In the 1992 U.S. presidential campaign, Bill Clinton ran on the central premise "It's the economy."
One could certainly make the argument the economy should be and is the focus of any major political campaign. Our economy provides the wealth we require as a nation to support all of the funding our government's provide.
Consider the breakdown of the federal budget. Personal income tax makes up 49 per cent of the revenue, while corporate (15.2 per cent) and GST (11.7 per cent) make up the bulk of the remaining taxes (EI premiums: 6.7 per cent, Non-resident income taxes: 2.5 per cent, Other revenues: 9.4 per cent; Other taxes and duties 5.4 per cent).
Personal income taxes and corporates taxes are directly related to the health of the economy. High unemployment drives down the total salary mass of the country and decreases income tax revenue while driving up EI payments which are not totally covered by the premiums collected.
A sluggish economy reflects back on corporate earnings decreasing the amount collected and taxed while also decreasing dividends resulting in less money going into pension plans and an increased need for social assistance to the elderly.
The total GST collected is tied to consumer consumption which is tied, in turn, to personal wealth and the ability to make purchases where the GST is applied. The amount of GST collected annually measures to some extent consumer confidence in the market place. When the economy is bad, large purchases are put off to some future date.
The amount of revenue the federal government has to spend directly correlates with the economic health of the Canada and the rest of the world. The federal government spends money on transfers to the elderly, the unemployed, and children. Roughly one third of every dollar collected goes directly back to people. Another $50.9 billion is funneled into health and other social programs.
The economy allows us to support people across the country and around the world by providing the revenue to cover the expenses. Growth in our economy leads to growth for us all. It allows us to support the lifestyle and social objectives we value. It supports the programs we want - from the military to the environment to our justice system.
It is not surprising, then, to find the economy or "economic conditions" high on the priority list for voters in Canada and the rest of the world. Bill Clinton is right - "it's the economy" which drives people to vote.
In a recent poll by Abacus, 76 per cent of Canadians view wages and the cost of living as either a moderate or very big problem while 75 per cent put affordability of housing in the same category. The economy is what matters.
A previous poll by Abacus had 34 per cent of Canadians rating the economy as the most important issue facing Canada. The high was in Alberta with 47% of respondents rating the economy as the most important issue while for B.C. it was only 27 per cetn. But out economy is doing well while Alberta is struggling.
If you add in unemployment, 64 per cent of Albertans put either the economy or unemployment at the top of their list. There is a great deal of fear across our eastern border which extends well out into the prairies.
On the whole, the Canadian economy has been doing well for the past four years. While the previous government oversaw an economic stall resulting in a recession, under the Liberals we have seen moderate continuous growth in the GDP. Unemployment across the country is down, dropping to a 40 year low of 5.7 per cent across Canada with B.C. leading the pack with a 4.6 per cent unemployment rate in April. British Columbia is effectively at "full employment" with companies now finding it difficult to attract workers.
The OECD has similar confidence in the Canadian economy, saying: "Well-being is high in Canada, and the economy has regained momentum, supported by a rebound in exports and strengthening business investment. Macroeconomic policies are gradually becoming less stimulatory, and budget policies are sustainable in the long term, although difficulties remain at the provincial level."
Their analysis does have some qualifications pointing to the affordability of housing as a concern along with our ongoing relationship with the United States. The recently lifted tariffs on steel and aluminum into the United States and on a variety of goods entering Canada were impediments to free trade across the border. We also still have a lumber dispute to resolve.
On the whole, though, the Canadian economy is doing well which leads to a question about this year's federal election. Will the economic record of the past four years be more important to the voting public than other issues? Do we want to go back to a Conservative government which ran up $150 billion in debt over the last five years of its mandate or stay with a government in which the economy has "regained momentum?"
Only time will tell.
