Jim Flaherty’s balancing act

From the Maclean’s archives: Jim Flaherty insists he won’t leave. Loyal Conservatives are wondering how long he’ll last.

Blair Gable/Reuters

In a surprise statement today, federal Finance Minister Jim Flaherty announced that he was leaving politics to go back to work in the private sector. Maclean’s political editor Paul Wells wrote about rumours of Flaherty’s impending departure earlier this year. This article was first published in January 2014.

The spectacle Jim Flaherty offered when he played host to provincial finance ministers at Meech Lake in mid-December was one of those moments when partisan politics takes a back seat to human drama. Stonewalling several provinces on Canada Pension Plan reform, the federal finance minister couldn’t hide the effects of a rare skin disease that has sapped his strength for more than a year. He had difficulty getting out of his staff car, he let a second-tier MP run most of the meeting, and could hardly speak at times.

It’s been only six months since Stephen Harper confirmed Flaherty as finance minister by keeping him at his post despite a major cabinet shuffle in July. Flaherty insists he has no intention of leaving Finance until he delivers a balanced budget, the first since 2008, a goal that seems beyond his reach until 2015. But for the first time, loyal Conservatives have begun asking, in private, whether he can possibly stay on the job that long. Only a year after admitting to reporters that he was taking corticosteroid treatments to deal with bullous pemphigoid, a rare and intensely uncomfortable skin disease, the toll on his abilities is often evident. “This isn’t the pugnacious, driving Flaherty that we’ve seen in the past,” one former Flaherty staffer told Maclean’s.

The weight of history sometimes rests on unsteady shoulders. Flaherty matters so much to the fate of Canada’s Conservative government in 2014 because an election will follow in 2015. If the Conservatives—whether under Stephen Harper or his successor—manage to win a fourth straight election, it will be because their credibility as administrators outweighs their increasingly shopworn and scandal-bedraggled style. And the guarantor of their credibility is Jim Flaherty.

Flaherty made it clear to Harper during the Conservatives’ first mandate that he was not interested in any cabinet post except Finance. He has resisted any attempts to coax him into another portfolio. His longevity in the budget-writing post has earned him many high-profile plaudits, including an award from Euromoney magazine as 2009’s international finance minister of the year. (To this day, Conservatives still enjoy calling Flaherty “The world’s best finance minister,” as though the award had been retired after Flaherty won it. In fact, four treasurers from other countries have received the annual award since Flaherty did. One was Alexei Kudrin of Russia, perhaps not the best model of sound fiscal management. Another, Australia’s Wayne Swan, belonged to a Labor government that lost the next election despite his best efforts.)

To be sure, time and Flaherty’s peculiar relationship with the Prime Minister have often dented the finance minister’s reputation, both as a manager and as the uncontested steward of his own portfolio. Flaherty has never had anything close to the near-complete sovereignty over budget decisions that Paul Martin enjoyed when Jean Chrétien was prime minister. In 2007, sources say, a coalition of blue-chip arts institutions in Toronto asked for infrastructure money in the federal budget. Flaherty, who had been at the cabinet table when Mike Harris’s provincial government approved similar cultural spending in the 1990s, wrote the arts groups’ plans into his budget. Only days before the fiscal plan’s release, Harper vetoed the spending package. “It had two words Harper couldn’t accept,” a source at one of the arts organizations said. “ ‘Arts’ and ‘Toronto.’ ”

That defeat happened in private. Others could not have been more public. It was Flaherty’s bland fall economic update that triggered the coalition crisis after the 2008 election, when the opposition parties nearly stripped the Conservatives of power. But the most provocative element of that update—a plan to eliminate public subsidies to political parties, which ended up rallying the opposition leaders against the Conservatives—was inserted in the update by Harper’s office without Flaherty’s approval. The economic update, largely concocted over Flaherty’s head, was withdrawn in similar fashion.

At times, Flaherty has seemed barely to understand the numbers coming out of his department, or to cheerfully assume most voters wouldn’t understand them. In January 2010, Kevin Page, who was then the parliamentary budget officer, said post-recession infrastructure spending had created “structural deficits” that would need either tax increases or spending cuts to eliminate. Flaherty dismissed the notion. “I see speculation,” he said. “I don’t see a lot of evidence. I see editorial comment without numbers, without analysis. I don’t get to speculate. I get to deal with budget-making.”

A two-year battle between Flaherty and Page ensued. But in 2012, Flaherty’s own finance department released tables that matched Page’s figures almost exactly. All a structural deficit is, after all, is one that can’t be attributed entirely to economic cycles. It’s a deficit governments can escape only by cutting spending or increasing taxes. And since the government wound down its recession-fighting economic stimulus programs in 2010, it has been aggressively cutting spending, which is the same as saying Page was right.

Here, though, we see another aspect of Flaherty’s performance as finance minister: a stubborn and, in many ways, increasing lack of transparency. The combative Page is out as parliamentary budget officer. His replacement, the much less pugnacious Jean-Denis Frechette, has continued to insist the Finance and Treasury Board departments simply don’t offer enough information to understand how this government budgets. “Little information has been provided to assess service impacts, the likelihood of achieving spending targets, and whether short-term restraint will require higher spending in future years,” Frechette wrote in his most recent report, on Dec. 5.

In addition to cuts, the details of which Flaherty refuses to specify, a truly stupendous amount of money is earmarked for spending but somehow never gets spent. Frechette wrote that the government “has failed to provide a concrete explanation” for this so-called “lapsed” spending authority.

Together, the unexplained cuts and the unexplained lapses have the same effect: they speed the day when Flaherty can announce a balanced budget. He has told cabinet colleagues the same thing he has said in public: he will hit that goal in 2015, and when the books are balanced, “It won’t be close.” There’ll be enough to finance new tax cuts or, less likely, new spending programs to entice voters at the next election. It is this race to clean up the books that makes Flaherty’s success or failure synonymous with the Harper government’s.

There was a time when he hoped to lead a government of his own. That period began on Feb. 8, 2001, when Mike Harris appointed Flaherty deputy premier and provincial treasurer for Ontario. Harris had been premier for almost six years. He announced his retirement from politics later in 2001. It was a laying on of hands. “He was Mike Harris’s ideological successor,” a Conservative who worked on Flaherty’s 2002 provincial leadership campaign said. “All of us felt that acutely. He was the great right hope.”

In that first run for the provincial leadership, Flaherty accomplished some of what Stephen Harper would do at the federal level a few years later. He assembled a coalition of powerfully motivated supporters who had very little in common, except that they liked Flaherty. “It ran from gay libertarians to social conservatives,” the veteran campaign worker said. Evangelical Christians and members of other faiths liked Flaherty’s tax credits for parents of children who attend private schools. They saw it as a way to get their kids out of a public school system they saw as corrupting. Small-government conservatives liked Flaherty’s hard line on government spending: there wasn’t much of it that he professed to like.

Ernie Eves, Harris’s first finance minister, was the prohibitive favourite from the outset. He offered blandness where Harris had often frayed nerves and Flaherty cheerfully promised to fray more. Flaherty could only shake that lead with what his former campaign staffer called “a high degree of tactical aggression.” This included red-meat policies like a plan to jail homeless people. In the end, Flaherty managed to win almost 38 per cent of party members’ votes as Eves’s only opponent in the second-round leadership balloting.

Flaherty also managed to persuade at least one young columnist that he represented the future of politics, or should. Writing in the National Post, I urged Ontario Conservatives to pick Flaherty, in language that surprises me when I reread it. “I believe him to be the most formidable new political talent to rise in Canadian public life in the last decade or so,” I wrote, “and I believe his party is about to make a mistake it will pay for with all its toys.”

The last half of that sentence, at least, was prescient. Eves lost the next election, and in 2004 it was time for Ontario Conservatives to choose yet another new leader. Again Flaherty ran, and this time he came even closer, losing to another bland centrist, John Tory, with fully 46 per cent of the second-ballot vote. The next year he quit provincial politics to run federally.

But he still had reason to follow Ontario politics closely. His wife, Christine Elliott, replaced him as the provincial member for the Whitby–Ajax riding. And in 2009, she ran to become Ontario Conservative leader after it became John Tory’s turn to blow an election.

Flaherty’s job was to deliver the federal Conservative caucus on Elliott’s behalf. It didn’t go well. John Baird and Rob Nicholson endorsed a younger candidate, Tim Hudak, as did a non-Ontarian interloper, Calgary’s Jason Kenney. Flaherty wasn’t able to deliver any comparable endorsements, besides his own. Lingering resentment from that confrontation may have much to do with the chip Flaherty plainly still carries on his shoulder when it comes to Kenney. In December on the floor of the Commons he told Kenney to “shut the f–k up” after Kenney said Toronto Mayor Rob Ford, a Flaherty family friend, should step down to deal with substance-abuse problems.

Like it or not, Flaherty and Kenney remain joined at the political hip. Flaherty’s 2013 budget announced the introduction of a Canada Job Grant to replace provincial job-training programs. The program has gotten very nearly nowhere against provincial objections. Kenney was shuffled into a new employment and social development portfolio to fix the program. If he can’t deliver, it will blow another new hole in the government’s credibility.

Kenney, it’s widely assumed, harbours leadership ambitions. Flaherty has hung his up for good. “It really makes me laugh” when Flaherty is included in lists of potential Harper successors, an associate says. “I think his aspirations in politics have been fulfilled.” Perhaps all but one. He wants to remain in politics long enough to ensure the Harper Conservatives survive a majority mandate that has been far more difficult than they could ever have anticipated. It’s painful to watch him try. It will be more painful if fate and health force him to give up.




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Jim Flaherty’s balancing act

  1. Flaherty will never balance the budget. Government can’t solve the job and economic problems as they _are the source of the problems.

    People with less money for taxes (income and hidden), less value money, rising debt will intimately get less goods and services and pay more for it. GDP isn’t jobs, affordable goods and services are jobs. Its why GDP can go up but people get less goods, services with a increasingly poor job market.

    Liberal economics of debt and print no value money (electronic counterfeit) to buy government debt no legitimate lender would buy is a utter failure that isn’t sustainable either.

    With over 2 million able working age on once social assistance or another, and a Ottawa bloated government with such low value to productive Canada, our society has far too much government consumption and not enough productive to support it. Just like the fail of the Roman Empire, too many non-productive consuption gets too much and producers get too little then the society will slowly crumble. Civilization on works when everyone able contributes and productive people exceed corruption and waste.

    Too many economic mistakes means one way or another, Canada is in for some turbulent times.

  2. No economic sense, as take governemtn creating jobs, its a oxmoron, a myth, just BS.

    If you take/tax/confiscate $1 from 50,000 people and create a $50,000 job have you created a job?

    Answer is no as 50,000 people spend $50,000 less and someone gets laid off while government reallocated the job to someone else. Gets worse too if you add in government GA costs of 29% that adds no value.

    Any economics worth knowing realizes governemtn consumption cannot create jobs, its reallocation of wealth and not the creation of wealth.

    But hey, Flaherty and government loves to push their myths, as to Ottawa, its about PR, selling people the false need for bloated government to get our money. Flaherty is pushing liberal economics fraud and he knows it.

  3. You should link to the audio of that awkward call you had with Flaherty during the 2011 (?) election where he got flummoxed with you for asking questions that involved numbers and details.

    I’m curious about the behind the scenes manoeuvring that must have taken place to decide to give Rob Ford all that money for a Scarborough subway. I understand there are policy reasons for choosing LRT or subway but I can’t imagine anything but politics driving that decision-making at the federal level and I can’t help but wonder if it was less about conservative MPs wanting to increase their chances at reelection and more about Flaherty wanting to throw his buddy a lifeline.

  4. If Cons are counting on Flaherty for ‘credibility’, they might as well quit and go home right now.

    Flaherty is the same ambulance chaser he was in Ont, and he’ll leave the country in the same mess he left the province.

  5. Books are being cooked – economist on Power and Politics. The Harper government has ‘economic action plan’ – adverts are still running Canadians even this week – the homeless are freezing – Flaherty is ‘drumming’ – electioneering – the greatest finance minister in the world and also in Canada – otherwise a Harper that has mismanaged governing x 8 years. The NDP or the Liberals could have minded the economy equally well.

    • Probably better!

  6. . “Little information has been provided to assess service impacts, the
    likelihood of achieving spending targets, and whether short-term
    restraint will require higher spending in future years,” Frechette wrote
    in his most recent report, on Dec. 5.”

    You really have to wonder how well this this blatantly obvious attempt to herd the libs and ndp into a – must raise the tax in ’15 box – will work. Flaherty wont let anyone outside of the govt see his numbers – whether they are in fact cutting into the bone of service jobs and front line public programme delivery.[ fat chance we'll ever find out if selling off the country's silverware amounted to anything other then an idiot fire sale] The Harper pointy heads are banking on the opposition parties having no choice but to go with tax raises or simply traditional lying about platform budgets.[ not that i think they are blameless. Had one of the parties found the moxy to try and sell the public on putting the gst back up, this farce would look even more of a farce then it is shaping up to be, if possible]
    Probably would have worked in the past, but the good ship, SS ethical and accountable Harper, is listing badly these days; quite simply much of the public take very little at face value that passes Mr Harper’s lips lately. I don’t think it will be as hard for the opposition to convince the public this time that these cuts are unethical, and an unnecessarily and an altogether too convenient attempt to buy another mandate. Sure a new crop of tax credits aimed at m/c families will do something to stiffen the C vote, but i doubt it will do anything to dissuade swing voters it is well and truly time to kick the Harper bums out.
    Odd how often history does try to repeat itself at times and politicians play to character eventually. Flaherty seems determined to cook the books in Ottawa in more or less the same way he did in QP. It certainly is painful to watch him try alright.

  7. just imagine, this government is going to bring the budget in right on time with extra to go around in 2015. the only problem is, this government had to sell off Canadian taxpayers assets to get there. That’s called ” in over your head “. I know the libs done it when they were in power, and that was because the mess the previous con party left. I guess the libs are going to be left with another mess to clean up by this bunch of carpetbaggers.

    • PS : Harper should not have gotten rid of one of the most honest and intelligent men in our Canadian political history, Kevin Page, because a lot of the cons numbers started to change then. When Mr. Page was let go, a lot of Canadian taxpayers, consumers or citizen thought this government lost its way, when it came to transparency, and I think the trust factor, no matter how good the eCONomy may be, will be the nail in the coffin of the harper government, and as long as harper is going to rule the roost, Canadians will not re-elect a majority conservative government.

      • Yes its all about morals and ethics now and we have a surfeit from Harper (the latest is a Bev Oda game park hotel caper in Africa during her tenure as Minister) – there is only so much we can take of any one item – just like its about the economy when the food lines get bigger. Page was a foil to Flaherty and Clement also. Was Kevin Page right? He had good intentions trying to create an ‘independent’ financial watchdog like the Americans.

    • The CPC is popular with those people who say “government should be run like a business”. Hence, asset stripping is not a problem in their eyes.

      • I think its great idea to add money to the treasury, but don’t do it to replace money that they blow like drunken sailors, on the backs of Canadian taxpayers.

  8. Somehow, in the spirit of the Olympic season, this gawdawful
    gummint seems to still get good marks on technical merit …
    while getting occasionally marked down on artistic merit.
    East German judges, I guess.

  9. Here are few steps to increase the budget, by getting more money from people, call them taxpayers of course. 1. Don’t allow Native Indian to sell Tobacco, a killing factor, allow only the government to make profit from it by selling this killing factor but in a more professional and legal way because I think it is better to kill people in a legal way than in a non legal way (lool is there a difference ?) 2. Let the banks increase the interest rates, not just the banks but almost every insurance company in this province. 3. Let people go bankrupt and sell their homes to the banks at cheaper costs so they sell them and pay for the money to cover the cost and the loss, and don’t worry about the guy who will get bankrupt, he will , with this brutal weather , get on the street, acquires mental problems and diseases, become sick and finally get accused of harassment or may be shot by the cop. I just want to say God have mercy as hard days are coming on this country.

  10. Good article and feeling sorry for conservatives as they are as good as dead. Get ready Nation for a decade of Libs and Trudeau.

    • More of the same? No thanks.

  11. A stark reminder of what a cruel bunch of dunces are running this country. Wish his sort of slime would stick to destroying Ontario.

    • Ontario doesn’t want him again, but I hear Alberta is very interested.

  12. Total conjecture and a continuation of the media narrative that Flaherty doesn’t know what he is doing. It was Kevin Page that had the incorrect information and still does. Page is working off the OECD playbook of policies they would like and is not impartial much as the media makes him out to be. As for money NOT being spend, I think I prefer that.

  13. I just finished reading your new book Wells, it was terrific other than you think Prof Gordon is credible on economics, and it made me wonder if Flaherty has been Fin Min for so long because Harper does not want serious rivals. Flaherty is sick man who has no leadership ambitions now, he is perfect person to be Fin Min if you are PM and worried about powerful lieutenant stabbing you in back.

    It is outrageous that Flaherty is ill as he is and there is very little media scrutiny of his performance. Meds Flaherty is on – corticosteroids – those are heavy drugs that alter your personality. Leaving Flaherty as Fin Min with his health complaints is amateur hour, it is shocking that Flaherty is employed in important position when he is on corticosteroids, they affect you mentally and Flaherty has to be doing half assed job if he’s in charge at all.

  14. Flaherty thinks that tax cuts will appeal to voters. How much more can they cut before the public services that Canadians rely on are affected adversely? The provinces will eventually throw the ball into the federal government’s court. The provinces can’t fund health care and education adequately because the federal government is cutting transfers.

    • Isn’t that Harper’s plan to systematically damage, dismantle then destroy Canadian services and systems then sell them off to the highest bidder, to fulfill his great dream of privatization.
      Stephen the CEO, sees Canada as a corporation and we, the citizens, are a commodity.

    • Transfers are at a all time, historic time never higher in history. Its false to say that a 6% increase infinitely is proper, a more sanguine approach needs to be to set transfers at the rate of inflation, not 3 or 4 times it.

      Flaherty should lower the increases to a more sustainable rate. and that is not a decrease in transfers, but a reduction in the present explosion of transfers under this Gov’t. No liberal has ever given the kind of money Flaherty has given to the provinces. He could have reversed the increases, stopped them leveled them out and he better start doing that now.

  15. wow a government thats concerned about balancing Canada s budget, we ll never see this again if the Tories Go, I remember back in 1973 when Powefull Pierre, Introduced Deficit Financing as he called it while implimenting millions of feed the socialists social programs off hard working Canadian Tax Payers Money, Deficit Financing turned out to be Double Canada s Debt, and keep his voters well fed, It also drove inflation sywards and increased prices of everything, property, automobiles and more,

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