Canada
0
Budget 2009: Will a little red ink buy Harper the time he needs?
Source: http://www.cbc.ca/canada/story/2009/...f-vp-boag.htmlBudget 2009: Will a little red ink buy Harper the time he needs?
Last Updated: Friday, January 23, 2009 | 5:49 PM ET By Keith Boag CBC News
It was not quite a year ago that former Liberal finance minister Ralph Goodale began to warn that the Harper government's cascading tax cuts would soon whittle away the surplus and lead the country back into deficit.
Almost no one took that seriously — just the opposition sounding off — because the prevailing political orthodoxy was as simple as it was rigid: deficits, never again.
Prime Minister Stephen Harper and Finance Minister Jim Flaherty listening to pre-budget submissions from the premiers. (Adrian Wyld/Canadian Press) As it often turns out, "never again" is a unit of time that can pass in a heartbeat.
In an unusual twist, virtually on the eve of Tuesday's budget, the Conservative government has confirmed that the deficit it promised it would never run will amount to about $64 billion over the next two years.
And that will be just the beginning because the government has also said the next balanced budget will be at least five years away.
It's easy to see this as a political disaster. The coming deficit will not be due entirely to the stimulus package the government unveils this week. A significant portion will be a consequence of the narrow margins for error that Finance Minster Jim Flaherty left himself while simultaneously underestimating the severity of the economic recession.
So as the Conservative party begins its fourth year in government, and Stephen Harper his fourth year as prime minister, they can look forward to a future that is significantly more challenging than anything they have experienced before.
What's more, it is a future made even more tenuous by the prime minister's political style.
Into the soup
The momentum behind the global economic collapse caught governments everywhere by surprise. Its impact on Canada was inevitable.
But the political crisis that accompanies the economic distress in this country wasn't inevitable. The government's toxic combination of stubbornness and recklessness poisoned the atmosphere of the new Parliament in the late fall and galvanized a weary and disorganized opposition.
Liberal Leader Michael Ignatieff: is the fate of the Conservative budget in his hands? (Fred Chartrand/Canadian Press) What followed was an historic confrontation that the Conservatives ultimately survived only by scurrying to the Governor General to ask that she end the parliamentary session to allow the government to evade a vote that would have meant its defeat.
The downside of the update
The stubbornness was evident in the finance minister's economic update in November.
You'll recall, the prime minister had spent previous weeks softening the ground in preparation for a budget deficit. He did this in Quebec City with visiting French President Nicolas Sarkozy; in Washington, D.C., with the G20 leaders; and in Lima, Peru, at the APEC summit.
Wherever Harper found himself before a microphone, he would note that the world faced the most serious economic crisis since the Great Depression, that deficits were an essential response to the threat and that Canada would do its part to stimulate global demand by increasing spending through deficit financing.
In contrast, Flaherty's fall economic update stubbornly ignored all of that. Instead it projected five balanced budgets.
In other words, it forecast no deficits at all for the next five years. His critics judged the minister excessively preoccupied with managing the books instead of managing the economy.
Flaherty did caution that, if the government opted for a stimulus package in the next budget, there would be a deficit after all. But that footnote was scarcely noticed because the update itself was so widely dismissed as a dud.
Economists across the country ridiculed the notion of a balanced budget in these difficult times. One even accused the Finance Department of "microwaving" the books.
The stubborn denial of what others saw as reality was compounded by the reckless coup de grace Flaherty tried to hand the opposition parties.
In his update, he gratuitously included a measure to end political party financing in a way that would have effectively bankrupted the Liberals and the Bloc Quebecois, and rolled back about 75 per cent of the Green party's revenue.
Faced with that prospect, the opposition parties reacted predictably, which is to say desperately: they conspired to use their parliamentary majority to take over the government and replace it with a coalition of Liberals and New Democrats, to be supported by the BQ.
Newtonian politics
Apparently there is a law of political physics that says that for every desperate action there is an equally desperate reaction.
As a result, immediately after the coalition was born the government accused the opposition of trying to overturn the results of the last election and threatened, in the words of Transport Minister John Baird, "to go over the heads of Parliament" to the people (a threat that some said sounded like a call for mob rule).
Fortunately, instead of anarchy Canadians were handed prorogation. That meant that instead of defeat, the government received a "time out" and, instead of Stéphane Dion, the Liberal opposition ended up with Michael Ignatieff as its new leader.
As a result of all this, the political environment within which the government will soon deliver one of the most important budgets in memory is fractious, suspicious, distrustful and brimming with recrimination.
And because this is a minority parliament, it is the fractious, suspicious, distrustful and recriminatory opposition that will decide whether the government stands or falls.
A plan for recovery
Realistically, the government's immediate fate lies in the hands of the new Liberal leader.
Ignatieff has met with Harper several times in recent weeks and discussed in broad terms what the budget should try to do, but he has kept his cards close to his chest.
He has preferred instead to leave the responsibility almost entirely with the government, apparently calculating that to take ownership of the solution is also to take ownership of the problem.
When it comes to the budget, both Harper and Ignatieff have avoided specifics but it seems clear that the two men inhabit the same universe of policy options.
They don't, for instance, disagree about stimulative deficits. They are both on the same page when it comes to infrastructure spending and have expressed support for enhanced employment-insurance funding and tax cuts (though there may be significant disagreement about the scope of both those last two measures).
But what will surely be a crucial test for the budget is the credibility of its plan for recovery.
The coalition option
Experience, the saying goes, teaches us to recognize a mistake when we're making it again. And the Canadian experience with deficits is that the getting in is easier than the getting out.
So there will be judgments made Tuesday about Flaherty's exit strategy, the roadmap from deficit to surplus, which he is promising will only take five years.
Forecasts, by nature, are less reliable the farther out they look.
In November, Flaherty didn't see any deficits at all five years down the road. Now, he sees tens of billions in red ink. Will his eyesight be any better this time as he tries to focus on a return to balance?
Defeating the government remains an option for the coalition. But it is nearly unthinkable that in the teeth of an economic crisis, with a Parliament that has sat only two weeks of the last seven months, a budget defeat would lead to an immediate election.
That is why the Liberal-NDP coalition option is not yet dead, even though the public is uneasy about it as are many in the Liberal caucus itself.
But if the budget passes then the political crisis should pass with it and the coalition will probably fade away.
Born at a particular time and in a particular battle, it's unlikely to continue as an option that either the Liberals or the Governor General would have to consider if the government is defeated on some other measure in the future.
Reply With Quote
Bookmarks