Analysis

How a recession would shake up the election campaign

Canada's latest GDP numbers will be released Tuesday and will show once and for all whether the country has been in a technical recession these past six months — which could have some surprising effects for all three major political parties.

Economic downsizing would undermine Tory claims of fiscal responsibility, but could bite other parties, too

Liberal Leader Justin Trudeau, left, and NDP Leader Tom Mulcair, right, have gone in different directions on the question of deficits - but both believe Conservative Leader Stephen Harper is vulnerable over an economy in the midst of a recession. What if there isn't one? (Canadian Press/Reuters)

It was almost as though they had co-ordinated it.

In the same room, on the same day, Conservative and Liberal candidates lined up to attack the NDP's spending promises to date.

Conservatives said that after one year, an NDP government would blast an $8-billion hole in the budget. Liberals painted an even scarier picture: a $28-billion hole over four years. Where is the money coming from to pay for all the NDP promises? How will the party get to a balanced budget and not raise taxes? 

All valid, worthwhile questions for the NDP and ones that will be asked time and again until they present a platform that has been fully costed, which they promise to deliver in the weeks ahead.

But perhaps the most interesting part of this equation: Why is it happening now?

The NDP is well aware of their vulnerabilities on the economy. You can't point to a record you don't have, which can be a strength, but in the current context, more likely a weakness for the orange team.

So, the other parties are zeroing in on that weakness as they see the NDP continuing to carry the momentum into what is now the fifth week of this mega election campaign. The party has now become an open target worth hitting. 

And the Liberals and Conservatives need to chip away at the NDP's credibility before any actual numbers from the party even become available, to put some doubt into the mind of the electorate before there's even time to defend the party's figures. 

Tories try to redefine 'recession'

Which brings us to this week, when Canada's gross domestic product statistics will be released on Tuesday and will show, once and for all, whether Canada has been in a technical recession these past six months — in other words, whether there have been two consecutive quarters of economic contraction. 

If so, it may be difficult for the Conservatives to claim robust economic leadership given they will have been in charge while two recessions have hit. At the very least, they can point to another global economic downturn, a decline in the price of oil and economic problems in China. What they may have more difficulty explaining is why staying the course somehow makes sense.

This may also be why senior Conservative ministers like Jason Kenney are now attempting to broaden the definition of recession to a "widespread downturn in the economy." That is one way economists define the word, but it is not in fact how the government itself most recently defined a recession in its own anti-deficit legislation

There, it clearly states a recession as "two consecutive quarters of negative growth in real gross domestic product for Canada." That definition may go some way to painting the Conservatives into a corner. It may not be a big downturn, but good luck trying to label it as something else.

Conservative Leader Stephen Harper reinforces his economic record in advance of tomorrow's GDP numbers which may show Canada to be in a technical recession. 1:48

The NDP will also be challenged by news of a recession if it is confirmed. It's one thing to promise a balanced budget; it's another to actually deliver it as the economy contracts. If the NDP's current weakness is the economy, Canadians will to wonder why, at a time of some instability, should they suddenly test a new commodity? 

Liberals could benefit

The Liberals may fare best with news of recession. They are the only party that has embraced the idea of deficits in order to stimulate growth.

But say the economy proves to be not quite as soft some expect. Say that recession doesn't come to be. And instead of negative growth, all we have is a weak economy rather than a contracting one.

The Liberals will then be forced to explain why a $10-billion deficit is necessary right now. The message about investment and growth can still be put forward, but it may be a tougher and more nuanced sell to Canadians. 

All that to say, it is the economy that will define this campaign. Or, at the very least, this coming week.

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