In political lore, the Bill Clinton campaign slogan "It's the economy, stupid" stopped the George H.W. Bush presidency after a single term. Despite his other successes, the economy became the elder Bush's electoral Achilles heel.

As Canada heads into an election year, it is certain that federal campaign advisers of all stripes are thinking hard about how a sudden turn in the domestic economy is going to affect their chances in the coming vote.

Perhaps most devastating for the Conservatives was yesterday's report from TD Bank that falling oil prices, now well below half what they were last summer, mean the government's fiscal record no longer looks so good.

"The conclusion is unambiguous," writes TD senior economist Randall Bartlett in the report. "In the absence of new measures to raise revenues or cut spending, TD is projecting budget deficits in fiscal 2015-16 and 2016-17."

Rate risk

Oil is just part of the problem. The Canadian economy continues to lose jobs while the U.S. economy surges. And that adds an extra difficulty. As the economy heats up south of the border, the U.S. central bank could begin to raise rates, pushing Canadian long-term interest rates higher.

Higher rates are not good for Canadians. "So much debt has been taken on during the course of this downturn that every uptick in interest rates that we get is going to hit the cash flow of ordinary people," said Bank of Canada governor Stephen Poloz during a CBC Radio interview in what may be my favourite economic quote of 2014.

But not everyone is gloomy about the state of the economy during this election year, including Simon Fraser University economics professor Richard Harris. He calls the sharp decline in the value of the Canadian dollar that has accompanied the decline in oil "incredibly good news," especially in B.C., a province dependent on U.S. tourism.

Loonie to the rescue

"Canada's competitiveness has improved dramatically from where we were a year ago," says Harris. "It would be great if we could get the dollar down another five or six cents."

Harris says that will create a new two-speed economy. But the roles will be reversed.

"I think the election strategies are going to have to revolve around that particular dichotomy. Ontario and Quebec are going to see dramatically improving economies," says Harris. "Alberta is going to be in quite a pickle and the rest of the provinces are somewhere in between."

A report from non-profit think-tank the Conference Board of Canada says Harper's home province, Alberta, may be heading into recession.

"The Conservatives are in a tough spot," says Harris. "Here they are, a fiscally conservative party and their base is being hammered."

It's difficult to hand out subsidies to the energy sector after telling everyone else in Canada to let the market decide. Harris doesn't rule that out, but any subsidies would have to be huge to have any more than a token impact. It would also leave the Conservatives open to opposition criticism of favouritism and recklessness.

'When the [oil] price falls … it doesn't look like they made a good choice' — York University's Robert MacDermid

One thing governments often do when the economy weakens is to spend on infrastructure. But experts say that even if the Tories are willing to go against their promises and increase the deficit, there won't be time for that stimulus to strengthen the economy this year. And when it comes to promises about the future, the governing party has no advantage.

Youth vote

One bit of stimulus that elections always bring is spending on the election itself, York University's elections specialist Robert MacDermid says. He calculates additional spending by Elections Canada and by the parties and candidates at something over $400 million.

MacDermid says the Harper Conservatives will take political heat for identifying so wholeheartedly with the energy industry.

"When the price falls and suddenly jobs start to disappear, it doesn't look like they made a good choice," says MacDermid. But he believes that isn't enough to wreck their chances. "I think that the Conservatives will quite ably be able to claim that they have managed the economy extremely well from 2011 on." 

According to MacDermid's analysis, two economic issues that may not play high in the coming election campaign are poverty and youth unemployment. Poor people and the young just don't pay enough attention in elections to make a difference. 

"Why would you spend your time and money in a short period of time on a group of people who are very unlikely to vote?" he asks.