Springtime in New York has much to recommend it, but for Prime Minister Stephen Harper, the fact that Sen. Mike Duffy is unknown there must have been its most charming quality when he visited the city last week. Interviewed in front of a well-connected crowd at the Council on Foreign Relations by the CFR’s co-chairman, former U.S. treasury secretary Robert Rubin, Harper looked at ease—perhaps deceptively so—fielding polite questions about oil pipelines, the economy and Middle Eastern strife. Rubin and the CFR’s opinion-elite guests naturally didn’t know or care enough to ask about the controversy exploding back in Ottawa—ignited by the revelation that Nigel Wright, Harper’s trusted chief of staff, had dipped into his personal wealth to give Duffy about $90,000, allowing the beleaguered senator to pay back improperly claimed Senate housing allowances and other expenses.
Of course, Harper couldn’t have guessed when he scheduled his CFR event that it would conveniently whisk him away, if only briefly, from such turmoil. Even in the placid confines of the Upper East Side beaux-arts mansion that houses the think tank, though, the enormous pressures building up on him weren’t quite banished. After all, Harper’s main mission in Manhattan was to pitch influential Americans on the job-creating upside of Keystone XL, the highly contentious proposed pipeline that would take Alberta’s oil-sands crude to refineries on the U.S. Gulf Coast. President Barack Obama is expected to make a decision on Keystone this summer, and its rejection on environmental grounds would deliver a bruising blow to Harper’s signature economic goal of building up Canada as an “energy superpower.”
But Keystone is only the topmost file on the growing heap of problems piling up on Harper’s desk—which makes the escalation of the Senate-expenses fiasco that much worse for him. After Harper returned from New York, Wright hunkered down for three days, as questions swirled before he resigned. By then, Duffy had already quit the Tory caucus, and so had Sen. Pamela Wallin, whose travel expenses are the subject of a separate, also potentially damning, Senate audit. Wright’s fall not only exposes Harper to an unprecedented outcry over his inner circle’s ethics, it robs him of his top aide and adviser, especially on economic issues. This has happened just as Harper prepares a summer reboot, which senior Tories say must re-energize their government sufficiently to propel it toward the fixed date of Oct. 19, 2015, for the next election.
Even before the media-shy Wright stumbled unintentionally into the spotlight, the Conservatives had arguably sunk to their lowest point since Harper first won power in 2006. They’ve spent most of 2013 on the defensive over controversies such as companies using a federal immigration program to hire foreign workers instead of Canadians, and an auditor general’s report that found the government couldn’t account for how $3.1 billion earmarked for public security was actually spent. Promised trade deals haven’t been inked. Highly touted pipelines are in doubt. Overall economic growth is tepid. Tory attack ads against Justin Trudeau evidently fizzled, since the Liberals now top the polls under their new leader. And Harper can’t count anymore on lock-step discipline from his MPs, after some defiant Conservative backbenchers recently asserted their right to speak in the House without permission from the party leadership.
No wonder a crisis mood was setting in before an emergency Conservative caucus meeting Harper called early this week to try to first calm, and then rally, his troops. He voiced predictable disappointment over the Senate mess, didn’t dare to mention Wright and then urged his MPs to get back to basics. “Canadians are looking to us to protect them—their jobs, their families, their communities,” he said. “That is what we must be focused on.” Goldy Hyder, long-time Tory insider and president of the public-affairs and -relations firm Hill & Knowlton Canada, says Harper has plenty of time to orchestrate a rebound. After all, this summer will mark only about the midpoint of his first majority term. “The issue,” Hyder says, “is how you use that half-time break to develop a strategy to execute for the second half.”
Harper’s lecture to caucus, which was open to the media, was his first public show of personal attention to a dangerously volatile situation. A more methodical rebuilding effort is expected to begin with a major speech at a Tory policy convention in late June. Later in the summer, he is widely expected to shuffle his cabinet, before a Speech from the Throne next fall recasts his agenda. All this was in the works before Wright’s stunning fall. Now, Harper must strive to stay on track against howls of opposition outrage. The NDP suggests Wright’s decision to cut that fat cheque was linked to a Senate committee’s agreement to soften the more damaging parts of an audit report on Duffy’s expenses. The official Opposition has asked RCMP Commissioner Robert Paulson to investigate. “What we do know is that a secret cheque was written for $90,000,” said NDP ethics critic, Charlie Angus. “And we understand there may have been interference with that Senate report. This suggests a much larger issue that is at the very desk of the Prime Minister.”
Harper finds himself under direct fire after several months of watching many of his top cabinet performers forced into defensive postures. Immigration Minister Jason Kenney had to scramble to announce changes to that Temporary Foreign Worker Program, which he had previously promoted as a big success, after news of companies passing over Canadians to make room for cheaper labour from abroad. Human Resources Minister Diane Finley tabled stricter Employment Insurance eligibility rules last year, but still hasn’t quelled the backlash over the impact on seasonal workers, and now faces the Atlantic-province premiers jointly demanding a halt to the changes. Foreign Minister John Baird is fighting in the United Nations to stave off a bid by Qatar to lure away the prestigious headquarters of the UN’s International Civil Aviation Organization from Montreal, but may be hampered by ill will among Arab countries and beyond, generated by Harper’s unbending support for Israel.
Still, foreign affairs, immigration and EI aren’t essential ingredients of the Harper formula. What matters more is his image as a prudent spender of public money and a smart strategist on the economy. Yet his government is looking vulnerable on both those fronts, too. That $3.1-billion gap the auditor general reported in federal accounting has made it difficult lately for Treasury Board President Tony Clement to boast of the Tories’ attention to every taxpayer’s dime. When it comes to reckless spending, another favourite opposition target is the estimated $46-billion plan to buy 65 F-35 fighter jets. Despite announcing late last year that other fighter-jet options would be considered, the government recently paid about $40 million to remain in the U.S.-led F-35 consortium until at least next fall, which means this drawn-out military-procurement mess remains very much alive.
Even all these items might not overly worry Conservative strategists, if only a buoyant economy assured them that Canadians would continue to feel upbeat about Harper’s economic direction. But forecasters project only about a two per cent expansion of gross domestic product this year, compared to the three per cent growth, or better, that was normal in previous economic recoveries. Most provinces are clamping down on spending to try to control their deficits, and many consumers are also less inclined to borrow, including to buy homes. Domestic drag means the slack must be picked up by export markets, especially the U.S. “What we’re looking for,” said Stephen Poloz on being named the next Bank of Canada governor early this month, “is that the engine of growth on the demand side gradually shifts into the export side of the economy.”
But no federal government can do much to immediately spur exports. Positioning Canada to compete abroad is a long-term policy aim. The period of faster results from federal stimulus at home—massive deficit spending, especially on public works, launched in 2009 to combat the recession—is over. The federal advertising campaign promoting “Canada’s Economic Action Plan,” however, continues. Can Conservatives realistically hope to keep reaping benefits from those ads, with their images of busy, gainfully employed Canadians and the familiar logo of upturned arrows? A poll in March by Forum Research found more than half of those surveyed reacted negatively to the ads; eight opinion surveys on the campaign, commissioned by the Finance Department from 2009 to 2012, found their early positive impact declining markedly—and the annoyance factor rising.
If the ads don’t work so well anymore, neither can Harper count as much as before on his most recognizable, reassuring economic-management messengers. Jim Flaherty, the only finance minister Harper has ever had, often looks weary these days as he battles a skin disease. Mark Carney, who as Bank of Canada governor lent Harper’s Ottawa his urbane aura of worldly leadership, departs next month to take over the Bank of England. That leaves the Prime Minister himself to do more of the heavy lifting. He can be a game salesman. Last week in New York, he spoke of Keystone creating 40,000 U.S. jobs and cutting American dependence on offshore oil by 40 per cent. “So I think this absolutely needs to go ahead,” he said. “But you can rest assured that making our emissions targets, including in the oil-sands sector, is an important objective of the government of Canada.”
His assurances are bound to be met with skepticism in at least some quarters. In late February, a U.S. state department report concluded there was no strong environmental-policy reason to block Keystone. But the U.S. Environmental Protection Agency countered in an April letter that highlighted concern over higher greenhouse-gas emissions from oil-sands production than for conventional crude. And pipeline politics aren’t noticeably easier in Canada. B.C. Premier Christy Clark, who last week won re-election with a majority that defied pollsters’ predictions, is guardedly open to the proposed Northern Gateway pipeline, which would take Alberta’s oil-sands crude across B.C. to a planned new Pacific port, and from there by tanker to Asia’s vast markets. However, Clark also imposes controversial conditions, including a bigger cut of the economic benefits for her province. In any case, a National Energy Board review of the Gateway proposal isn’t slated to wrap up until late this year.
With better access to both U.S. and Asian oil markets far from certain, Harper badly needs to post other wins on his export-oriented economic agenda. Bringing the drawn-out negotiation of a trade deal with the European Union to a successful conclusion would rank as a major victory. This month, the EU’s ambassador to Canada, Matthias Brinkmann, said the key lingering sticking point is how much Canadian beef Europe accepts and how much European cheese Canada allows in. “This government has talked of joining trade talks as if that’s an accomplishment,” University of Ottawa international relations professor Roland Paris says. “But they haven’t yielded anything yet that’s an actual accomplishment.” Trade breakthroughs, Paris adds, are all the more important for Harper, since his broader foreign policy looks “unstrategic.”
A shortage of strategic thinking across many policy areas might be a reason the Harper government has lacked a feeling of forward thrust in recent months. David Zussman, a University of Ottawa professor of public-sector management, says Harper’s Conservatives don’t often turn to senior bureaucrats for ideas, relying on them only to “loyally implement” policy, rather than offer advice on its broad direction. Cutting mandarins out of the high-level planning leaves political aides to do more of the deep thinking—and many Conservatives admired Wright as the deepest of them all. Along with managing the Prime Minister’s Office and chairing a key weekly meeting with cabinet ministers’ chiefs of staff, Wright selectively stickhandled problematic files. Last spring, for instance, when Canada appeared in danger of being left out of the so-called Trans-Pacific Partnership trade talks, Wright took over from Trade Minister Ed Fast to make sure Harper was spared that embarrassment. Not only was Wright a former Bay Street deal-maker who understood business, he was a long-time Tory backroom organizer. His combination of partisan fervour and economic acumen, along with a highly discreet personal style, made him seem the perfect Harper adviser.
Until last week. At first, the PMO tried to defend Wright’s cheque-cutting intervention to rescue Duffy. Andrew MacDougall, Harper’s communications director, insisted that Wright’s “overarching imperative was to get that money returned.” But opposition MPs contend the real aim wasn’t to reimburse taxpayers, but to save Duffy from more intense scrutiny, before his past behaviour did more damage to the Tory brand. Duffy’s downfall began with improper claims of a Senate housing allowance, but reports that he also filed expense claims as if he were travelling on Senate business, when he was really campaigning during the 2011 election for the Tories, more directly involves the party.
Harper has his work cut out for him from now until the House shuts down sometime next month for its summer break. After a winter and spring of successive setbacks that knocked his key ministers off-stride, the Senate scandal now taints his own office. As if that isn’t bad enough, it’s all happening as Trudeau’s polling strength begins to look more sustained than a fleeting new leader’s honeymoon, and NDP Leader Thomas Mulcair, rather than fading, steps up his question-period assaults, while bidding to reintroduce himself to voters with his own new ads.
Amid all that action, it’s hard to maintain an unruffled, prime-ministerial detachment. Harper will no doubt try as he travels this week in South America. As with his foray last week to New York, statesmanlike settings abroad might show him off to advantage, but they can’t change the political reality back home that seems certain to test his skills as never before in the pivotal weeks ahead.