Jim Flaherty's dance with the deficit demon in Tuesday's budget

The federal finance minister is to deliver his tenth — and last? — budget tomorrow with the very real understanding that he has to pirouette from free-spending recession fighter to deficit slayer. Can he pull it off, Chris Hall asks.

'I don't give up,' Stephen Harper's only finance minister says as he approaches 10th budget

Finance Minister Jim Flaherty sits down with the CBC's Chris Hall to discuss his Tuesday budget, his longevity at Finance and his health. 14:55

Jim Flaherty tables his tenth budget tomorrow, and the question going around Ottawa is whether it could also be his last.

The finance minister has been a constant presence in the demanding finance portfolio since the Conservatives came to power in 2006.

That's constant as in he's the only minister who's never been shuffled. And that he has come to represent, along with Stephen Harper, the Conservative claim to solid economic management, including the commitment to eliminate the deficit before next year's election.

Flaherty would add another element to how he's seen.

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"I think the most significant thing is stability,'' he told CBC News in a sit-down interview in his centre block office that's adorned with a coveted portrait of another politician of Irish descent, Thomas D'Arcy McGee.

"Canada's place in the world is remarkable today. We're viewed as a solid country fiscally. We know what we're doing.''

But for all the stability he has brought to the portfolio, some lingering questions remain.

The big one: Can he move beyond the recession-fighting priorities of these past five years to achieve some of the broader fiscal goals he and the prime minister first set for themselves.

The corollary here: Will his health allow it?

His political friends worry that a rare and painful skin disorder won't allow him to continue in the demanding job. His opponents wonder the same thing.

Flaherty bristles when asked about it. "I'm much better than I was last year,'' he says.

Pressed about what impact it's had on him, he's curt. "I'm OK.''

The virtuous cycle

It's an economical answer even for a finance minister, and not especially revealing about his future. But he's said repeatedly that he intends to complete the cycle of going from surplus to deficit to surplus.
Finance Minister Jim Flaherty speaks at a pre-budget press event at the factory for the Canadian shoe company Mello Shoes in Toronto on Friday. On Tuesday he is to deliver his tenth budget, including the 2011 one that he delivered twice in an election year. (Canadian Press)

That goal appears out of reach until next year, though Flaherty suggests he’s very close to balancing the books now.

But in a world where even retiring the deficit is seen through a political lens, 2015 is the preferred target because it is an election year and the Conservatives made a number of expensive promises in the last campaign, such as to allow income-splitting for couples with minor children, contingent upon getting rid of the deficit.

For now, the economic signs are not all that encouraging. The dollar's falling. Job creation remains sluggish. The manufacturing sector continues to struggle against overseas competition.

And Canada's economic growth is expected to be outpaced by the U.S. and Britain this year and next.

Flaherty suggests that is because the U.S. and Britain fell further during the recession, and are now just catching up to Canada.

“The most important thing we’ve done is reduce corporate taxes, taxes for all businesses large and small ... which the Americans and others think is fabulous.’’

His critics, however, complain Flaherty is far more interested in cutting than spending. More interested in reducing Ottawa’s ability to help Canadian companies become more productive.

Liberal MP Ralph Goodale, a former finance minister, says Flaherty may be too obsessed with budget cutting when the economy still needs help. (Adrian Wyld/Canadian Press)

Liberal Ralph Goodale, a former finance minister himself, charges that the Harper/Flaherty agenda is driven by political dogma, not economic realities.

"Their mania around austerity, cutting the budget, cutting the size of the federal government, making it less and less relevant in the lives of Canadians, that's job one,'' he says.

"That overriding objective means things like proper services for veterans, like a jobs program that actually does something fall by the wayside.''

The PM 'came around'

Just how deep those prospective cuts are, however, is a matter of considerable debate.

The government refuses to detail where and how much it is chopping. The Parliamentary Budget Officer has also noted billions of dollars in already approved spending has, well, not been spent.

Where is it? No one in government is saying.

In our interview, Flaherty was happier to look back and discuss the past eight years, and how he came to the decision that the string of federal surpluses had to turn, out of necessity, into one of the biggest single deficits in Canadian history in 2008.

His critics say Flaherty was slow to bring in the stimulus plan. That he only did it when confronted with defeat over his botched economic update in 2008, which put eliminating political subsidies ahead of economic stimulus at a time when the world economy was going off the cliff.

Flaherty insists the two events are separate, that running a deficit was his choice based on the bleakest of the many bleak forecasts he heard from business leaders during the pre-budget consultations that took place while Parliament was prorogued, to prevent the opposition coalition from taking over.

"I remember one meeting in the middle of December in Saskatoon, and just thinking to myself that this is worse than I thought and we're going to have to run a large deficit if we're going to do anything, which is a big choice for a Conservative government because there are lots of people who think the government ought not to intervene," he said.

"But that was my view and the prime minister came around to that."

'I don't give up'

It's an interesting insight into the often uneasy relationship between finance minister and prime minister. Paul Martin and Jean Chretien worked together to end 27 years of deficits in the 1990s, but they were never close. In fact, they were increasingly bitter rivals.

Flaherty laughs when asked if he has an easy relationship with Harper.

"I think some of the other ministers are surprised sometimes because I debate with him. So we don't always agree, no. But I can usually get him around to a point of view I can live with."

Flaherty is one of a very few cabinet ministers who's given a free hand under Harper — Foreign Minister John Baird and Employment Minister Jason Kenney are the others — and he seems willing to exercise it.

He's mused recently about interest rates and the value of the Canadian dollar — to howls of anguish from those who say he's stepping on turf reserved for the independent Bank of Canada.

What's more, he continues to push for a single securities regulator over the objections of certain provinces and to the surprise even of Harper.

"A couple of times I think the prime minister has sort of looked at me and said 'when are you going to give up on that one.' But I don't give up.''

That may be another clue into Flaherty's determination to see the books balanced, and to why he’s already talking publicly about a legacy that goes beyond creating stability during a recession.

It's the kind of determination a D'Arcy McGee would understand.

About the Author

Chris Hall

National Affairs Editor

Chris Hall is the CBC's National Affairs Editor and host of The House on CBC Radio, based in the Parliamentary Bureau in Ottawa. He began his reporting career with the Ottawa Citizen, before moving to CBC Radio in 1992, where he worked as a national radio reporter in Toronto, Halifax and St. John's. He returned to Ottawa and the Hill in 1998.


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