Tuesday, 6 November 2012

Economic stagnation in US means whoever wins the US Presidential Election has his hands full.

Who ever wins today has the same job to do.

The US Presidential Election: a prediction about implications for Canada. 

Canada needs a strong United States so we can keep China off our natural resources. 

by Tom Thorne

It’s Election Day in the US. President Barack Obama will likely remain President of the United States for a second term. Governor Mitt Romney will do very well but when the dust settles in the Electoral College, Barack Obama will squeeze by with enough states siding with him to just make it. The magic number of Electoral College votes needed is 270. The closeness of the vote says that the US is polarized and no clear set of policies for economic reform are apparent from either candidate.

There is probably very little difference for Canada whether Mitt Romney or Barack Obama becomes president. That’s because of the US Senate and House of Representatives remain  in political grid lock. A Democrat dominated  Senate and a House of Representatives ruled by Republicans will likely be retained after today. 

The real threat to Canada is not who is in the White House but what they do about the mounting US Government debt now at $16 Trillion plus. To this point there is no will apparent to cooperate for a solution.

If the US literally prints its way out of its economic mess, the mess will be compounded.  Such an action is guaranteed to create inflation and a rise in interest rates charged to service the debt and also generally for business and lenders of all kinds. The US may be called an economic basket case like Eurozone countries who overspend. Lenders will want more interest to cover the risk of carrying US Government debt loads expressed in diluted valued bonds and currency.

Serious debt reduction is needed in the US Congress and Administration.  And there is very little wiggle room to cut US government expenditures. However failure to do so will mean in the middle range of time that the US will become more and more an economic lightweight and hence its world presence will be diminished. That is bad for Canada.

The current financial situation faced by the US offers powers such as China immense strategic clout on the world stage. That is what the Chinese Government wants today as they also choose their new slate of leaders behind closed doors. The US is making itself militarily and financially vulnerable. Canada, no matter how well we manage our financial affairs, will be forced into the same situation as our major trading partner.

It will be tougher for Canada to retain our natural resources.  Potential deals like the Chinese State taking over Nexen in our oil sands, will become more likely if we want to maintain our own economic performance independent of a financially errant US. We need to sell our oil to the US not to China. President Obama nixed the pipeline to US markets for domestic political reasons that deal needs to come back on the table if he is re-elected. Mitt Romney says he will bring back the Canadian pipeline to the US.

It really is time for the United States Government and its politicians to bite the economic bullet. Failure to do so means a downsizing of the United State’s influence on the world stage and that can only mean that Canada will need a more independent economic policy as China grows in influence. In short the lack of action on the economic front by our major trading partner is taking us more to Europe and into the arms of the Chinese Government’s hegemony.

© Copyright 2012, Tom Thorne, All Rights Reserved.   


  1. Nice article, Tom. Is Nebraska still a stick in the spokes of the pipeline? I know a new route has been designed, but I heard during the election that the Governor of Nebraska doesn't want it going anywhere through their state now.

    From Wikipedia: The governor of Nebraska holds the "supreme executive power" of the state of Nebraska as provided by the fourth article of the Nebraska Constitution. The current governor is Dave Heineman, a Republican, who assumed office on January 20, 2005, upon the resignation of Mike Johanns. He won a full term in 2006.

    This does not sound like someone who will play with President Obama. On the other hand, Governor Romney was promoting the immediate go ahead for Keystone, and I suspect a lot of Republican businessmen will be pushing hard for it to go through now.

  2. The US pipeline is inevitable. Now that Obama has a new term it will likely happen. Rather this US pipeline than a deal with China where Canadian oil flows to a state owned conglomerate of a country whose respect for democracy is about nil.