Flaherty’s Last Act


Jim Flaherty, coughing and wincing through a hoarse voice, told Robert Fife that the books would be balanced, manufacturing is back, there is no housing bubble, and that household debt is nothing to be concerned about.

Everything.  Is.  Fine.

Bit of an odd interview, that.

Flaherty, Harper’s long-trusted finance minister with a knack for getting Canada to swallow any lumps it has to take, isn’t quite the salesman he used to be.  He spent the whole end-of-the-year CTV interview answering in short, strained answers — sometimes missing the question completely.  If they unleashed that Flaherty onto the barbecue circuit, he would have trouble convincing the average Canadian that he’s capable of frying a burger without keeling over, let alone trying to hawk the lark that our economy is doing a-okay.

Greece could still slip into the sea, the IMF could be boarded by pirates, Toronto could suddenly realize that most of its condos are vacant, Canadians could be crushed under the weight of their own piling mortgage payments.  Any number of things could doom this country financially.

Any voter with a keen eye would look at Flaherty, whose health problems are well-known but supposedly not life-threatening, and wonder if he’s capable of handling the swirling storm that may come to Canada at any given time.

Flaherty, in fact, is more than capable of handling it.  And that interview was his chance to convince Canadians of that.  It was his job to stay upright, and sell the golden egg that he’s sitting on.

But, as it happens, he didn’t.

Flaherty’s Willy Loman-style interview was painful to watch.

He did manage to mumble something about our manufacturing sector coming back.  But in his gruff vagueness, Flaherty forgot a key figure: Canada added 48,000 manufacturing jobs from the first three quarters of 2010 to 2013.

Eat it, Dutch Disease.

Yet any recovery in the manufacturing sector is outpaced by the other moving parts of the Canadian economy, as the dividends of oil and gas development, coupled with a picking-up of exports continues to reverberate across the country.  Helping it, too, appears to be the much-decried Employment Insurance changes imposed on high by the Harper Government.  Pass over that gag reflex you feel — according to departmental statistics, only 1 per cent of EI claimants were kicked off the program in 2013 because of Harper’s changes, and most of those really were tropically-vacationing fraudsters.  Defying expectations, the EI changes really appear to be throwing workers back into the job market and decreasing skills shortages across the country.

Canada is pouring itself a cup of coffee and getting back to work.

As for this impending housing bubble that threatens our very existence — it’s slowly deflating.  Housing starts have shown double-digit drops since 2012, which was probably the peak of the house-building craze, as the available supply of houses finally meets demand. Housing prices, meanwhile, have stabilized — up from the rock bottom they hit in 2009, but down from their spikes in 2010.  We’re at the 10-year average.

Things are normal.

And given that interest rates have been at one per cent for the past several years, a reasonable fear could be of the inflationary boogeyman.  But, nope.  Prices have, if anything, been coming down.  So while interest rates come up — which, Flaherty promised, will happen soon — prices will likely stay flat for the foreseeable future.  While that’s not, all-in-all, a good thing, it at least gives families a reprieve as they pay off their substantive debt-loads.

And what of the crushing debt?

Well you can’t really blame Canadians for fattening themselves on cheap money.  That was the goal, really. The peal-clutching wannabe tight-fisted holders of the purse strings who crow at the horrors of public debt forget that they were once those Keynesian stimulus-lovers who were once pushing the home eco-renovation tax credit on reams of previously spend-thrift Canadians.  Their histrionics are not necessary.  As interest rates slowly rise, and charges on that borrowed money cuts into the country’s disposable income, that debt will be paid down.  Canadians currently owe about $1.64 for each dollar of disposable income they have.  Not a nice thing, for sure, but hardly the cataclysm that will push us back into the ocean from whence we came.

Flaherty’s laborious interview hardly even danced on what promises to one of their greatest achievements — balancing the budget, with a healthy surplus, in 2015.

There promises to be a bit of axe-grinding in that achievement.  It would have come much sooner, Flaherty must be ruminating, if it wasn’t for those meddling kids and their goddam dog, too.

He and his government were forging recklessly towards surplus in 2008, as the world was tumbling down around them.  Goddangit, they swore, there will be no deficits.  But as the mental conjuring of breadlines and urban ghettos arose, they backed down to the demands of the opposition parties, poised to grab the keys to 24 Sussex in their ill-fated coalition attempt, and began stimulus spending.  A single tear trickled down Flaherty’s dimpled face for each cent into the red they spent.

But things are better, now.  The jobs are back, manufacturing has rebounded, and families are on track back to the new normal.  That’s thanks, in no small part at all, to the hostage negotiations triggered by that coalition scare, but Flaherty is lucky enough to take credit for them.

He, of course, didn’t.

Flaherty has a lot to be proud of.  Under his tenure, he navigated the desolate Mad Max-style hellscape that became of international finance, and even had the car fixed up and returned it in better shape than it had been.

But, if he can’t properly claim that as a genuine accomplishment, perhaps it’s time he drive off into the sunset and let some other upstart finance minister get a turn.  One that can sell this government’s economic record to Joe Sixpack and Nancy Twofour-Sixpack (she kept her maiden name.)

Being Finance Minister is one part economic decision-making, and one part perpetual electioneering.  Flaherty has certainly shown himself incapable of doing the latter.

Alas, Flaherty seems committed to sticking around until that balance budget is birthed, regardless of the consequences.


Other articles by Justin Ling

The Fundraising Begins

What of the falling sky?

Senate Appointments

Follow Justin Ling on twitter: @Justin_Ling


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