Three Economic Risks Now Backfiring on Tories

Market wonks are sure to rejoice as three party leaders go head to head-to-head on the economy tonight.

Conservative Party leader Stephen Harper has been taking a beating on the economy despite the announcement of a surprise surplus and the party's new attempts to frame the NDP and Liberals as poor economic managers.

One attempt took the form of a letter from Industry Minister James Moore (not seeking re-election) to British Columbia's business community, which warned against electing a "risky" new government.

But with a crashing loonie, weak jobs numbers and only a small surplus following six consecutive deficits, the Conservatives may have a hard time convincing Canadians they know what they're doing on the economy.

Here are three economic missteps that are now dogging Conservatives, and could play out during tonight's debate.

1. Bet on oil as economic engine

A common phrase used to explain Canada's current recession, announced just two weeks ago, is that Harper "bet big on oil and lost" -- but what exactly does that mean?

Critics say our economy has been too focused on oil, so when prices crashed late last year, a large portion of the Canadian economy went with it.

We lost nearly 50,000 oil patch jobs in 2014 due to the crash, and another 25,000 are threatened this year, according to a Canadian association of oil drillers.

Janice Plumstead, senior economist with the Canada West Foundation said the government "bet big" by giving more support and attention to the oil industry rather than other sectors.

"There's been very little attention on the manufacturing sector," Plumstead said. "There's been no compensating policy or investment in R&D to look into new technologies and increase our productivity."

Canada's low dollar comes as a byproduct of the oil crash, and manufacturers haven't been able to capitalize due to weakened infrastructure.

In 2006 Harper declared Canada would be an "energy super power" and his policies reflect efforts to make that happen. But that promise could backfire during the second leaders' debate on the economy.

2. Overstated job creation record

The Tories often brag about creating 1.3 million jobs since the 2008 recession stabilized in 2009, but Unifor economist Jim Stanford says that's not enough to restore pre-recession employment.

Job creation figures under the Conservative government show a stagnant job market and, in some cases, private sector wages rolling back, Stanford said.

He said since 2009 the government has created 750,000 fewer jobs than it needs to get the employment rate where it was before the 2008 downturn. Canada's employment rate still lags two per cent behind pre-recession levels.

That lag persists because business aren't hiring, investors are holding on to their money and Canada's economy is being held up by consumer spending, he said.

"Almost no jobs have been created all year in the private sector," Stanford said of the weak job market, noting 95 per cent of the jobs created since January have been in the public sector. "In fact private sector payrolls are lower today than they were last October."

Those Stats Canada job creation figures tracked by Stanford also include temporary foreign workers, who are included in labour surveys.

3. 'Irresponsible' tax breaks

Six consecutive deficits could have been avoided had the Conservatives stopped giving away tax breaks it couldn't afford, said Dennis Howlett, executive director of Canadians for Tax Fairness.

Howlett blames shaving points off the GST, so-called boutique tax credits like the recent child benefit increase and a low corporate tax rate for the government's funding shortfalls.

"They keep doing this, they keep giving tax cuts even before they have a surplus available to give away," said a frustrated Howlett. "It is irresponsible."

He said those who save money on the tax breaks often sit on the money or buy imported luxury items, which does not help create Canadian jobs.

Canadian corporations are currently sitting on more than $600 billion in "dead money" they aren't investing back into the country.

Canada charges 15 per cent in corporate tax while the U.S. government tax rate begins at 34 per cent.

Howlett also pointed to cuts to Canada's revenue agency, which has made it more difficult for the government to crack down on tax cheats.

Will leaders address the Conservatives' own economic risks? Canadians will have to tune in tonight at 8 p.m. Eastern, 5 p.m. Pacific to find out.