Musings —01.15.2015 06:02 PM—
It’s the economy, stupid.
That’s what Bill Clinton’s top strategist, James Carville, famously wrote on a piece of paper, a generation ago. He then put it up on the wall of the Clinton campaign war room in Little Rock, Arkansas. (He also posted two other important messages that have achieved less recognition: “Change vs. More of the same” and “Don’t forget healthcare.”)
Clinton, aided and abetted by Carville, would go on to win the 1992 presidential election campaign, of course. Most folks attribute that victory to Clinton and Carville’s laser-like focus on the economy.
It’s become conventional political wisdom in the intervening years. Incumbents win when the economy is good; challengers win when the economy is bad. Everything else – health care, national security, whatever – is important, but not nearly as important as the economy.
But is that axiom still true? Justin Trudeau doesn’t talk about the economy all that much, but he is doing rather well with just the above-noted “change” formulation, thank you very much. He could win simply by being unlike the other two guys, and by maintaining a pulse.
Stephen Harper, meanwhile, is defying the conventional political wisdom with a singular focus on foreign affairs. In recent months, the Conservative Prime Minister has been much more preoccupied with international files: brokering détente with Cuba and the U.S., staring down Russia’s despot Vladimir Putin, an increasing focus on the Arctic Circle geopolitics, and of course military action against ISIS/ISIL. It is harder to recall anything noteworthy that he has had to say about the economy.
Despite that, Harper’s party is competitive again – and he has started to emerge in polling as Canadians’ preferred choice as Prime Minister.
So what, then, of the economy? With both Trudeau and Harper remaining popular, and with both saying precious little of note about it, is the Clinton/Carville formulation no longer true?
One senior analyst with a major bank (one who, unlike most bankers, knows a great deal about politics, and has even helped run a few winning campaigns) knows why Harper has not yet been hurt by his pirouettes on the international stage. The bad news – plummeting oil prices, a declining dollar, and a December drop in jobs and building permits – hasn’t really registered on the public consciousness, he says.
“The next fiscal year, 2015-2016, is when we will see the big impact from oil prices,” says the analyst. “[But Harper] will still balance the budget this year – the $3 billion contingency fund allows him to do that. Next year may show a slight deficit, which is bad for political purposes. But it’s virtually meaningless for financial markets.”
The analyst concedes that this week’s much-publicized TD Bank report likely caused some consternation at the Department of Finance and the Prime Minister’s Office. In the report, TD predicted that the Conservative government’s balanced budget would now only happen “with the thinnest of margins.”
Our anonymous political-financial analyst, who works for a rival bank, is undeterred. “The trend in debt-to-GDP continues down, and positively,” he says. “Canada’s AAA credit rating is intact. Even TD projects surpluses to return. And refinancing of the debt is resulting in big time savings for federal government.”
But does that mean, then, that the Prime Minister has many more months of wiggle room – and that he can put off Election 2015 to the Fall?
The smart banker doesn’t hesitate. “If was his advisor, I would say: let’s go sooner. Let’s not give any more time to the Opposition on the Summer BBQ circuit!”
In other words: it’s still about the economy, stupid. And Stephen Harper is well-advised to go before the economy gets worse, and the electorate start to notice.