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Economists grade the leaders

Three Canadian economists from across the land and across the spectrum watched Thursday night's Globe and Mail debate and graded Conservative Leader Stephen Harper, New Democratic Leader Thomas Mulcair and Liberal Leader Justin Trudeau on their performances. Eveline Adomait, Jack Mintz and Christopher Ragan will continue to watch the final weeks of the federal campaign through an economic lens – watch for their discussions each week.

Eveline Adomait is an economics professor at the University of Guelph, a fomer TEDx speaker and author of the books Cocktail Party Economics: The Big Ideas and Scintillating Small Talk about Markets and Dinner Party Economics: The Big Ideas and Intense Conversations about the Economy.

Dr. Jack M. Mintz is the President's Fellow of the School of Public Policy at the University of Calgary after serving as the Palmer Chair and Director since 2008. He serves on the boards of Imperial Oil Limited and Morneau Shepell and is chair and vice-president of the Social Sciences and Humanities Research Council of Canada. Widely published in the field of public economics, he was touted in a 2004 British magazine as one of the world's most influential tax experts.

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Christopher Ragan is an associate professor of economics at McGill University and a research fellow at the C.D. Howe Institute. He was the Clifford Clark Visiting Economist at Finance Canada during 2009-10 and was special advisor to the governor of the Bank of Canada during 2004-05. He is the author of Economics, the most widely used introductory economics textbook in Canada.

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Jobs

Jack Mintz

  • Harper: B
  • Trudeau: B-
  • Mulcair: C+

None of the leaders had a clear answer as to how they would deal with economic structural change resulting from lower resource prices. Mr. Trudeau banks on public infrastructure spending, but this is at best only part of the answer. Mr. Mulcair clearly answered the question to promote a knowledge-based economy, although details were scant. Mr. Harper was more exact, arguing for affordable investments in infrastructure and research. One incorrect point, especially raised by Mr. Trudeau, was with respect to Canada's record over the past decade. Any government would have gone through a difficult time in 2009, due to the financial crisis in the United States and Europe. Yet Canada's employment record was stellar among developed economies, as suggested by Mr. Harper, increasing from 16.4 million in 2006 to 18 million in 2015. This was due to strong fiscal management starting in 1995 under the Liberals to avoid deficits.

Eveline Adomait

  • Harper: B+
  • Mulcair: B
  • Trudeau: D+

Mr. Harper had more facts and figures than the other candidates and throughout the debate came across as knowledgeable, though defensive. The good news is that jobs are up, but as Mr. Trudeau endlessly harped, the past 10 years have not been kind for growth in Canada and for Mr. Harper. If this is particularly damning depends on whether you compare Mr. Harper to other prime ministers in the past or to leaders in other countries during the same period. Mr. Harper did ask the question, "Where would you rather have been [during the economic crisis] than Canada?" Well, Germany does come to mind, but he does have a point. Mr. Mulcair made a funny analogy that Mr. Harper had put all his eggs in one basket "and then he dropped the basket." In reality, OPEC cut a hole in his basket.

Christopher Ragan

  • Trudeau: B+
  • Mulcair: C+
  • Harper: C

When asked about the Conservative plan to promote job growth, Mr. Harper offered low taxes and a balanced budget as the central pillars of his policy package. The first is sensible but the second is definitely not, especially when growth is very weak and the labour market continues to be very fragile. He even went so far as to claim that increased government spending was bad for jobs, directly contradicting his later comments regarding why his government increased its spending massively during the global financial crisis. Mr. Mulcair offered a cut in small-business taxes and expanded child care as his jobs plan, but could not explain why either would increase employment (probably because the effects would be minimal). After a bit of a rough start, Mr. Trudeau explained clearly how an expansion of infrastructure spending would create jobs, which is reasonable, and that this benefit would be worth the three years of modest budget deficits required to finance the spending.

Energy and the environment

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Jack Mintz

  • Harper: C+
  • Trudeau: C+
  • Mulcair: C+

Both Mr. Mulcair and Mr. Trudeau pointedly argued that Mr. Harper has so far failed to get pipelines built to take oil and natural gas to tidewater. What they would actually do to achieve a better result was less clear, but seemed based on a new vague carbon policy. Mr. Mulcair made the strongest comment in favour of responsible energy development, but failed to make clear how tight his emission regulations would be lead to some expected carbon price. Mr. Trudeau correctly recognized the variation among provinces and therefore the appropriate carbon policy, but did not make clear what federal role would be involved as part of the overall policy. Mr. Harper argued for a regulatory approach, not making clear that ultimately it would impose an implicit price for carbon, which would be lessened with a cap-and-trade system.

Eveline Adomait

  • Mulcair: C
  • Trudeau: C
  • Harper: D

Most of this was about the environment, not energy – too bad. The drop in resource prices has created a problem for Canada, but after this debate, it isn't clear what Mr. Harper and Mr. Mulcair would or could do about it other than to acknowledge sectoral suffering. In all honesty, Canada doesn't have a place at the OPEC table. Mr. Trudeau saw the current downturn in Alberta as an opportunity to take unemployed construction workers and re-employ them on infrastructure projects because companies now have the "bandwidth" to take on these projects. The environment dominated the conversation, with all three typical responses to pollution: cap and trade, carbon tax and regulation. Mr. Mulcair favours a national cap-and-trade program, Mr. Trudeau a provincial co-operation of mostly carbon taxes, and Mr. Harper regulation. In reality, all three are tricky. Cap-and-trade programs require a strong stomach, once the price of permits rise and businesses start to yell; a carbon tax takes time to see results because people don't change the amount of gas they buy in the short run; and threat of regulation is a stall tactic to avoid doing anything at all – or if actually implemented, an inefficient approach to the problem. Given the price of oil, emissions might just sort themselves out.

Christopher Ragan

  • Trudeau: B+
  • Mulcair: B
  • Harper: C

Mr. Mulcair was asked to explain his carbon-pricing proposal and its cost. He argued for a cap-and-trade system, which is sensible, but refused (twice) to provide any financial estimates. When asked about leaving carbon pricing policy to the provinces, Mr. Trudeau argued that provinces are already moving ahead with policy and that the NDP's proposed federal action is difficult if not impossible in a country like Canada. He stressed the importance of the federal government working with the provinces to develop policy. Mr. Harper responded to the others by arguing, incorrectly, that carbon taxes are not about reducing GHG emissions but rather about raising government revenue. He supported his government's approach of developing direct regulations but was quite misleading when he claimed that "we are not imposing costs on consumers," apparently ignoring the fact that regulations are typically far more costly for the economy than either carbon taxes or cap-and-trade systems.

Infrastructure

Jack Mintz

  • Harper: A-
  • Trudeau: A-
  • Mulcair: B+

All three parties are proposing more spending on infrastructure. Mr. Trudeau made the strongest case for new infrastructure spending except that he incorrectly argued that Mr. Harper's government cut such spending. Mr. Harper was correct that public infrastructure spending has climbed sharply (3 per cent of GDP in 2002 and now over 4 per cent of GDP in 2015). This was making up for a dearth of spending, especially in the 1990s. Mr. Mulcair's plan was not out of step with the others, especially with transit.

Eveline Adomait

  • Trudeau: B+
  • Harper: B
  • Mulcair: C+

Mr. Trudeau had good ideas about spending on infrastructure but didn't tell a compelling story or give concrete examples to nail down his points. That was unfortunate for him, as this section was his strongest suit. Mr. Trudeau's approach is to work with various levels of government through some sort of infrastructure bank. The idea is to spend on things that provinces and municipalities think are important rather than try as a federal government to pick "winners." Small and steady was Mr. Mulcair's approach, as he criticized Mr. Trudeau for unsustainable spending plans. Mr. Harper fought off accusations that he has left an infrastructure gap given how much the Conservatives have spent on this item. To be honest, most of that was "bucket-ready culvert" spending with the purpose of kick-starting the economy out of the financial crisis, rather than to solving Canada's infrastructure problems. Two birds, one stone.

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Christopher Ragan

  • Trudeau: A
  • Mulcair: C+
  • Harper: C

Mr. Trudeau was asked to make the case for infrastructure investment and he offered a very strong argument for why now is a good time for such investment – especially given very low interest rates, a low debt-to-GDP ratio and sluggish economic growth – and why running modest budget deficits for a few years to finance this spending is justified. Mr. Harper responded with the claim that budget deficits are not what is needed at this time, suggesting (incorrectly) that more infrastructure spending would weaken the economy. Mr. Mulcair's comments in the open discussion were essentially that Mr. Trudeau's promises were unsustainable (which is clearly wrong), but he did not make his case with any clarity.

Immigration and the economy

Jack Mintz

  • Mulcair: A
  • Harper: A-
  • Trudeau: B+

I thought the exchange on immigration was one of the more informative parts of the debate. Mr. Trudeau and Mr. Mulcair criticized Mr. Harper with respect to family reunification being insufficient, although Mr. Harper did argue that it has risen 25 per cent. Mr. Mulcair hammered the PM on the temporary foreign workers program that was once such a political hot potato, and was effective in supporting former chief of the defence staff Rick Hillier's argument for a large increase in Syrian refugee intake. Mr. Harper talked about some of the innovative policies brought in, such as express entry. as well as balance in funding the cost of integration. However, some misinterpretation of data was apparent. It is true that the Conservative government has increased immigration at 250,000 per year, better than the 1990s.

Eveline Adomait

  • Trudeau: C+
  • Mulcair: C+
  • Harper: C

The debate got heated on this one, with both Mr. Mulcair and Mr. Trudeau accusing Mr. Harper of fear-mongering. Mr. Mulcair quoted Rick Hillier as saying, "Stop using the security concerns as an excuse to do nothing." Some of the negative image stuck, although Mr. Harper did show that Canada has success in integrating new Canadians through effective but limited programs. He wants to do more but in the wake of the refugee crisis facing Europe sooner is better than later. Mr. Harper was on his toes when Mr. Mulcair accused him of having secret meetings with the (ethnic) media, to which he replied, off the cuff, "I'm not sure how you have a secret meeting with the media." Mr. Mulcair and Mr. Trudeau could have been more forthcoming with how they would take in large groups of Syrians. They seemed to be more concerned about family reunification than refugees.

Christopher Ragan

  • Harper: B+
  • Trudeau: C
  • Mulcair: C

The main question here was about the right balance between "family reunification" and "economic" immigration. None of the three leaders really answered the question. Mr. Harper was able to provide a coherent explanation of some elements of existing policy, and the need to think carefully about how to maximize the benefits of changes in immigration policy. Neither Mr. Trudeau nor Mr. Mulcair offered specific policy proposals. Unfortunately, this part of the debate then turned into a shouting match (one of many) about the government's response to the Syrian refugee crisis. Nobody really shined, although Mr. Harper clearly showed his command over many details of current policy.

Housing

Jack Mintz

  • Harper: B-
  • Mulcair: C
  • Trudeau: C

None of the leaders were particularly good in answering the question about what sort of housing policies they will have to help younger people buy in high-cost cities like Toronto and Vancouver. Mr. Harper at least mentioned several policies, including increasing the new buyers' support, TFSA expansion for saving and the home renovation credit. Mr. Mulcair's answer was to put more money in the hands of families with children through subsidized childcare, but hikes to Canada Pension Plan payroll taxes would offset some of this. Mr. Trudeau repeated his growth-promoting infrastructure program, but offered little else. In fairness, it's unclear what can be done at the federal level beyond massive subsidies that would only bid up home prices.

Eveline Adomait

  • Trudeau: D+
  • Harper: D
  • Mulcair: D

Mr. Mulcair and Mr. Trudeau mentioned high prices in Toronto and Vancouver as a problem, but with no real analysis of what can be done about it other than Mr. Mulcair's policy to raise the federal minimum wages to $15 an hour (I can't imagine that many federal minimum-wage earners are homeowners in either of these cities). In fact, there is very little federal policy can do about home affordability given that interest rates are controlled by the Bank of Canada and land-use policy is provincial. The federal role in social housing was mostly ignored, although Mr. Trudeau mentioned that he would provide more funding for rental and senior housing. A side note: Mr. Trudeau did make a pitch to reinstate the long-form census as a way of getting information, which most academics think is a good idea, although you don't actually need this census to get information about housing prices and household levels of debt. Mr. Harper said home ownership is a good-news story in Canada with the rate of home ownership up. Overall, a wasted section of the debate, except that it was home to a funny exchange between Mr. Trudeau and Mr. Mulcair. Mr. Trudeau accused Mr. Mulcair of policies that were "puffs of smoke," to which Mr. Mulcair interjected, "You know a little bit about that, don't you Justin?"

Christopher Ragan

  • Harper: B
  • Trudeau: C+
  • Mulcair: C+

This was probably the most confused segment in the entire debate. The initial question to Mr. Trudeau was about how to prevent a housing bubble, but his answer was about how to help the middle class – largely through small cuts in income-tax rates. The question to Mr. Mulcair actually was about how to help the middle class, and he offered an expanded child-care program and an increase in the federal minimum wage, the first of which may be effective (but very expensive) and the second of which is probably a bad idea. During the open discussion, Mr. Harper spoke coherently about how rising home ownership in Canada is a good-news story, and also about how TFSAs provide assistance to many Canadians (both of which are right). Mr. Trudeau made a good point that it makes little sense to provide the Universal Child Care Benefit to rich people. Mr. Harper had the edge overall, but nobody really stole the show.

Taxation

Jack Mintz

  • Harper: A
  • Mulcair: B
  • Trudeau: B

Mr. Harper's strongest suit was tax policy; he argued that payroll and corporate tax increases would hurt the pocketbooks of Canadians. Corporate tax policy was Mr. Mulcair's soft spot. He argued for fair corporate taxation, not making it clear who really pays for corporate tax, never mind dismissing well-known investment impacts. In reply to Mr. Harper, Mr. Mulcair wrongly asserted that full taxation of stock-option benefits would raise $500-million, even though by necessity it would be offset by a corporate tax deduction as is current practice for other forms of compensation. Mr. Trudeau focused on his redistributive package of increasing taxes on the rich to fund a middle-income tax reduction. What that does for growth is another matter, with Mr. Mulcair making the strongest point that marginal tax rates above 50 per cent discourage people from working.

Eveline Adomait

  • Harper: C
  • Mulcair: C
  • Trudeau: D

Of all the topics covered in the debate, taxation had the potential to be the most important, but I was quite underwhelmed. Most of what I know about the leaders' relative positions I knew before the debate. A few criticisms of their policies: Mr. Trudeau's plan to go after the top 1 per cent isn't big enough to give him the funds he needs to fund the middle class. Mr. Mulcair's position to tax corporations and increase payroll contributions wasn't challenged as to how many jobs this might impact. I think we should have some good guesses before we do anything. Certainly, if I were an employee (a unionized worker, perhaps) in a large corporation, I should be very concerned about what happens to my future compensation, let alone my job security. Both Mr. Harper and Mr. Mulcair are courting the small business owner, who votes, although I think Mr. Trudeau is correct in thinking that a tax break to this group is unnecessary. Family businesses can already split income through their corporation. Furthermore, this tax break is ineffective if these folks have no plans to hire more people with the extra profits in their pockets. Small isn't always beautiful nor big inherently bad. This seemed like a lot of vote-buying to me.

Christopher Ragan

  • Trudeau: A-
  • Harper: B+
  • Mulcair: C

The original question, put to Mr. Mulcair, was about explaining why the NDP is proposing an increase in the corporate income-tax rate from 15 to 17 per cent. He responded with the familiar (and misleading) argument that corporations need to pay their fair share, but that he would reduce the rate on small- and medium-sized firms. Unfortunately, his policy would create problems by increasing the existing tax-rate gap between small and large firms – although he ignored this point in the debate. Mr. Harper responded, correctly, that increases in corporate taxes are generally bad for both investment and jobs, but unfortunately (and not surprisingly) defended his government's introduction of many inefficient "boutique" tax breaks. In the open discussion, Mr. Trudeau argued that the Liberal plan asks the most successful Canadians to pay more so that the middle class can receive a tax cut, and he also argued, correctly, that raising corporate income-tax rates doesn't as effectively address the inequality issue.

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In summary

Jack Mintz

The discussion on the economy brings out the clearest differences among the three leaders in terms of taxation, deficits and growth. Yet, I cannot help feel that I did not get a good answer as to whether the three parties have a consistent growth plan. Canada is going through through major restructuring in face of weaker resource prices. Trade will be critical but hardly mentioned. Obviously, Canada needs to improve its productivity in the coming years, which is an age-old question. I didn't get any new ideas this evening.

Best one-liner? Mr. Mulcair: "I don't want to do like Mr. Trudeau, leave a massive debt on the backs of future generations."

Most preposterous statement? Mr. Mulcair: "We're going to be asking Canadian large corporations to start paying their fair share" of taxes – whatever that means, since it's people who pay taxes.

Surprise of the night? None.

Eveline Adomait

Mr. Mulcair's $15-a-day child-care program is so significant to spending that it should be carefully analyzed. The cost to fund the program once child-care workers are inevitably unionized, the standardization of care (protecting children at risk) and the impact on the labour supply of women is revolutionary. This is a very big deal and it might be more prudent to propose a scaled-back version that targets low-income families rather than guaranteeing this benefit to all families. Here is where I think the big difference lies between Mr. Harper and Mr. Mulcair, one the electorate should consider carefully.

Mr. Trudeau mentioned during the debate that they had not discussed First Nations issues. That topic should have been covered under a broad topic of social programs, which could have included social housing. Also, the moderator should have stopped the leaders from talking over each other sooner. It made parts of the debate unbearable.

How did they do? Most Conservatives will be happy with Mr. Harper, but Mr. Mulcair did serious damage to Mr. Trudeau's campaign in this debate.

Most preposterous statement? Mr. Trudeau's assertion that incomes should rise at the same rate as housing prices.

Christopher Ragan

The first part of the debate had isolated elements of clarity and coherence, but they were far too scarce. Too often, the three leaders were speaking (or shouting) over each other, and at some points, I felt embarrassed to be watching. The moderator did not do a good enough job of keeping speakers in line, and almost never forced them to answer the precise questions they were posed. During the second part of the event, however, the three leaders spoke longer and were less scripted. As a result, we saw more coherence in their views.

Best one-liner? Mr. Harper: "I'm not sure how you have a secret meeting with the media."

Most preposterous statement? Nothing that particularly jumped out at me.

Surprise of the night? Once the debate was over, and I analyzed the various elements of the economic platforms using my grading scheme, it became clear that Mr. Trudeau had significantly better policy ideas and arguments. But it wasn't always so obvious during the heat of the battle, probably because the other two leaders often appear more comfortable and articulate – even while saying things that don't hold up economically. So Mr. Trudeau won the debate because his policy proposals are more grounded in solid economic analysis – and unlike Mr. Mulcair and Mr. Harper, he avoided taking positions based on wishful thinking from left- or right-wing ideology.

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