Paul Wells

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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