Listening to Flaherty this morning, and worrying. - Macleans.ca

Listening to Flaherty this morning, and worrying.

JOHN GEDDES

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Listening to Flaherty this morning, and worrying.

Update:
Speaking Montreal moments ago, the Prime Minister amplified Flaherty’s morning message about a sprawling, ambitious budget, in which anything is possible. “We are examining hundreds of options,” Stephen Harper said.

Hundreds?
He went on to sketch a budget that will simultaneously attempt short-term stimulus and ambitious steps aimed at shoring up Canada’s post-recession competitiveness. “We really do have an opportunity here,” he said, “to do some unprecedented measures to build on our strengths and to emerge stronger than ever.”

The combination of short-term defensive actions and long-term opportunistic moves will, he said, result in “one of the biggest budgets in a long time, a comprehensive budget to deal with a range of not just economic problems and challenges, but economic opportunities.” Yet this massive blueprint is being drafted fast against a backdrop of shifting understanding of the economic situation, which Harper said “has frankly changed every couple of weeks.”

Jim Flaherty was at his phlegmatic best at his news conference in Thornhill, Ont., this morning. Yet stolid as he was, I couldn’t take much comfort from his message. He made it sound like everything is on the table as he conducts cross-country pre-budget consultations. Rather than conveying a sense of strategic focus, he gave the impression of a man trying to maintain control of a bewilderingly wide-ranging policy process.

If you were under the impression that the Jan. 27 budget might be a surgically targeted stimulative response to the economic crisis—a gush infrastructure spending, an injection of tax relief—think again. I counted at least a half dozen significant thrusts in Flaherty’s relatively brief remarks, which he delivered with this catch-all warning: “We are in uncharted waters. There is a high degree of uncertainty.”

Flaherty started out by suggesting that getting banks and other financial institutions lending more freely is his top priority. “The Number One concern that has been expressed to us has been access to credit.” He spoke of federal financial agencies, including the Export Development Corporation and the Business Development Bank, meeting with the banks today to sort out what can be done. Sounds like taxpayers, one way or another, will be backstopping more loans.

When it comes to more direct government stimulus, Flaherty unsurprisingly said infrastructure and “tax measures,” by which he must mean cuts, are the “two primary areas.” He did not touch on the obvious problems with either. On infrastructure, big projects require long planning, and hence it is unclear enough can be done quickly to have the desired impact this year. On tax reductions, economists warn that many Canadians (although not the poor) would, quite prudently, use them in bad times pay down debt or build up savings, rather than buy stuff.

Flaherty also signalled that Ottawa is receptive to pleas for the provinces and others for special programs to help those thrown out of work during the tough months ahead. “We are going to have substantial job losses. Now, what’s the government’s job when it comes to dealing with that? We need to respond to the needs of people who will lose their jobs this year,” he said. “We have lots of suggestions being made to us in the course of the consultations with respect to employment issues, with respect to retraining issues, with respect to work sharing—all important matters to help Canadians get through what is going to be a difficult year with respect to employment.”

Hard to argue with this thrust, but retraining is not on any list I’ve seen of good ways to stimulate a faltering economy. Flaherty is describing measures that might help the jobless find work when things pick up. Similarly, the massive help for the auto sector, along with any other support directed at troubled industries, has to be seen not as a way to fight the recession now, but an attempt to position these sectors to thrive whenever the economy recovers.

And there’s no doubt that a lot of ideas for pumping money into business and public projects are being contemplated. Flaherty listed four other cabinet ministers who are engaged in their own pre-budget consultations, paralleling his own. It’s hard to image they won’t come to him with a grab-bag of ideas, some worthy, some dubious. Sorting it all out in the mere two weeks before the budget will be a daunting task. And there are other major policy questions vying for Flaherty’s attention, not least of which will be responding to the study of securities regulations that he announced will be released in Vancouver next Monday.

It all adds up to a blur of activity, on a confusing array of only loosely related ideas, in an unusually compressed pre-budget period, as horrible economic numbers just keep coming. And another thing: the usual pre-budget niche pleas for money for special projects haven’t stopped flowing in just because times are tough. Flaherty’s news conference ended with a local reporter’s question about possible federal funding for a medical devices development centre. “Yes it’s one of the items that is under consideration,” he answered. “We’re in the process of developing the budget, and decisions have not been taken with respect to specific projects.”

We can only hope that Flaherty and his officials have the discipline to take all this and make something coherent of it. It’s a test unlike any I’ve seen a finance minister face, including Paul Martin is his mid-’90s deficit-fighting budgets. Then the economy was growing and the goal was sharply defined. Today, the economy is contracting and, worse, exactly what the budget is supposed to accomplish has still to be made clear.

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