Inkless Wells

Paul Wells on all the latest out of Ottawa—along with the occasional post about jazz. Follow Paul on Twitter: @InklessPW
He also offers his thoughtful perspective of Stephen Harper’s last 10 years in his recent eBook, The Harper Decade.

Categories: Capital Read, Inkless Wells

Actually, don't bother firing Jim Flaherty

by Paul Wells on Wednesday, May 27, 2009 4:31pm - 203 Comments

Actually, don't bother firing Jim Flaherty There is nothing wrong with the Liberals calling for the head of Jim Flaherty. It would be hard to imagine a parliamentary system anywhere in which the finance minister’s validity wouldn’t be questioned by the opposition, on a day when he announced he had managed to turn 2% of GDP of fiscal stimulus, spread over two years, into 3% of GDP of deficit in the first year. Recall that we are still only five months from the good old days when Flaherty was projecting no deficit at all, in an economic update whose policy proposals were disowned by the transport minister two days later.

So I say the following with real regret. I’m the guy who endorsed Flaherty to replace Mike Harris for the Ontario Progressive Conservative leadership in 2000, after all. (The OPC preferred to herd lemming-like off a cliff named Ernie Eves.) But come on. This guy is easily the most ineffectual federal finance minister in decades. Why believe a word from his mouth? Does anyone seriously believe he believes most of it?

So it’s fair for the opposition parties to call for Flaherty to be fired. But realistically now, would it make any conceivable difference?

Fun questions:

Who would replace Flaherty as finance minister?
Would that person have any more influence over budgetary policy, fiscal projections, his own public statements or objective reality than Flaherty has had?
Then why bother?

For comparison’s sake, look over at Environment, where the minister’s job has gone from Rona Ambrose to John Baird to Jim Prentice, arguably a considerable step up in clout and seriousness every time. (I know, I know. I said arguably.) And how’s that going? Risibly. By the government’s own standards, its environmental policy is now fully self-mocking. Excellent news for a government that wants to base its entire bilateral relationship with the new U.S. administration on a credible energy-environment partnership.

But I digress. What I’m saying, without believing for a second anyone will listen, is that since replacing Jim Flaherty will not address the real problem with this government’s pillar-to-post management of the economy, it is pointless to be cruel by calling for his replacement. He is a funny wee leprachaun, and as long as nobody ever listens to another word from his mouth, there is no harm in letting him continue to ride around in the fancy car.

Tags: Jim Flaherty

More by Paul Wells

http://deleted Sandi

Well, Harper sure as hell won’t take blame for anything. He doesn’t take responsibility – it’s the Liberals fault, the Liberal biased media’s fault, Linda Keen’s fault, etc., etc. So, he’d probably let go of Flaherty, rather than take responsibility, but he has a serious problem. “NO” talent in his caucus.

Who’s left – Rob Anders, Del Mastro, Menzies – frightening.
sf

Frankly, I don’t think any other finance minister in the world is doing better with predictions than Flaherty.

Anyway, for those wondering what happened to the money, take a look at what happened to corporate profits, from whence corporate taxes come. Then ask yourself if you think that an 83% drop in corporate profits, across the board, in just two years, is something easily predictable.

I know the Liberal partisans will claim to have super-human clairvoyance, but the rest of you can think about that.

Gene Rayburn

Let’s look at it another way. For months now (since this crisis began) people have been predicting double-digit unemployment (>10%) including Harper if I recall correctly, but we still haven’t hit that figure (latest statscan data pegs that at 8.0%). Yet, Flaherty claims the ballooning of the deficit can be attributed to a surprise increase in EI claims. It’s (partially) for that reason that the deficit has increased 50%, he says. That implies that his initial estimates for unemployment figures were incredibly optimistic (and nowhere near consensus figures). And we haven’t even hit the worst in terms of unemployment numbers, if we are to hit 10%. It’s one thing to have an estimate 20% off actual figures, but it’s quite another to be almost 50% wrong.

Orson Bean

That’s not correct. Flaherty said the increase in the deficit could be primarily attributed to three things. EI claims was one, but the two others, which are rather significant, were cost of the auto bailout and tax revenue (particularly from business) falling off a cliff.

Gene Rayburn

That’s why I said partially. Indeed it’s not the only factor, but the fact it was a surprise at all is incredible given the multitude of warning signs.

Andrew (not Potter or Coyne)

There’s absolutely no denying that the Fall EFU was a complete fabrication. At a time when the Minister knew the government was already in deficit, forecasting endless surpluses was an unabashed lie.

brick tamlin

Sorry to be *that* guy. But if you check the fiscal monitor at the ministry of finance’s website, we were 0.88 billion in surplus through to the end of February 2009. So, it wasn’t a fabrication per se, it was more like thinking you were flying when you were really just taking a nosedive (revenue wise).

Also, it’s hard to pin this on Flaherty when a good chunk of your profit centres (EI contributors, taxable persons) become massive cost centers overnight.

TD

Yes, let’s look at corporate profits, which some are still recording an increase in record numbers. Maybe we should quit making excuses and call a spade, a spade. The conservative government has been one debacle after another. At which point do you pull your head out of your own butt and realize that a closet full of monkeys couldn’t do any worse than a “three-defunct-party” government is doing.

sf

When you’ve pulled your head out of your butt I’ll tell you.

Kevin Lafayette

Deficits are always bigger, and they always last longer than predicted. Anyone who did not see this coming should probably get acquainted with this thing called reality.

Here is more reality for you. The stimulus will not help, doing nothing was the best option, and it was rejected by all parties.

Jenn

Yeah, but we have, in effect, done nothing, or at least next to nothing. Talking about doing something is not doing something. And yet, in spite of the fact that we haven’t actually spent anything on the stimulus (6% is akin to nothing), our deficit has ballooned. I actually thought that was the plan, and a pretty good one, too. Announce spending, reassure the economy it will be getting help, send out a trickle here and there just to keep up the pretense, but in the end do nothing of the kind. Obviously, it hasn’t worked. The economy, it seems, won’t be bluffed.
Liz

Well, the upshot is that at least 6% got out to Conservative ridings which is really Job One, so in fact Flaherty is not a dismal failure.

BobbyB

Of course Flaherty has got to go! How on earth can a government operate if they have no sensible finance minister in place? This guy Flaherty has no idea how to manage money or spend money or even how to tracj what money is being spent when and where! He can’t apparently decipher what the heck is going on in the economy and is just taking pot shots at what to do. he obviosuly does not have the lights on and I can assure you all that trying to read a balance sheet in the dark cannot be done, regardless of how loud you say it can be done in question period!

Canadians are dependant on a relistic believable finance minister to make sure the economy purrs as best it can. To make sure that the accounts are accurate and that what spending is done maintains some sort of an even keel through the downturn! To say that it would be no better with anyone else there as finance minister is a cop out. Why not just say we will be just as good off (or bad off) if Harper were not there as PM then? Well, OK, that would be true.

If the consensus amongst Canadian voters and bloggers on this site is that we don’t need a reasonably adequate finance minister then fire Flaherty and I’ll do it at 1/10 the salary that Flaherty is making! If your logic holds true then the results with me at the helm will be no worse than with Flaherty and Canadians will save money in the process.

Bottom line ….. Flaherty is a joke as a finance minister! Harper is a joke for leaving him in this job!

danby

My God you’re a cruel, cruel person – but you’re right on the money
Liz

Ahh, grasshopper. Good plan. But you forgot who’s actually running Canada’s Finance Minister. Making him say and write things which might go against his grain, or be even untrue, but there his is saying them on cue.

Now if you want to do Harper’s job for 1/10 the salary throw your hat in the ring. Because Canadians will be looking for all new ministers and a new first among equals very soon.

BobbyB

Some bloggers suggest we get real with the state of how bad the economy is and that no one can or could or will be able to get us through this mess so why not leave Flaherty in place. Well, you are all absolutely right if we accept that we keep the worst finance minister (Flaherty) then there is absolutely no way that anything will get better sooner and we all will just have to wait for the economy to fix itself. With that logic why have a finance minister at all since the economy knows when to take care of itself all on its own! We could just watch things happen, the ups and the downs because a finance minister has no influence on the state of the Canadian economy!

I would suggest that we need to change the finance minister because the successes in the Canadian economy are based on trust in the financial stability and Flaherty has shot himself in the foot so many times that how could anyone trust anything that he says, regardless if that means things are worse or things are getting better. he has blown the trust he was given by the Canadian people to be our finance minister and hence he needs to go!

The financial state of the Canadian economy is not a popularity contest. Why does Harper see it as bad to get rid of someone that has lost the confidence of the Canadian people and or the Canadian financial institutions? Is it that harper really doies not care about Canadians and hence will leave the worst finance minister in place for spite! What an idiot!!!

Liz

Um yeah, pretty much.

http://www.tennisvagabond.com BigDaveS

I like this post.
Insightful, honest, and funny.

knick

Same here. One thing tho, Bernier might even be funnier than Flaherty as Minister of Screwing up Finance.

Richard

He could auction his next girlfriend’s dress and put the proceeds toward the national debt. Not much, but slightly more than what Flaherty’s doing.

Liz

Patience. Harper’s doppelganger Flaherty will get around to the dresses just as soon as he’s finished flogging Canada’s silver and china. To anonymous bidders. On an unpublished auction. Capiche?

Bruce

CP- This year’s deficit represents about three per cent of the size of the country’s economy of more than $1.5 trillion. By comparison, the United Kingdom has tabled a deficit equivalent of 10 per cent of their gross domestic product, while Washington’s US$1.75 trillion shortfall is 12 per cent of GDP.

As well, Canada’s debt to GDP remains among the lowest of industrialized nations.

Austin So

Ah…the days when the Liberals were at the helm…

Thanks Bruce for reminding everyone of the great economic stewardship under the Liberals that has enabled Canada to withstand the dual pronged assault of the global recession and the gross incompetence of the CPC.

Bruce

Get off the meds AS.
Liz

Take some comfort Austin So in the fact that when Harper, Flaherty & Corp move to points south they will have to pay %100 for their own meds. Unless of course they morph into the dratted “Canadians of convenience” they’re always on about.

Frankly, I wouldn’t put it past them to keep their Canadian status and all the freebies while they while away their lucrative retirements in milder climes.. Un-Canadian from start to finish, that’s the Harper party.
Two Yen

Oh yes, the Liberals.

The party of Trudeau that created structural deficits that took decades to get out from under…

Or perhaps, the party of Ignatieff that has been calling for more spending even as it claims to be surprised by the fact that the government is going into a larger deficit than anyone forecast.

Lynn

It’s all well and good to compare our deficit and debt to other countries for a comparative perspective of how well we’re doing – or not doing – so we can feel better about ourselves.

Thing is, that we’re not the UK, we’re not the US, and we’re sure as hell not the EU. We have different export-import ratios, a different economic mix, and different regulatory frameworks. Our concern should be whether our deficit becomes structural debt – and it could, if government spending isn’t managed properly and because this recession isn’t confined to our borders – and generating wealth and revenues (both tax-based and export-based) so that it doesn’t.

Liberal, Conservative, or in between: what we have now is a big deficit. We need to have an exit plan, and none of our current federal parties have anything that resembles such a thing.

Bruce

OTTAWA, May 27 (Reuters) – Canada’s three opposition parties, which can only bring down the minority Conservative government if they all vote together, could not agree on Wednesday how to handle Ottawa’s admission it would run a record budget deficit this year.

The Liberals, the official opposition party, said the news that the deficit would reach more than C$50 billion ($45 billion) made it increasingly difficult to work with Prime Minister Stephen Harper, whose January budget they backed.

But the left-leaning New Democrats showed no enthusiasm for cooperating in a bid to defeat Harper while the separatist Bloc Quebecois said it wanted more details of what the Liberals had in mind.

Randy

Yeah, it is going to be funny watching Jack Layton squirm now when he is the one that will prop up Harper because he will be scared to have an election.

Brammer

“He is a funny wee leprachaun”

Kind of attack-adish, don’t you think? A wee bit below your normal standards Mr. Wells.

JVSCant

It’s creative channeling of outrage, a mode I now refer to as Wellsian. I remember him tearing a hole in PM Paul Martin without the whimsical-resignation style as a buffer — it was awesome, but lord, it wasn’t pretty.

The flippancy is a way of outlining the target’s irrelevance. Fair game in my book; the current crop of ministers do project an aura of being infinitely interchangeable.

BobbyB

Bruce, with all due respect those numbers while interesting have nothing really to do with whether Flaherty stays or goes. Flaherty is the Canadian finance minister. All I care about is how Canada is doing and what Canada is doing to minimize/mitigate/minister the finances of Canada and Canadians! Yes it is a global issue. But, Canada could spend the money to employ Canadians on projects that have been required for years but have not had any money allocated previously, like the stimulus package was intended for. Those federal projects could be receiving the deficit generating dollars to go to Canadians and Canadian firms to build/re-build those infrastructure items such as bridges that are a federal responsibility. While there were excuses in the past why moneys were not allocated to these projects we now have an opportunity called deficit spending to help us through the downturn and to get some things done that are needed to be done. Deficit spending is not the best but if they have agreed to go into deficit then get off the pot and start spending it now and maybe, just maybe this will have a small impact on reducing the plight of Canadians, how ever small that benefit may be. I could care less how much of GDP the US spends or what Britain spends or anyone else. I only care what is done in Canada for Canadians. Flaherty, as finance minister, could be making sure that everything possible is done to get the money out the door as soon as possible to get these projects moving forward. I don’t see him working this issue to make that happen. I only hear him and Harper repeat time and time again they are spending as fast as they can! What tripe! They are dragging their feet with any amounts of spending! Sure the deficit may climb and we can’t know exactly how much or when. Flaherty may not be able to do anything about how bad things look globally but surely Flaherty has at least some sort of influence on projects in Canada for Canadians? If he doesn’t then put someone in place that can move Canadian projects and Canadian spending forward. Is that to much to expect from our finance minister?

Bruce

“Flaherty, as finance minister, could be making sure that everything possible is done to get the money out the door as soon as possible to get these projects moving forward. I don’t see him working this issue to make that happen.”

The budget money goes out of the door after the spending estimates are tabled and voted on at the end of June, just before the summer break. That is how it is done every year, no matter what party is in government. The only thing that would stop that money getting to the projects already approved would be if the opposition parties vote against it and we go into an election.

Liz

Another load of malarky.

Do you ever get tired, Bruce, of saying the same thing over and over again?

The budget money hasn’t got out the door.

You and Diane Finley can talk a cow onto a blue moon, and then some.

Oh right, I forgot that the $50 million to Haldimand-Finley was one of the first to start adding up to that collossal 6%.

Way to go, Canada! And you too, Bruce, presumably.

Bruce

If clues were shoes you’d be barefoot.

The expenditure plans are submitted to the House in their consolidated form as the “Main Estimates”. Under normal circumstances, the Main Estimates are tabled in the House on or before March 1 for the upcoming fiscal year and submitted for concurrence by the House no later than June 23.

http://www.parl.gc.ca/Sites/Compendium/web-content/c_d_financialcycle-e.htm

keith c

remind me of how flaherty is bad for running a bigger deficit than he forecast, but yet the solution is for him to spend more.

http://www.chuckercanuck.blogspot.com chuckercanuck

Oh vey, Paul Wells.

Even Warren Buffet lost money. If you find a business leader who got 2008/2009 right, well, I’m sure it exists but is exceptional.

As a business owner, I can tell you how it worked for us:

Aug/2008 receivables still pretty good, even in the US market.

Dec/2008 receivables drop sharply –> just when we are doing our salary adjustments for 2009. So we have to forecast 2009 based on 2008 in total and mitigate with December’s very poor results. So we gave a 3.5% increase overall (they worked like dogs in 2008 and we can’t say, “it looks like your lucky to have jobs for the next 52 weeks.” They deserved the most we could afford.

Jan/2009 sales disappear and receivables closing in to 0 –> cash burn is going to be big and painful. Regret giving employees 3.5%. Asked to forecast 2009 by January and we are quietly very worried.

Today: we feel very confident that we know the floor on sales for 2009. We feel slightly optimistic that we will exceed that floor. If we do, we will be thrilled.

But between Jan/09 to Today, what should we have done vis a vis the folks who depend on our payroll for their food, lodging and clothing? “Hey, we have no bloody clue! Could be catastrophic! Or, best case, just merely very disappointing.”

While, this isn’t to draw an exact parallel by any stretch with the MoF.

But if the MoF or MacLean’s or Michael Ignatieff could have predicted WITH ANY CONFIDENCE what my company’s contribution to the 2009 corporate tax collections would be, I would be stunned because we certainly could not have done it.

Orson Bean

Aw, c’mon, don’t let the orgy of recriminations against Flaherty get sidetracked by factual considerations. Burn the witch!
Mulletaur

What total rubbish. Department of Finance officials do not eff up a forecast by 50% over 4 months, even in the economic conditions we find ourselves at present. The GDP estimates have not suddenly changed. We are not suddenly at 15% unemployment. Deficit projections are not based on the anecdotal evidence of one enterprise. The $50 billion figure Diamond Jim quoted outside the House yesterday is just as fishy as fermenting herring.

http://www.chuckercanuck.blogspot.com chuckercanuck

Forecast by 50%? When 50% is 2 points to 3 points, its not the same as 50% being 20 points and 30 points. So, to get all worked about about the 50% is kinda sleight-of-handish.

Mulletaur

What, so now I have to give math lessons ? (3-2)/2=0.5 or 50%. Or, if you want an illustration using the ‘real’ numbers rather than percentage of GNP, $50 billion minus $34 billion equals $16 billion. $16 billion divided by $34 billion is 0.47 or 47%. Really, what do they teach these kids in school nowadays ? Keep on like this and I’ll start telling old stories about how I had to walk 10 miles to and from school with a half a tonne of coal on my back uphill both ways … ;-)

http://www.jackmitchell.ca Jack Mitchell

These days they tell the kids they’ll have to walk 10 miles with half a tonne and when they show up it’s actually 15 miles with 3/4 of a tonne.
http://www.chuckercanuck.blogspot.com chuckercanuck

Hey, I’m not doing math, I’m doing engineering.

If the deficit was 0.1% and then it went up by 100% to 0.2% the 100% increase in the deficit is less significant than a 50% climb in the deficit when that 50% climb means from 2% to 3%.

So, saying “a 50% increase in the deficit” is true but not meaningful. So, I guess if I was William James, I would just say its not true.
http://www.jackmitchell.ca Jack Mitchell

Surely the Department of Finance does its estimates in dollars, not in %’s of GDP.
Mulletaur

Does the question “how long is a piece of string ?” appear on engineering exams ?
madeyoulook

Jack, I would hope they are thinking in terms of dollars AND in terms of “in relation to GDP” AND in relation to inflation-adjusted benchmarks. Because ALL are relevant for analysis.

Just think, a billion-Zimbabwean-dollar deficit in Harare’s budget only sounds big until the baker sends over a few loaves of bread and a stick of butter for free and the budget balances.
http://www.chuckercanuck.blogspot.com chuckercanuck

Of course, but my point is it isn’t expenses that so difficult to forecast its government revenues.

And on that front: over the last 10 months, I could not have predicted with any confidence at any given time what my 2009 corporate taxes would be or even if we would be paying corporate taxes because of losses. No idea.

And, I am confident that my competitors were equally confused. In other words, I feel fairly confident that an accurate forecast of my industry was not possible. Is my industry particularly hard hit by the recession? Maybe. But it seems at least plausible that other industries were equally confused and uncertain and wrong.

So, at least for corporate taxes, I would cut DoF forecasters some slack for not getting it close to perfect.
Gene Rayburn

I’m also a studying engineer, chuckercanuck, and your logic is flawed. Just because the difference between 2% and 3% appears small to us, it is a 50% difference.

Look at it another way: in this case, 2% and 3% of GDP actually represent figures of $34 billion and $50 billion deficits in this situation. That’s $15 billion difference, in four months. I wouldn’t let someone off for having messed that calculation up. (I think this is the point Jack was making)

Just to go back to the original mathematical argument, I could have personally chosen a scale where $34 billion represents 0.0001 Gene deficit units, while $50 billion represents 0.00015 units. You may say, “oh well it’s still just a 0.00005 difference between the two, so who cares?” Guess what. It is still a 50% difference. Scale doesn’t matter.
http://www.chuckercanuck.blogspot.com chuckercanuck

Well, Gene, while I dont buy your argument, I am happy for the talk.

Liz

Some departments of finance do. Canada’s for instance. It’s not like Canadians are paying for high-priced know-it-alls to check into matters, have their ducks in a row, and advise a Finance Minister and all.

Not Canada.

Harper tells the Finance Minster what to say. And FM says it, in stereo.

Out or off by 50%?

No worries, says FinMin channeling Harper.

Time for the people to snuff the candles out on Harper’s seance.

Time for Harper’s psychic to hit the road, too. Really, what good has she done for Canada while on the taxpayer payroll? Did she foresee the economic disaster? If so, did she tell her employer who employs her for just that sort of information?

Harper is ridiculous. Harper should step down, go to his safe place and await the rapture. If he has faith in his psychic hairdresser then he should stand her motel room for the duration. Frankly, Canadians are getting tired of End-Of-Days Economics versus Get-What-You-Can-Then-Get-Out Economics.

Soon as you’re done with your various Freakonomics, can we get some real governance over here?

Mulletaur

LMAO.

madeyoulook

You know, it might be time for a Parliamentary Budget Officer to file a report.

http://www.jackmitchell.ca Jack Mitchell

LOL
Mulletaur

Yeah, for a start I would like to know how the figure of $50 billion was suddenly arrived at after a forecast of $34 billion a scant 4 months ago. Good call.
Liz

I’ve often wondered in the people of Canada ante up the insurance for our officials. And I wonder now if the PBO is worth more dead or alive.

D

There’s really only one solution to this farcical mess of a so-called “government”. It’s time for Harper to go.

Will anyone in the Conservatives have the cajones to stage an internal coup? (Mr. MacKay?) Will the Conservatives come to the collective realization that Harper is dragging them down into the abyss of irrelevancy?

Unlikely.

Orson Bean

Yeah, getting rid of Harper will instantly vapourize the deficit.

I’m not making this up.

Liz

Rip that blood-sucking leech off the Canadian people and the healing can begin.

I’m not making this up!

billg

Fire him and do what? Get rid of Harper and do what? If you read most comment boards you get the same stomach turning answers….fire this guy and elect another guy and everything will be better.
Well…it wont get better. It cant get better with anyone else. If your answer is to fire this guy or elect another guy then we truely are screwed. This situation gets better when we decide to stop blaming someone else for our stupidity and our greed. This situation gets better when we decide to start to take the education of our children seriously. What we’ve got right now is what we deserve. We are an arrogant, a greedy, and a lazy society. Want to know how lazy? Why bother to reform or change when you can fire or vote in someone else. Want to know how greedy? Demand from all levels of government that your pensions be rescued while knowing full well that your neighbor is in the same boat as you but screw him…your in a union. And arrogant is thinking that while the entire world goes through the same economic situation as you that somehow your issues and troubles and worry’s are more important. Small thinking is how we got to this point….how about thinking outside of the political rhetorical box for a change.

Mulletaur

“We are an arrogant, a greedy, and a lazy society.”

Yes, that’s right Bilge, it’s all our fault. All your pumping won’t stop the good ship ‘Cons’ from sinking, I’m afraid.

http://skinnydips.blogspot.com Skinny Dipper

I thought Harper was the finance minister!
Frank

Ha ha, those Liberal and NDP MPs with the faux outrage are hilarious, aren’t they?
Just a few months ago, they were DEMANDING the government SPEND,SPEND, SPEND on a “stimulus package”. The KIng Hypocrite – Jack Layton was demanding a “package” of $40 Billion or something, just a few months ago.
Then, the next faux outrage was that the Conservatives better not just throw money out there willy-nilly, better be accountable, they raged.
Then, the next outrage was, “the Conservatives are taking too long to get the money out”. Why? of course, because they don’t want to just throw it out, they want it done properly.
Now here we are, after DEMANDS for BILLIONS in spending, the ever hypocritical opposition is crying foul because hey, guess what, we’re in debt.
Of course, no journalist in the media could ever see or describe this for what it really is – HYPOCRISY!
As long as the Libs or NDP are crapping on Harper, then it’s good with the MSM.

HYPOCRITES

hollinm

Amen!

Its disgusting watching the hypocrisy and the media not calling the opposition parties out on that hyprocrisy. Of course the intent is to ensure that the Liberals are seen to be competent and that nasty Harper is incompetent.

kc

Ahem…maybe you two old grumps should pop next door to AC’s blog. I believe he’s msm isn’t he?

JP

I’m going to take off my partisan hat, and just acknowledge that it seems to be pretty damn hard to make budget projections during one of these nasty economic downturns. Some memorable examples…

- Allan MacEachen during the recession in the early 1980s

- Bob Rae’s Ontario provincial govt during the early 1990s

- The performance of other countries (the U.S., Britain, Germany, etc.) during the current economic crisis

In all these cases, governments seem to be surprised by the speed at which the economy deteriorates. Now one could argue this has happened often enough now that finance ministers SHOULD be able to predict this and make appropriate projections, or at least acknowledge that they really have no idea how much their revenues will be.

All this to say, I find it difficult to know how much blame to lay at the feet of Flaherty (or the real finance minister Harper). I do think he could more honest about how he has no idea what his numbers are going to be, but that might be too much to expect from any finance minister. They have to at least pretend that they know what’s going on, and try to project calm and confidence.

Orson Bean

Good points, I agree. The twist here in the Canadian case, which I think might have made things worse, was the minority parliament context in which this all unfolded. I realize that many Canadians recoil in horror at the thought of a Tory majority government, but there’s a good argument to be made that had the Tories had their majority, Harper wouldn’t have had whipped the chequebook out so eagerly to buy off every constituency, rent-seeker and whiner out there who wanted to be greased courtesy the federal government. Because basically what Harper has been doing ever since he got in is buying everyone off in order to remain in power. It ain’t a healthy situation, many people have been warning us about that fact, and now the price is staring us in the face.

Looked at in that context, while Harper’s behaviour is bad, I still think Trudeau and Mulroney’s behaviour is worse, because those guys had safe majorities and still managed to create (in Trudeau’s case) and run huge deficits.

Liz

Sure, Haper would have just ripped out the chequebook to pay off his cronys, with no oversight at all, not even a FinMin with a modicum of respect for himself to call Harper on his excess.

Sure, but’s that’s a fair tall tale ye be telling there old Bean.

DT

frankly Liz, I think you should take a pill. You’re just throwing out wild accusations now, no facts, no real argument just the manufactured outrage of a shriveled old shrew.

Liz

Frankly, DT (is that short for delerium tremens?) I don’t prescribe to self-medicating though it seems that that is your first resort. No manufactured outrage here, but then you’re reading through a self-medicated haze.

Northern PoV

JP: Cute analogy
but your personal experience (assuming its veracity) does not jive with the well documented economic history of the last year

And sure these things are tough to call precisely, but given the deliberate cover-up of the obviously impending economic doom during last falls’ election, and directly after the virtually-criminal economic update – why should we believe anything he says. Or his intentions to actually do what he says he will to fix it.

JP

I agree that Harper and company were probably mischaracterizing the state of the economy last election campaign because they were worried telling the truth would hurt their re-election chances.

But there’s a reason economics is called the dismal science. It’s so hard to make predictions about the economy even during “normal” periods. Politicians will always choose to interpret economic data in the way that best serves their political goals.

That’s why the idea of a Parliamentary Budget Officer was a good one. Too bad Kevin Page is being out to pasture just because Harper doesn’t like what he’s been saying.

keith c

they might have been mischaracterizing the state of the economy or painting an optimistic piture – heym you’re running for re-election, who wouldn’t but i think northern pov’s “virtually criminal deliberate coverup” is an overblown way to describe it. Lehman blowup was going on during the campaign. Chuckercanuck describes how for his business a lot of the scary stuff didn’t happen until jan-feb in the new year.

hollinm

Perhaps we should fire the journalists in this country who have corrupted their profession. How absolutely breathtaking for Paul Wells and all the other finance minister want- to- bees who simply say Flaherty is incompetent and should be removed or say the government doesn’t know what it is doing.

While its troubling that the budget deficit is so far off projection lets get real here. Nobody but nobody saw the sub prime issue and the financial collapse in the U.S. coming which skyrocketed around the world causing banking failures, housing markets to collapse, automotive companies to collapse and recession hitting every country the likes of which we have not see since the great depression.

Flaherty does not pick the numbers out of the air although some journalists would have us believe it. It is done with private sector economic forecasts along with the Finance dept. The budget was done two months early in Jan. versus March to safisfy the blood thirsty opposition parties and of course the unofficial opposition in the country, the media. So Flaherty rushed used the worse case scenario provided by economists and then some.

The fact remains the world economy and particularly the United States our major trading partner continues to hurt big time. Things continue to get worse and there is no sign of it letting up.

So based on opposition demands and against their own ideology the government rolled out a huge deficit of $34 billion going to $84 billion in five years. Spend, spend, spend the opposition cried. If you don’t we and the media will call you heartless, meanie Conservatives because you don’t care about ordinary people.

None of the spending comes cheaply. Infrastructure alone carries a big price tag. Of course there are automatic stabilizers built into the economy. One of them being EI whose costs continue to soar. Yet not enough for the opposition parties. Spend more. Another $.1.5 billion + so that people who work 10 weeks can collect a full year’s employment insurance. Spend more on culture, research, forestry workers, fishers etc. etc.

So those with a partisan agenda can bitch till the cows come home and the journalists can write columns ad nauseum but I would ask them to put their money where their mouths are. What would you cut between now and the end of the year to reduce the $50 billion deficit? It is a valid question. Criticism is cheap unless you are prepared to give an alternative. These should be the ones posed to the Count who looks like a fool demanding spending and then wondering why the deficit is hard to predict.

However the media will once again let the Count off the hook and keep suggesting the government is incompetent. If I were Harper I would call a summer election. Let the Count come out with his bushy eyebrows raised and face the people of the country who clearly remember he signed the coaltion agreement.

Northern PoV

” nobody saw the sub prime issue and the financial collapse in the U.S. coming”

any body who was watching (like fer instance the finance dept) saw exactly this starting in the SPRING of 2006

duh

hollinm

Show me where the government should have known the sub prime collapse was coming the U.S. and the collapse of their financial markets. Get real!

Mulletaur

I did below, troll.

Mulletaur

“Nobody but nobody saw the sub prime issue …”

Quit lying while you’re ahead.

Northern PoV

lying????
I just love commentators who can call names but not offer any reasoned, informed argument.
Oh that stung!!!!

The worst of the bubble real-estate mrkts in the US were bursting in early 2006.
Holding a fair bit of real-estate and thinking of buying more I was playing close attention.
I not only decided to hold off purchasing but also sold half my holdings.

The US decline was steady and predictable AND Dim Jim was introducing 40-year-no-down payment mortgages here (under pressure from US lenders desperately trying to keep their PONZI scheme in the US alive).
This mess would have hit us in any case but Jim:
* cut taxes and somehow increased spending (ala his Mike Harris style – where did the $$ go?)
* swung us from surplus to deficit
* stoked the real-estate surge

and generally did all the opposite things a prudent fiscal manager would do. No one could predict the severity or exact timing but rest assured … our Finance dept (civil servants) are very sharp and they knew what was coming. That is exactly why the election-law was broken by Steve.

These guys are out to sabotage our very successful society based on neanderthal theories and under the guise of an old an honoured brand (Conservative) that they stole from the hapless Peter McKay.

Mulletaur

You’re right, you may not be lying, simply very badly misinformed. That’s the thing about opinions, everybody has the right to one no matter how wrong or misinformed they are.

Here is a reference for you : C.A.E. Goodhart, “The background to the 2007 Financial Crisis”, Journal of International Economics and Economic Policy, Springer-Verlag 2007 (published online February 2008), Vol 4 p 334. Here is a link to the full article. Note the date of publication : 19 February 2008. The article itself was written in 2007.

So, giving you the benefit of the doubt, NPoV, that you are not making sh1t up for partisan purposes, you are at the very least badly misinformed. Before you go making broad statements about what was known and what was not known about the financial crisis and when, you might take the trouble to actually do some research first. There’s this thing called ‘the Internet’ which I hear is quite handy for that.

Speaking of, it remains a mystery to me why interbank lending came to a virtual stop on 10 October 2008, four days before we went to the polls, and yet this was not even mentioned as something which could have an impact on the campaign.

Northern PoV

Sorry Mulletaur – I think your on my side of the issue – but we might win more converts if we drop the name calling. ;-)

hollinm

People like this have no valid arugments so they resort to name calling. That’s what Liberals do. No valid arguments so they attack the other person.

hollinm

You are in denial my friend. Anything you can do to malign the government eh? Perhaps it is you who is stop lying for partisan reasons.

Mulletaur

Point to one thing I have ever written that you believe is a lie, and give your reasoned argument for your belief. That would be a good contribution to the discussion here. You might even learn something.

YTZ

“The budget was done two months early in Jan. versus March to safisfy the blood thirsty opposition parties”

If you really believe this is true, presumably the Conservatives would have more power in opposition.

hollinm, some of your arguments are certainly valid – but when are you and other Conservatives going to stand up and hold this government accountable for its actions? This government chose to bailout the auto sector. This government chose to embark on stimulus measures. If they believed this was wrong, they shoud not have done it. Even Sweden refused to take a position in Saab.

I agree that the opposition parties had a significant role in pushing for stimulus spending and the deficit, and are currently being somewhat hypocritical. But be an adult and admit that the GOVERNMENT IN POWER is at least PARTIALLY responsible for their own choices and their own legislation.

DT

you know effing well the coalition would have pulled the plug if the money hadn’t been spent and your argument that they had a choice is ridiculous. They were unwilling to hand power over to a bunch of lunatic socialists, separatists and thier LIberal enablers. Imagine if they had caved, we’d be spending more billions on everyone that managed to stay employed for 9 weeks regardless of circumstance and that’s just the Liberal lunacy. Imagine your deficit a year from now if the the NDP and the Bloc were involved.

YTZ

There is always a choice – the Prime Minister could’ve faced the house and then asked for an election. It is not at all clear that the coalition would’ve been able to take power.

hollinm

“But be an adult and admit that the GOVERNMENT IN POWER is at least PARTIALLY responsible for their own choices and their own legislation.”

I am an adult and I am not going to criticize the government for taking action to help Canadians in the worst recession in our life time.

The fact is if Harper had not acceded to the opposition demands there would have been an election or the disaster waiting to happen called a coalition government. I believe Harper with all the information he was getting as flawed as it was knew this was bad and that doing nothing was not the right thing to do to help ordinary Canadians and the country at large.

The size of the deficit is really a mute point. Whether its 30-40-60 billion it is up to those that are criticizing to offer alternatives or stay quiet and let the stimulus package work. Otherwise tell Canadians what they would do differently and which programs or which stimulus measures they would cancel etc. etc.

Its easy to sit in the cheap seats and to crticize the government for all that is happening in the country. The reality is the Liberals would be in the same mess if they were in power.

However, as I said in my comments the Count had better be careful because Harper could call an election and then we will see the results of Iggy signing the coaltion agreement and then speaking out of both sides of his mouth calling for spending and then criticizing the size of the deficit.

Justin Wordsworth

How about a bunch of us concerned citizens go to the Governor General and ask her to prorogue parliament indefinitely?

You asked what to cut out of the federal budget. How about the whole government?

You want the government to stimulate the economy during this recession by spending more money on infrastructure? This is the equivalent of a near-bankrupt trying to stimulate his finances by remodelling his home and charging it to his credit card. Infrastructure projects are for countries with extra money to spend, not ones that desperately need to tighten their belts.

Sorry folks, but we have unioned and public sectored ourselves into poverty. Our industries our dead. Our economy has expired and is only measuring a pulse because the government refuses to pull the final plug. Our economy is Teri Shiavo.

The only hope we have left is that we can find Jim Flaherty’s pot of gold.
Mike514

What I find ironic is that yesterday on the radio, John McCallum was actually sympathising with Jim Flaherty, saying how the world is in a complicated economic situation, and it’s very difficult in this context to foresee such shortfalls (I’m paraphrasing – I don’t know exactly what he said but it was along those lines).

I found this sympathy to be a rare moment of non-partisanship and maturity in Ottawa. I was impressed with McCallum’s professionalism.

But sadly it didn’t last, as today the Liberals are calling for Flaherty’s head. I much rather prefer the Liberal (or at least McCallum’s) viewpoint of yesterday to that of today.

Mike514

After a few minutes searching on Google, I unfortunately can’t find evidence of McCallum’s sympathy comments from yesterday.

Perhaps it was all a dream? It would certainly be the most plausible scenario…

langmann

Someone point me to the majority of people asking for serious cuts to the budget and or tax increases?

Flaherty is simply doing, albeit grudgingly, exactly what the media wanted. A big stimulus package and no cuts.

And now Paul Wells is complaining that there is a big deficit. What did he think was going to happen?

C’mon. If you want governments to start budgeting honestly during this recession, it is simple, Paul. Start making a strong concerted effort amongst your self-righteous media pals to tell Canadians that its this simple:

either cut, or tax, or run deficits.

There is no other cake.

Mike514

The debate is about the inaccuracy of Flaherty’s forecast, not whether we should have deficits or not. We were all expecting deficits, but the finance minister was unfortunately way off in his estimates. Hence the call for his head to roll.

I lean towards sympathising with the finance minister. It must be extremely difficult to forecast these things, especially in the current unstable economic situation.

http://www.jackmitchell.ca Jack Mitchell

“I lean towards sympathising with the finance minister.”

The man, yes; the politician, no.

Losing confidence in the finance minister (which is what Wells’s post is about) is not a matter of distrusting his judgement, competence, etc.; it’s a matter of no longer believing he cares about the difference between telling the truth as he sees it and just making stuff up.

Gamesmanship aside, that’s why the Liberals are calling for him to resign: once a Minister of Finance loses his credibility, he can never get it back. You need a fresh face, even if it’s only to be a mouthpiece for further spin.

Mulletaur

Quite right, Jack. Actually, the financial health of any nation depends to a great extent on the credibility in the markets of its Finance Minister. But the former Reform country wreckers, who have never felt like they have had a stake in making Canada work, just can’t recognize this basic fact of life in the global economy.

Liz

Flaherty’s done Ontario, he’s done Canada, now it is time for him to do America. Lots of Harper Party CVs floating around DC these days, one more couldn’t hurt. Put Flaherty up for auction. Cheap.

Orson Bean

Speaking of losing credibility, methinks one Paul Wells kinda lost his cred as a halfway objective journalist on this issue (at least temporarily) with that “funny wee leprachaun“ comment.

http://www.jackmitchell.ca Jack Mitchell

Yeah, that “wee” made no sense to me either.
Mulletaur

I wouldn’t pretend to speak for Wells, but I think that it was to emphasize the point (and rub salt in the wound) by patronizing him extremely that Flaherty is in no way his own man.
madeyoulook

Well, I will most certainly NOT pretend to speak for Wells (he gets a mite cranky when we do that), but I will speak for how I received it: a not altogether pleasant or respectful heightist slur on the Finance Minister’s stature. Tied in for good measure with a comment on Irish heritage.

Like I said: that’s how it came through this reader. But (and this is for Jack), we all know that the HRCs care about the intent of the writer in evaluating the slight of the slighted.
http://www.jackmitchell.ca Jack Mitchell

Calling Flaherty “slight” won’t mend matters, MYL.
Liz

Yo! Flaherty has been raising funds and his stature as a mini-ster based on his ubiguitious green ties and his jaunty step since well since he’s been strutting and sweating on the stage, which is some while.

At least, AT LEAST, Flaherty won’t be brought low by someone making light of his slight beingness.

Surely.
Dot

Leprechaun = pot of gold at the end of a rainbow.

keith c

hogwash. Paul Martin regularly set lowball targets for deficit reduction / surpluses that he beat, time after time. nobody questioned his credibility or having reckless disregard for the difference “between telling the truth as he sees it and just making stuff up. ”

i mean tell me what exactly is the long term negative consequence for canada that the finance minister initially underestimated a deficit figure? by the comments here you would think the man’s job is to compete with Don Drummond for economic forecasts, rather than be charged with the nation’s long term budget health and year on year budgeting choices.
`

Mulletaur

Prudence in financial matters means underestimating surpluses and overestimating deficits within the margin of error of your calculations, which is what Martin did. It doesn’t mean Guy Giorno pulling a number out of his arse and telling you as Finance Minister to step outside of the floor of the House of Commons to announce the number, like Flaherty just did.

JP

Hold on are you blaming the people or the media? Are you suggesting that the opinion of members of the media are significantly different than other Canadians? If so, in what way? Are you suggesting that the media can manipulate public opinion at will?

Justin Wordsworth

Are you suggesting that members of the public have opinions?

Liz

Load of hogwash. Point me to just one thing besides the coalition that ever made PM Harper NOT do what he wanted, the will of the people be darned.

john g

I don’t know Paul…in terms of ineffectual FinMin’s, it’s hard to top Ralph Goodale writing 3 budgets in 2005 in order to buy Jack Layton’s vote.
Kevin

And the answer to the problem would be the Liberals? What would Ignatieff be doing differently? Don’t you think that those comments were made at a time when optimism was more important than pragmatism? He couldn’t say those things or the coalition would have prevailed in January and we would have the Bloc (you know traitors to the country) and the NDP making policy. NDP making policy during a recession. As a university graduate in 93 I remember what the NDP did to Ontario during that recession. And who orchestrated that fiasco? Well, it was Bob Rae. And if Ignatieff was forming the coalition who do you think would be the Finance Minister? Bob Rae. So to all those who dismiss Flaherty, realize it is the times and not the man. And that in comparison to the Liberals, we should be grateful.

kc

Flaherty, a man with a less ha stellar record of his own i think.
T.Thwim

Actually, that fiasco was orchestrated by Conservatives, when Mulrooney’s Michael Wilson proceeded to shovel federal debt onto the provinces. What Rae did was a number of decidedly un-NDP things, such as reopening labour contracts with city and provincial workers to add days off with no pay and freezing union wages, and backing off on a promise for public auto insurance.

That said, he did stick to a Keynsian type of strategy, although, as noted above, did not go near far enough, thus ending up hurting business without providing enough stimulus to make up for it.

And incidentally, for all the conservatives whining that “The Liberals made us do it” are you thus admitting that staying in power outweighs following your conservative ideals? After all, Harper could have proceeded onward and let the government fall at the hands of the coalition. Once that was done, it would have gone to an election, which likely would have given him a stronger hand, or gone to the Coaltion, which would be having to deal with this mess themselves. To be honest, it likely would have wound up banishing all three opposition parties to the woods for a long time.

Instead, however, because Harper simply is incapable of giving up power, even for the long term good of his party or his country, we have the situation we’re in now — and you’re seeing strengthened opposition and a continual weaking of conservative support.

But hey, he’s the chessmaster, right? I just wish he’d stop playing games with Canada’s future.

Liz

Hear hear T. Thwim.
Mulletaur

“And incidentally, for all the conservatives whining that “The Liberals made us do it” are you thus admitting that staying in power outweighs following your conservative ideals?”

This is the very definition of the Harper government. Just ask Andrew Coyne.
William

If you want people to pay heed to what you say you must speak the truth and not try to rewrite history. The massive downloading of expenses and services to provincal from federal happened when Paul Martin was finance minister—-you seemed to have skipped over a decade.

Also, Harper realized that the ill-advised coalition would self-destruct in a matter of weeks, however, he thought it might be irresponsible to allow these fools to attempt to govern in the midst of an economic crisis, and besides, the GG knew this as well and she would have called for an election. Therefore he did what was best for the future of the country.

Mulletaur

The Harper government introduced the ‘stimulus’ budget of their own free will. Harper had a choice. He could have chucked it in or asked the GG to call an election, even if it was within the 6 month limit that constitutional experts seem to think applies. In the occurrence, he forced a prorogation which was nothing less than a constitutional travesty. He held on to power for dear life, betraying every (conservative) principle he ever held dear.

William

Actually, I agreed with TT above that prorogration has helped the 3 opp. parties because it`s given them time to understand that the coalition would have been a PR disaster and a constitutional travesty. You might not realize that but I assure you Iggy knows it.

Here`s a hypothetical: Suppose Harper had been a true ” conservative” and refused to table a stimulus budget—-we would have had a snappy election in Jan.—Harper probably gets a majority or close to it and makes spending cuts, no stimulus, etc. to ensure we have a balanced budget. I have a pretty good idea how you would feel about that but I would like to know what Andrew Coyne would be writing these days.
Mulletaur

If your hypothetical came true, Coyne and others would likely be writing about how nobody learned the lessons of the Great Depression and would be quoting Santayana : “Aquellos que no recuerdan el pasado, están condenados a repetirlo.”

Dick Richards

I agree with the notion that Flaherty has no real power, similar articles surfaced after the botched November budget. This is what happens when a Prime Minister wants to micro manage every portfolio; though I never did like Jim too much which, is probably why support him being fired
keith c

Why oh why have all the Harper and Flaherty haters gone silent on their favorite bugbear, the GST cut, hated by many economists. The legit critique of the Tories and the unpleasant deficit suprise seems to me to be that the GST cut was imprudent – Mulroney invented it as a deficit-fighting fire hose, so if you cut it ahead of a worsening recession, you get a nastier deficit, assuming of course that the threat of losing power means you must cave to the opposition/Paul Wells demand for panicked stimulus spending. Ignatieff, being a smart cat, knows he’s vulnerable if he’s painted as a tax-riser, and so attacks Flaherty’s credibility as a messenger. Good for a few days’ battering Tories in the polls.
Tory strategy here is probably to take a big bath in the press over next few days about the shock horror deficit number, which is probably inflated, and then take credit later when the reality isn’t as bad as the projection.
All this reminds me of stock market coverage actually. Companies forced to give earnings updates every quarter, whether it’s in anyone’s long term interest or not. Accountants taking `big bath’ losses to get bad stuff out of the way all at once, and game the system. Shock, horror, punishment, analysts and fund managers criticizing the `lack of credibility of management’ and punishing a stock when a target is missed, instead of thinking for themselves about a business’s long-term fundamentals.

As latest interview with David Rosenberg (not known as favoring one or the other political party) in the Globe and Mail will tell you, Canada’s long-term fundamentals are very bullish indeed. (And yes, we have everyone from Mulroney through Martin to thank for it.)
C$ back to parity at the US$ by end of the year, i bet, as the Alberta oil patch perks up again and offsets the big-auto damage. There’s a good case for Ignatieff to try to engineer an election right now. I don’t think Harper wears the recession in 12 months’ time, but I think he would today.

Orson Bean

That’s an excellent post, and a very apt comparison to the problem with quarterly earnings reports & estimates — I remember doing research a few years ago into that issue, and there’s a lot of legit criticism about the pathological/dysfunctional behaviour that results from that, especially the short-term focus that it encourages. I realize I’m pointing to a dreamworld that will never exist, but all of this chatter and recrimination is also a function of the fact that most people don’t understand statistics, and politicians (especially the more unscrupulous ones) take full advantage of that. Time lag is a good example. These days, most stats that are coming out are March numbers, yet people treat them like they’re today’s facts. It’s also part of the reason why a lot of people make idiotic investment decisions — they look at stale numbers, unthinkingly assume they’re fresh numbers, and cut a cheque to their broker/real estate agent.