The Political Crisis Almost Eclipses the Economic Crisis (CAA Bulletin)

December 8, 2008

The Political Crisis Almost Eclipses the Economic Crisis

Just the Facts

Canadians witnessed high political drama this past week as the government was challenged with a possible successful non-confidence vote on the Economic Update delivered the preceding week by the Minister of Finance, the Hon. James Flaherty. The creation of a coalition by the Liberal and New Democrat parties, supported by the Bloc Québécois, threatened to defeat the government on December 8, 2008. The political crisis has been forestalled for the time being by the prorogation by the Governor General of the first session of Parliament after a mere two weeks of business.

What does this mean for the business of government? The Prime Minister has now promised that Parliament will reconvene on January 26, 2009 and a new federal budget replete with stimulant measures will be delivered on January 27, 2009. In the meantime, Cabinet retains its full powers to make appointments and to deal with the day to day business of running the government. The main impact of the crisis for the arts and culture sector is that since there was insufficient time for the government to place legislation on the Order Paper, revisions to the Copyright Act are once again in limbo.

The Coalition and the arts and culture sector

On December 1, 2008, Liberal Leader Stéphane Dion, New Democrat Leader Jack Layton, and Bloc Québécois Leader Gilles Duceppe announced that an agreement had been reached among the three opposition parties to support a cooperative government to address the impact of the global economic crisis on Canadians.

The resulting policy accord includes a proposal “…to provide active stimulus for the economy over the next two years, with a shared commitment to return to surplus within four years” maintaining that the necessity to stimulate the economy “is consistent with the understandings arrived at by all nations in the G20”.

While arts and culture did not figure widely in the proposal, the fact that the sector was mentioned at all in the brief four-page document is of some significance. The following sections are particularly noteworthy for the sector:

    Support for culture, including the cancellation of budget cuts announced by the Conservative government;

    Accelerating existing infrastructure funding and substantial new investments, including municipal and intergovernmental projects;

    Ensuring that the federal government has the appropriate programs in place to assist those most affected by the economic crisis so that all citizens will be in a position to fully participate in the economic recovery to follow;

    Facilitate skills training to help ensure Canadian workers are properly equipped to keep pace with the rapidly changing economy, while respecting provincial jurisdiction and existing agreements.

The CCA has already identified three of the four coalition proposals as possible elements of stimulus package.

Tell Me More about the economic crisis

Any attempt to read the tea leaves regarding the Canadian economy is a confusing challenge. In the past few weeks, three different assessments of where the economy is headed have been released by three different sources with three different perspectives!

The Minister of Finance, the Hon. James Flaherty delivered the annual Economic Update in the House of Commons on November 27, 2008. This statement joins that of the Parliamentary Budget Officer and another by the Canadian Centre for Policy Alternatives, each of which has delivered prognostications on the performance of the Canadian economy.

The Update includes few measures to stimulate the economy but most surprisingly of all, Minister Flaherty is projecting a balanced budget for this and following years, with a modest surplus of 800 million dollars at the end of the current fiscal year. Hoever, this confident projection has not stopped the Prime Minister’s talk of the likelihood of a deficit in the current fiscal year.

The Parliamentary Budget Officer is a position created by the Conservative government to ensure that Canadians could have access to a fact-based assessment of budgetary issues free from political coloration or interpretation. The Parliamentary Budget Officer’s Economic and Fiscal Assessment projects a balanced budget for 2008-09 but deficits in 2009-10 and 2010-11. These conclusions are based on a number of factors such as real growth in the Gross Domestic Product, decline in Canadian exports and American domestic demand, the reversal of commodity prices and a slowing in the growth of employment.

The Centre for Policy Alternatives’ Alternative Fiscal and Economic Report shares the Prime Minister’s view about the likelihood of a deficit, including closing 2008-09 in the red. They see this trend escalating from a modest deficit at the end of 2008-09 to a 31 billion dollar deficit by 2010-11. The Centre has also developed four different scenarios on which its calculations are based: a slowdown, a minor recession, a recession and a major recession.

It was widely expected that the Minister of Finance would announce spending initiatives to bolster the lackluster economy. The Minister of Finance did announce a program of restraint and spending cuts following a comprehensive review, some fiscal measures to shore up lending institutions’ access to credit, and changes to the rules regarding Registered Retirement Income Funds.The lack of stimuli to the economy drew fire from the Opposition but it was the elimination of the subsidies to the political parties that hardened its resolve. Since 1998, each political party receives a payment for every vote received in the last general election. These funds are used for party operations, research, and other political activities. Minister Flaherty announced that the government would introduce legislation to bring this practice to end on April 1, 2009.

Since the Economic Update and faced with the revolt of the Opposition, the government has backed down and simply indicated that it will cap the subsidy after April 1, 2009 rather than eliminate it. This news did little to assuage the anger of the opposition parties. The government has also promised a new federal budget on January 27, 2009 in response to the saber rattling by the opposition parties.

Proroguing the first session of the 40th Parliament has bought the government some breathing room. Canadians can expect to see the drama unfold once again as the 2009-10 federal budget comes to a vote when Parliament reconvenes. A defeat of the government on the budget could once again trigger more drama on Parliament Hill and maybe another election.

The CCA continues to develop ideas for the consideration of the Minister that use the arts and culture sector as key players in the advancement of the creative economy. These ideas will be the basis of a brief to the Minister which will be delivered before Christmas 2008.

What Can I Do?

The CCA is very interested in hearing any idea you or your organization may have about measures that can be used to stimulate the economy through the efforts of the arts and culture sector. If you have suggestions, please send them to the CCA by December 15 at the latest, for possible inclusion in the pre-holiday submission on economic stimuli and the arts and culture sector. You can also write directly to the Minister of Finance: The Hon. James Flaherty, House of Commons, Ottawa, Ontario KIA OA6.

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