TORONTO - Canada's economy would be plunged into nuclear winter if the auto sector was allowed to die, Ontario warned Tuesday amid an unprecedented interest rate cut in the U.S. and fresh calls on Ottawa to spend billions to jump-start the economy.
Economic Development Minister Michael Bryant pulled no punches in defending a $3.4-billion rescue plan for the sector as the only way to fend off the "catastrophic" loss of 580,000 jobs over the next five years.
"We are talking about CPR -- literally, CPR -- for a company to avoid it from going under and causing a chain of events that would be catastrophic to the economy," Bryant said.
That "doomsday scenario" was just one of several developments Tuesday that helped to drive home the point of just how transformative the ongoing economic crisis is proving to be across North America.
In the U.S., the Federal Reserve did everything short of erasing its key interest rate, slashing the so-called federal funds rate to a "range" of between zero and 0.25 per cent -- the first cut of its kind and the lowest rate in the history of the Fed.
That propelled stock markets sharply higher; New York's Dow Jones industrial average was up 359.85 points to close at 8,924.94, while the S&P/TSX composite index moved up 262.28 points to 8,724.11.
The Canadian dollar closed with a gain of more than two cents to 83.21 cents US.
Those sorts of gains have been few and far between this fall.
Statistics Canada said the net worth of Canadian households fell by about $191 billion in the third quarter, and has likely plunged even further amid the current period's stock-market free fall.
The 3.2 per cent decline in household net worth between July 1 and Sept. 30 was the largest percentage drop since the third quarter of 1998, when Canadian stock prices fell after the Asian financial crisis, Statscan said.
Those numbers don't incorporate the record-setting stock market declines seen in October and November, as well as a country-wide decline in housing prices, said Bank of Montreal economist Doug Porter.
"I hate to use a cliche, but I think in some ways this is just the thin edge of the wedge."
As they prepared to meet in Saskatoon, federal Finance Minister Jim Flaherty and his provincial counterparts -- a group not generally given to pleasantries -- were sounding a conciliatory note.
Some, albeit not all, expressed support for Bryant's plea.
"It's a huge and critical problem when any part of Canada is hurting financially," said Alberta's Iris Evans.
"When they are losing jobs somewhere else, it hurts in Alberta as well."
Ontario Finance Minister Dwight Duncan said he was gratified by the support other provinces have expressed.
"I've sensed what I would call a great deal of empathy from my provincial counterparts."
Meanwhile, the chorus of voices calling for drastic action from Ottawa in next month's federal budget was also growing louder.
The beleaguered forestry industry called for a boost to corporate credit, relaxed employment insurance rules and more mergers in the lumber and paper sector to prevent job losses at mill towns across the country.
The Forest Products Association of Canada issued an urgent call for action -- $600 million over five years -- that it said could save the 300,000 workers dependent on forestry.
The Conference Board, an Ottawa-based think-tank, urged Flaherty to spend as much as $13 billion to stimulate the economy -- a move that along with expected tax revenue declines would create a deficit of about $20 billion or more next year.
The central bank has cut rates by 1.5 percentage points this fall alone to stimulate borrowing, investing and spending, but Canada doesn't have time to wait for those cuts to have an impact, warned Glen Hodgson, the board's chief economist.
"Governments can't afford to wait 18 months for the full benefit of lower interest rates to kick in," Hodgson said.
"Complementary fiscal action must now ride to the rescue."
Canada's economy has grown marginally for much of the last year and is now in recession, with little growth expected until late 2009 at the earliest. Unemployment is expected to rise above seven per cent in 2009, with continued weakness in manufacturing, forestry and the troubled auto sector.
