting tax cuts to families where one spouse stays at home. But the idea of sloshing around cash might seem a little like a premature luxury by October if the economy turns ugly, and the government is cutting back to balance the budget while voters worry about their jobs. That’s one reason the Conservatives promised those income-splitting tax breaks – which go to very few taxpayers -- only after the budget was balanced. Will the Conservatives be able to promise new tax cuts?

A tighter budget might be a bigger problem for the opposition parties, the NDP and the Liberals, than it is for the incumbent Tories. That’s because the projected surpluses for future years would be small, and those opposition parties couldn’t make costly promises without pushing the country into deficit. How else, then, will they emphasize what they’d do differently? They could stay careful, or take a risk: would either party make promises that would push the budget into deficit, gambling that voters will accept that if they think it will help create jobs and economic growth?

Mr. Harper is an incumbent with one big advantage: a reputation among voters for handling the economy well. His Conservatives are counting on using it, notably against a less experienced Liberal Leader, Justin Trudeau, especially if voters are fretting about the economy. (Latest Nanos poll has a close race between Mr. Harper and Mr. Trudeau.) Prime Ministers aren’t responsible for every upturn or downturn in the economy, but they take credit and can expect blame. His government has stoked a narrative that Canada has done relatively well in tough times, creating jobs while others, like the U.S. lagged. If the impact of falling oil prices is slow growth in 2015, Mr. Harper’s big advantage may soften by October. Expect him to roll out policies and announcements in coming months to convince voters he’s keeping up with economic change.