BUDGET 2010: Unable to spend big or whack taxes . . .

Without any splashy new spending or landmark tax cuts to announce, Finance Minister Jim Flaherty faced a tough challenge trying to convey an upbeat economic vision in his 2010 budget.

There was no getting around his budget’s somber central message of restraint. Still, Flaherty tried for a more positive tone by blending traditional Conservative aims, like freer trade and less red tape, with some themes familiar from the old Liberal government, like innovation and education.

Flaherty’s move to make Canada a tariff-free zone for manufacturers importing machinery and equipment was perhaps the closest he came to a bold stroke. “This will give Canada the status of being the first G20 country to become a tariff-free-zone for manufacturers,” he told the House in his budget speech.

His budget estimates that eliminating tariffs on the gear manufacturers import to improve production will save them $300 million a year in duties. In related moves, he promised to upgrade the international taxation system to cut red tape involved in the taxation of cross-border business.

Drawing inspiration from the way British Columbia and Ontario streamlined regulations, Flaherty announced the creation of a new Red Tape Reduction Commission, with a mandate to reduce the paper burden of complying with federal rules on small business in particular.

Less regulation and freer trade are both well within Flaherty’s comfort zone. They were also aims he could pursue without adding to spending or tinkering with taxes. The rest of his bid to project an upbeat economic vision relied on modest spending for projects that symbolize the economy’s future.

He announced $45 million over five years into establishing a post-doctoral fellowship program aimed at luring top emerging university researchers to Canada. The program is designed to pay up to 140 researchers $70,000 a year for two years.

Also in the world of high-level research, the budget earmarks $222 million over five years for British Columbia’s TRIUMF, the world’s largest cyclotron, a particle physics research facility. And $18 million is allocated over five years for the pre-construction design work on a new research station in the High Arctic—a project that straddles the government’s messages on innovation and Arctic sovereignty.

Among a cluster of other measures Flaherty packaged together as trying to promote economic growth through innovation:

— boosting the budgets of research granting councils by $32 million a year;

— injecting another $75 million into Genome Canada, on top of the $840 million Ottawa has already pumped into the not-for-profit corporation;

— giving the National Research Council $135 million to support 11 regional technology clusters across the country;

— investing $397 million over five years in the Canadian Space Agency’s work to develop radar remote-sensing satellites.

In wrapping up his budget speech, Flaherty made a bid to connect, at least rhetorically, his small-scale pro-innovation measures to his much bigger challenge—trying to persuade critics he has a real plan to rein in the deficit.

“We will balance the budget, but not for its own sake,” he said, before sketching a Tory vision of restrained government. “We must support, not replace, the talent and hard work of Canadians,” he said. “We must support, not suppress, their freedom and creativity.”