It is hardly surprising that former prime minister Stephen Harper would choose The Wall Street Journal – or it, him – to weigh in on the extraordinary spending Western governments have been undertaking to support businesses and individuals hurt by coronavirus-related economic shutdowns.
The Rupert Murdoch-owned newspaper has long been a big fan of Canada’s 22nd prime minister – and with good reason. When he was in power, Mr. Harper personified the Journal’s editorial philosophy of fiscal rectitude and hawkish foreign policy, in contrast to then-U.S. president Barack Obama, who sought a middle ground on both.
Mr. Harper demonized Iran, embraced Israel unequivocally, trash-talked the United Nations, pooh-poohed the effectiveness of economic stimulus policies and implemented fiscal austerity once the worst of the 2008-09 recession had passed. While Mr. Harper was being pilloried at home after Canada lost its bid for a seat on the UN Security Council in 2010, a Journal editorial heaped praise on him for having “annoyed a sufficient number of Third World dictators and liberally pious Westerners to come up short” in the General Assembly.
So, Mr. Harper’s op-ed this week in the Journal served both his purposes and those of the newspaper. The Journal’s editorial writers have been chafing at the apparent casualness with which U.S. politicians have turned on the spigots. Turns out that Mr. Harper, who has shunned the Canadian media since he lost power in 2015, has been chafing, too.
Noting that “public-sector balance sheets will be an unholy mess” after the pandemic passes, the former prime minister warns that a fiscal reckoning is inevitable. While “leftists see a model for the future” in the sudden and massive expansion of government, Mr. Harper counters that the fiscal measures currently being undertaken are neither sustainable nor a substitute for the private-sector wealth creation that underlies the West’s capitalist economic system.
“All of this intervention has been economically ruinous,” Mr. Harper argues, noting that the trillions of dollars being spent to partially replace income lost by businesses and individuals because of the shutdowns could never be enough to offset the collapse of the private economy. While stopping short of condemning them, Mr. Harper appears to question the necessity of the blanket shutdowns, writing that “we will be able to evaluate them with any certainty only after the crisis.” What is not in doubt, as he sees it, is the “staggering” economic damage they have caused.
And what comes next, he predicts, could be even worse. “Unless we experience a period of astronomical global growth, simple arithmetic dictates that many governments, both national and subnational, will experience debt crises, or at least severe pressures, in the years to come. If they fail to practice mild austerity pro-actively, a brutal kind will be thrust on them,” he writes.
The former prime minister takes a swipe at the proponents of Modern Monetary Policy who “will prattle on” about deficits not mattering. “Their core belief – that governments can never really run out of money – is nonsensical.” He notes that Canada itself “came close” to defaulting on its debt in the 1990s, forcing Jean Chrétien’s Liberal government to slash spending.
The dilemma now facing the Harper-less Conservatives is whether to align themselves with their former leader’s hard-line stand on fiscal policy when most Canadians appear to support (and even like) the big-government policies of Liberal Prime Minister Justin Trudeau.
The Liberals have already announced an extension of the Canada emergency wage subsidy beyond its initial June expiry date. And this week Mr. Trudeau insisted his government would not cut off beneficiaries of the $2,000-a-month Canada Emergency Response Benefit who refuse to return to work because they fear for their own safety. The Liberals are even said to be considering making these income-support measures permanent in the form of a guaranteed minimum income. Mr. Harper thinks that idea is a “delusion.”
Conservative Leader Andrew Scheer has called on the Trudeau government, which scrapped its plan for a March budget, to table a fiscal framework for the 2020-21 fiscal year. But he has refrained from directly opposing the spending measures that have been unveiled so far and which have Ottawa on target to run its biggest non-wartime deficit ever. At an estimated 12 per cent of gross domestic product and counting, few active politicians seem to be thinking about the consequences of this mother-of-all deficits, much less what to do about it.
Will Canada’s Conservatives heed their former leader’s warnings, or just go with the flow?
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