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At Issue
Sponsorship Scandal Drowns Out Federal Budget Preparations
Tuesday, February 24, 2004
It's been a rough week for Prime Minister Martin. His "mad as hell" tour continued, taking him to the wilds of Manitoba and Alberta. Lost in this charade is what's happening to our economy. Last Monday the government announced a federal budget would come down March 23.It should be a good read. Not only will it be Paul Martin's first budget as Prime Minister, but also it will be Canada's first budget put together by Saskatchewan's Ralph Goodale. With an election in the balance, you can bet there will be some election goodies on the way.
Goodale faces a pretty good challenge. He was saddled with big spending commitments from the previous Chretien administration. With the provinces currently rumbling about health care spending, Goodale is being asked to come up with the goods. On his "mad as hell" tour, Martin, when he wasn't deflecting criticism, was telling the Premiers to tone down rhetoric regarding the Canada Health Act.
As the American economy goes, so goes Canada's. That should bode well for Goodale as he puts together the budget. The American economy has been strong buoying George W. Bush's election prospects. But he's got a problem with the war. Combine that with some new criticism from Senator John Kerry regarding the "outsourcing" of jobs in the US and Bush's journey to election day might not be so smooth. Aside from the war, it's the economy stupid, something George W. Bush knows too well.
The outsourcing criticism is an interesting tack for the Democrats to take. It also has big implications for the Canadian economy. The current fight over outsourcing has to do with white-collar jobs being sent over seas, specifically to India. Call centre jobs have been sent over to India to take advantage of lower wage rates. India has a vast supply of English speaking well-trained workers who toil for a fraction of the cost of American worker. Legislation is now being proposed in the US to stop this trend.
Canada has benefited by American moves to "outsource" some of these jobs. New Brunswick has been a major beneficiary of American call centres moving north. More locally Wallaceburg and Sarnia have seen American companies set up call centres in their communities. But moving them to places like India has led Democratic hopeful John Kerry to call their American bosses "traitor" and Benedict Arnold.
It is all leading up to a political showdown later this year. If somebody blinks, a direct result could be job losses in Canada. When you add our higher dollar to the equation, the growth in this job market in Canada has probably matured.
The service sector of the Canadian economy will surely be on Goodale's radar screen. He'll be cheering for the global economic free traders to do their work. The more free trade and free movement of capital in this world, the more American call centre jobs Canadians will get. The problem for Goodale; the outsourcing issue is leading to protectionism in the US congress. I don't think that is good for anybody.
But you won't find everybody agreeing with me on that point. There are many eloquent voices in the Canadian Automotive Industry who want a "made in Canada" auto policy similar to the auto pact, which was sent packing years ago. WTO requirements took care of that and the many automotive related jobs that went with it.
Interest rates may drift lower. Bank of Canada governor David Dodge has hinted at that. It seems nobody wants another 20% appreciation in the loonie. If rates do go down, that will help Goodale. He'll need all the political capital he can muster. Spending money "Liberal style" has certainly lost a little bit of its lustre.
Goodale has a quiet ace in his deck. You might remember me writing about an expected federal surplus for this year of $2.3 billion. Now private sector economists are projecting a federal surplus to top over $7 billion. That's huge increase over projections.
It will probably mean we'll see a new infrastructure program, coupled with even more money for health care. That is despite the fact that under Paul Martin cumulative health care transfers to the provinces has gone way down.
There will be more aid to Canada's devastated beef industry. They are now accepting single pennies on the dollar for Canadian beef. No industry has suffered worse over the last year than Canada's cattle sector. There is no easy way back. Goodale needs to keep that in mind.
But his mind and a lot of other Liberal minds are busy with other things these days. No matter how noble some of these fiscal and economic goals are for the future, the sponsorship scandal is muddying the water. When March 23rd comes along, amid the economic hyperbole, I think the sponsorship scandal will still have legs.
Philip Shaw, farms 830 acres near Dresden, Ontario. He holds a Masters of Agricultural Economics and Business Degree from the University of Guelph and is a well-known commentator on agricultural issues in print, on radio and over satellite in Canada and the United States. In the Chatham-Kent Times, Phil will use his frank and forthright writing style to address political and economic issues from the local to the international stage. He is a keen observer of political life at all levels, reads widely and has travelled the world to gather fodder for his column. See what's At Issue this week.
