Flaherty has learned to low-bridge his fiscal update

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The Gazette, Wednesday, October 13, 2010

Two years ago, the Harper government's fall fiscal update nearly resulted in the toppling of the newly re-elected minority government.

When the full story of those tumultuous days is written, it will be noted that the provocative measures that nearly blew up the new Parliament were ordered into Finance Minister Jim Flaherty's speech by the Prime Minister's Office at the Langevin Block.

Two poison pills -- one ending public subsidies of political parties and the other setting aside public servants' right to strike -- united the opposition parties and created the Three Stooges coalition. Only by proroguing the House, something Stephen Harper had to be talked into by his inner cabinet, did the government avert a defeat in the House.

Lessons learned?

First, deliver the fall update away from Parliament, thus taking it off the floor of the House of Commons as a potential confidence vote.

In other words, minimize rather than maximize the importance of the event. Canada already has a budget in the winter or spring, it doesn't need a second one in the fall. As Harper himself has said privately: "We've got to stop having two budgets a year."

So last year, Flaherty delivered the fall update in Victoria, as far away as you can get from Ottawa, during the summer recess. A total nonevent.

And yesterday, with the House out for a break week, Flaherty delivered the fall update before a Chinese Business Association luncheon in Mississauga, which is to Toronto as Laval is to Montreal -a bedroom community with a different area code, this one being 905, where the Conservatives have designs on growing to a majority in the next election.

They also have designs on the multicultural vote, which the Liberals have always regarded as their own. So Flaherty was working the suburban and ethnic vote -a two-fer. This would be why Flaherty blasted "the abuse of our immigration system by human smugglers," such as the ones who recently landed 500 uninvited Tamils on our shores. The Tories have been getting an earful about this, with no one more incensed than the Canadian Asian communities who would never dream of jumping a queue or making transparently bogus refugee claims.

Meantime, there's a byelection next door in Vaughan, and the Tories are running Julian Fantino, former chief of both the Toronto and Ontario Provincial Police, who announced his candidacy yesterday. That's a big catch on the law-and-order front, an issue that plays big in the burbs. What a coincidence that Flaherty happened to be in the region on the same day.

Flaherty's constant message is on two tracks -first, that Canada has come out of the recession in much better shape and with significantly better prospects for growth and fiscal balance than any of our G7 partners, particularly the United States.

He read all kinds of third-party endorsements to that effect from the likes of the International Monetary Fund, the World Economic Forum and the Organization for Economic Co-operation and Development.

From the IMF: Canada will have the best growth and lowest debt levels of the major economies over the next two years. From the WEF: Canada has, once again, the soundest banking system in the world; from the OECD: "Canada shines." It's always better to have other people tooting your horn on your behalf.

And second, that the recovery is fragile, and that expectations for growth should be trimmed, given the persistently high unemployment of 9.6 per cent in the United States, compared with eight per cent here. This message track's refrain is simple: "Stay the course."

Buried in Flaherty's text, barely mentioned in passing, is that "the deficit is expected to decline from $55.6 billion in 2009-10, to $29.8 billion in 2011-12 to a small deficit of $1.7 billion in 2014-15."

Wait a second. The current deficit was projected at $53.8 billion in the March budget. So that's a $1.8 billion miss on the wrong side of the number. As the recovery took hold, monthly government revenues were tracking better than forecast, and there was a whisper number for the deficit to come somewhere under $50 billion. It might be that contingencies, such as the $1-billion security bill for the G8 and G20 summits, ate into that. Nevertheless, the current deficit is the largest in Canadian history in dollar terms, though not as a percentage of GDP, about three per cent compared with 10 per cent in the United States.

As for economic stimulus, most of the $62 billion earmarked for the recovery phase has already been spent or allocated, with no indication from Flaherty that Ottawa won't exit stimulus as planned after two years, at the end of the current fiscal year next March.

There's no news in that, and none in the rest of Flaherty's update, other than the deficit miss.

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