Fitch Downgrades Canada's Credit Rating

Fitch Ratings, one of the big three global credit rating agencies, has announced it's downgrading Canada's credit rating from AAA to AA+. This is due to the tremendous debt -- roughly a quarter of a trillion dollars -- the Canadian government took on to prop up the economy during the COVID-19 lockdowns.

Though the Trudeau government was quick to argue that Canada's economy remains strong and that the country in an ideal position to turn things around, this does have the potential to significantly increase the cost of government borrowing and of doing business. That danger, moreover, will be amplified if, as some think, there are further downgrades to come:

David Rosenberg... has been predicting a downgrade on Canada’s sovereign debt since late April and thinks this won’t be the last. “The real question is: What took so long?’ .... Canada’s excessively leveraged national balance sheet has looked a lot like China, Italy and Greece for quite a while.” While Ottawa may appear to be in “solid” financial shape to some, this has “masked bloated debt ratios” in households, business sectors, and most of the provinces, he said. “This won’t be the last ratings cut, I can assure you,” said Rosenberg.

Now, it is true that governments worldwide have responded to the pandemic by racking up what would normally be unthinkable amounts of debt. Consequently, it is likely that Canada won't be the only country to have its rating downgraded.

But one thing that makes Canada unique is the shame that its governing elite feels about one of the pillars of its economy. As Dan McTeague of Canadians for Affordable Energy said the other day in an excellent piece on Erin O'Toole's environmentalist pitch in the CPC leadership contest,

Rather than championing Canada's hydrocarbon industry and creating economic growth with our country’s wealth of natural resources, O’Toole’s policies seem most focused on maintaining the what-seems-to-be-required, green-is-god image of so many politicians.... Our natural resources are an asset to this country, not a liability. They keep energy affordable, and give us one of the highest standards of living. O’Toole and other political candidates seem determined to remain blind to that fact.

You would hope that this turn of events would cause Canada's governing class to thank its lucky stars for the energy sector, a potential launchpad for recovery. But unfortunately they'll probably keep just hoping for pats on the head from similarly green-obsessed organizations like the UN  -- and how's that been working out for them?

Eventually someone is going to have to grow up and start taking things seriously.

Erin O'Toole, Environmentalist

Back in March I drew your attention to an article by Canadian Tory insider Ken Boessenkool which argued, in the wake of an election which saw the Conservative Party of Canada (CPC) pick up 26 seats, that the party needed to go all in on environmentalism.

Vote for us, the Conservatives said, and we’ll cut your taxes.

Vote for us, the Liberals said, and we will address climate change.

This worked wonders across western Canada, in rural Ontario, around Quebec City, and in a smattering of ridings in Atlantic Canada. But new polling for Clean Prosperity conducted by Conservative pollster Andrew Enns from Leger suggests climate change was a key reason why the Conservatives failed to gain ground in the 905.

I pointed out at the time that this was specious reasoning, since the Conservatives are less likely than ever to win in the Greater Toronto area  because of the collapse of the New Democratic Party as a viable electoral (and vote-splitting) force, not to mention the fact that the polling he cited was done by the carbon-tax activist group Canadians for Clean Prosperity. It isn't that surprising that their conclusion was Canadians Love Carbon Taxes!

Shockingly, Erin O'Toole, purported co-front runner in the CPC Leadership race, seems not to have read my post. (He must have skipped his press clippings that morning). That is, he sounds like he's going all in on the Boessenkool theory. At last week's leadership debate, his opponents hammered O'Toole's plan to introduce a "national industrial regulatory and pricing regime" as being a carbon tax-like scheme that would harm consumers and the oil and gas industry alike.

O'Toole [replied that] the party needs a serious environmental platform for the next election. "I'm the only one who has a detailed plan. It's disappointing to see Mr. MacKay attack that. If we're not clear on the environment in the next election ... we're not going to be able to get pipelines built," O'Toole said.

It's a surprising tack for True Blue O'Toole to take. His whole campaign is built upon contrasting himself with the Mr. Progressive Conservative, Peter MacKay, but here he is going all in on alienating the west.  Maybe he figures he can get away with it because they have no where else to go -- what are they going to do, vote Liberal?

But O'Toole is counting his chickens before they're hatched. He isn't leader yet, and western Canadian party members can still give that title to someone else, perhaps Derek Sloan or Leslyn Lewis.

Hopefully they do something to make it clear to O'Toole or MacKay or whoever wins that the party's base can't be ignored.