Lawrence Summers has no wish to become embroiled in this year's federal election. He may anyway.
The former treasury secretary to Bill Clinton is preaching a gospel of "inclusive prosperity." Justin Trudeau is listening.
His ideas "are in the mix," said a senior Liberal, speaking on background. If those ideas – which emphasize increased government investments rather than the Conservative mantra of balanced budgets and lower taxes – become part and parcel of the Liberal platform, they will offer a stark either/or contrast between the two parties in the election slated for Oct. 19.
Mr. Summers was in Toronto on Monday to speak at the Rotman School of Management at an event hosted by Canada 2020, a progressive think tank. The former director of the National Economic Council in the first Obama administration repeated a message he has been delivering on both sides of the border over the past couple of years.
In an era of low growth, rising income inequality and bargain-basement interest rates, it makes no sense for governments to shy away from needed investments in physical and social infrastructure, he believes.
While Mr. Summers stressed he didn't want to get involved in partisan Canadian politics, he advised against the balanced budget that Finance Minister Joe Oliver has committed to delivering later this month come hell or cheap oil.
"The case for surpluses is greater when economic growth is accelerating than when it is decelerating," he said in a sit-down with The Globe and Mail. "To the extent that the present moment is one of transitorily bad conditions because of the collapse of oil prices," coupled with low demand, low interest rates and deflationary rather than inflationary pressures, "this would not seem the moment to elevate fiscal discipline," he maintained.
But the Conservatives are determined to impose exactly that discipline. Prime Minister Stephen Harper has repeatedly chastised provincial governments, especially the Ontario Liberal government of Kathleen Wynne, for running deficits at a time when the economy is not in recession.
At a speech in Davos, Switzerland, in 2012, Mr. Harper offered a rebuttal to Mr. Summers's way of thinking by warning political leaders against falling "into the trap" of "too much sovereign debt, too much general willingness to have standards and benefits beyond our ability or even willingness to pay for them."
But Mr. Summers argues, as Mr. Trudeau has also argued, that combatting climate change, upgrading infrastructure, investing in education and training and other government programs will not only increase demand and create jobs, but bolster confidence in the future among stressed middle-class taxpayers.
"The challenge of inclusive prosperity is to craft policies that can respond to today's changes in the global environment in ways that will enable ordinary citizens to feel that they are fully sharing in the progress that is possible," he told the gathering at the Rotman School.
The election will be fought over this.
To the extent that the Liberals are listening to Mr. Summers, who has conferred with Mr. Trudeau and is a close friend of Toronto Liberal MP Chrystia Freeland, they can be expected to argue against tax cuts and balanced books, and for investments that fill potholes, fight climate change and create well-paying jobs.
Mr. Summers is also not fond of major tax cuts at a time when technological acceleration is concentrating more and more wealth in the hands of those few able to understand and benefit from a transforming economy. And he questions the wisdom of lowering corporate tax rates, as the Conservatives have done, which he believes encourages a beggar-they-neighbour competition among states for capital.
Industry Minister James Moore emphasized on the weekend the April 21 budget will contain new infrastructure investments. Nonetheless, a clear schism appears to be emerging between a Conservative emphasis on balanced books, lower debt and targeted tax cuts, with some additional spending on infrastructure, and a Liberal emphasis on major investments in green energy, education, public transit and other infrastructure, with a balanced budget put off for a few years.
That, at least, could be the choice, if Larry Summers's priorities remain in the Liberal mix.