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At Issue

With Philip Shaw

Economic Forecast for "Soviet Canuckistan" Still in the Black

Tuesday, November 5, 2002

Jeez, we've got a new name. No, we're not from Canada anymore. We're from greater "Soviet Canuckistan." At least that's what American commentator and former Presidential candidate Pat Buchanan said last week. He was responding to the latest controversy regarding customs restrictions at the American/Canadian border.
Pat Buchanan was once a Republican presidential candidate. In the year 2000, he must have hit his head because he ran on the American "Reform" party ticket. He was the subject of the infamous "Palm Beach" County recount in the year 2000. That's when the heavily Democratic county sent over 3000 votes to Buchanan, a seeming impossibility. The Al Gore Democrats cried foul. Dubya Bush went on to take Florida by a few hundred votes. Folks in Palm Beach county were left wondering who had voted for Buchanan.
The Canadian analogy would be the Canadian Alliance sweeping the separatist country around Lac St.Jean, Quebec. That's not going to happen. But in the United States, Pat Buchanan has parlayed his political eccentricity into being a popular right wing commentator. "Soviet Canuckistan" was grandstanding for his audience. The problem this time is some of his followers might actually believe that.
At the other end of the extreme last week, we had finance minister, John Manley referring to Canada as a "northern tiger." He made the statement after releasing his latest synopsis of the Canadian economy. He said the federal surplus for this year is projected to be $1 billion. This is after the government restores a $3 billion contingency fund which was used for post 9/11 security concerns. Economic growth rates are strong. In the first half of this year, growth stood at 5%. Next year some analysts are predicting an annual growth rate of 3.5%.
These numbers are huge. Canada is a developed country with a very sophisticated economy. Growth rates at 5% are more reserved for third world countries which usually have a lot of growing to do. So with Canada chiming in at 3.5% and higher, clearly the economy is humming.
Regional disparities in our economic picture are obviously Manley's problem. You don't have to be a rocket scientist in Chatham-Kent to know that with the Navistar and Q3 closings, our local economy is reeling. Add another droughty year on local farms, and there is nothing "northern tiger" about our local economy. Surely, better times are around the corner.
Unfortunately, just around the corner, always takes a long time. Certainly finance minister John Manley knows this. He's dealing with a couple other priorities which seemingly are about to wait no longer. Health care and defense are both looking for lots more money. Manley might have no choice but to satisfy those needs first before any other type of fiscal stimulus.
The health care issue is a big deal. Last week, the Kirby senate report on health care was released. It has called for a "health tax" to raise $5 billion additional dollars annually. That is a lot of tax money, something Manley would surely love to avoid. With the provinces constantly demanding more money for health care, he may succumb to the pressure. More money will be on the way, but not necessarily a health tax and not necessarily 5 billion dollars.
Defense will probably see more money, but like health care, the Liberals have no stomach to raise taxes for military spending. The problem is with our best friend and neigbour constantly rattling its sabre at Iraq and others, we're expected to pitch in our fair share. Defense minister John McCallum has chimed in with his opinion. He wants more money and he wants it soon. If he doesn't get it, I expect McCallum to be shifted out of defense. As a former senior Bank economist, he's not used to being stood up.
Underneath all of this, is something even more interesting. It's the political manifestations surrounding the departure of Prime Minister Jean Chretien. Clearly, Paul Martin is on the fast track to be the next Prime Minister and his minions in Parliament are starting to assert themselves. In many ways, these forces are the new opposition to the reigning Chretien government. As Chretien's finance minister, you can be sure John Manley is very aware of them.
So why not get in front of the cameras and call Canada a "northern tiger" in the same week that American commentator Pat Buchanan calls us "Soviet Canuckistan." Manley has leadership aspirations himself. Luckily for him, the economic numbers are still rosy. His challenge will be to keep it going.



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.