With the American election resolved and the President re-elected, the question now becomes what to expect in a second Obama term, and what its implications are for Canada. To be sure, the President retained his position decisively in the Electoral College, but won much more narrowly in the popular vote. Moreover, neither candidate campaigned seeking a broad mandate; this leaves the President and Congress with significant latitude in governing.
However, governing in the present context will be a challenge. The Democrats picked up seats in the Senate, though the House of Representatives remains in Republican control. Advancing legislation in divided government is characterized by the strong likelihood of legislative gridlock. What is eminently clear, however, is the acute need to strike a budgetary bargain between Democrats and Republicans. Indeed, the looming fiscal cliff threatens to have profound, inimical effects on both the US and Canadian economies. It is slated to take roughly $600 billion dollars out of the US economy, triggering caution from various economists that this could generate a recession.
Absent bold, bipartisan compromise, automatic tax increases and concurrent spending reductions will be put into effect, which poses a grave threat to the American economy and, by extension, the Canadian economy. As our largest trading partner, an economic slowdown south of the border would have damaging repercussions on the Canadian economy. It is in the Canadian interest to see progress by Congress on budgetary and tax issues.
Equally important to Canadian prosperity is the Obama administration’s receptiveness to Canadian energy. The Keystone Pipeline was an issue in the US election, championed by Republicans and generally not addressed directly by the President. On energy, the Canadian government has been seeking to diversify its markets – including in a recent trade deal with China and a prime ministerial visit to India, among other initiatives. Diversification, however, is limited by geographic reality. Canadians ought to keep a close eye on the energy policy promulgated by the Obama administration, and in particular whether a decision is made to approve the pipeline project.
In short, it is an open question as to how the results of the election will affect Canadian interests. What is clear, however, is that the symbiotic economic relationship between our two countries demands conclusive action on the economic and budgetary front by the US Congress and the President. Legislative gridlock in the US would have serious, deleterious effects for Canada. We hope for broad, bipartisan compromise in the interest of continued cross-border economic prosperity.