Congressional gridlock threatens economy: Flaherty

Jim Flaherty. (REUTERS)

Jim Flaherty. (REUTERS)

Mark Dunn, Senior National Reporter

, Last Updated: 4:46 PM ET

Now that the U.S. presidential race is history, several bilateral issues are bubbling to the surface, including an oil pipeline to Texas and the biggest threat facing a fragile Canadian economy - a gridlocked Congress.

Finance Minister Jim Flaherty flagged concerns Wednesday about the ability of U.S. legislators to address the fiscal cliff the U.S. is headed to in January.

If not addressed in time and the combination of tax hikes on the middle class and deep spending cuts kick in, the United States would fall into recession and Canada would follow, Flaherty said.

"And that would have a significant effect on the global economy. So this is all very serious and we hope our American colleagues move forward to a resolution promptly."

With the re-election of President Barack Obama and the Republican-controlled House of Representatives and Democrat-led Senate staying virtually the same, a divided Congress paralyzed by partisanship could toss a wrench into things.

On the energy front, Natural Resources Minister Joe Oliver, the government's point man on the $7 billion Keystone XL pipeline to the Gulf Coast from Alberta, said he was confident the stalled project would move forward.

Obama delayed XL in January over environmental worries, but later approved the southern portion in what observers said signalled his intention to proceed after the election and a new route through Nebraska was approved.

"We believe the XL pipeline will ultimately be approved by the U.S. administration because it's in America's national interests," Oliver said.

The pipeline was a hot topic along the corridors of Parliament Hill on Wednesday, with interim Liberal leader Bob Rae - who supports the pipeline - taking a shot at NDP Leader Thomas Mulcair, who wouldn't give a straight answer on his position.

"He can waffle until the cows come home and it won't matter because it is not his decision," Rae said.

Other issues between the two countries that will gain attention in the coming weeks and months include renegotiating a softwood lumber deal that expires in 2015, border security and trade, and the escalating situation in the Middle East.