What's a Couple Billion Between Friends, Anyway?

Jim Flaherty's fiscal update shows that he's – thankfully – no ideologue when it comes to managing the economy.

As you might have read here or elsewhere, Finance Minister Jim Flaherty delivered a fiscal update yesterday in which he admitted that the country won't meet its goal of eliminating the deficit by 2014-15. Likewise, he also announced that a scheduled 10-cent hike in employment insurance premiums would be halved to save employers and employees a little (very little) bit of dough. That deficit reduction target was one of the Tories' principle election promise and key feature of their June budget. The Toronto Star's editorial board cuts Flaherty some slack for reneging on that pledge, noting that "missing the deadline by a year or so is not a great concern, given that Ottawa is still firmly on track to balance the books." And kudos to Flaherty for recognizing that doggedly pursuing the 2015 deadline – which, given this outlook, would have required even deeper cuts to the public service – wasn't in anybody's interest. But the Star also notes that Flaherty's twin announcements were just about the "bare minimum" the party could do. If the economy flatlines and we end up back in a recession, the Tories "will have missed a chance to be bolder when it might have counted," say the editorialists. Saving workers $20 on their EI payments is a nice gesture, but it won't be much comfort if thousands more end up out of work.

The National Post's John Ivison suggests that the updated forecast is proof that "Stephen Harper may have won a majority government but he is still guided by the lessons hard won in minority – that is, govern pragmatically and don’t antagonize people by lurching suddenly in one direction or other." By taking a wait-and-see approach with the economy, Harper and Flaherty buy themselves some much-needed flexibility over what will certainly be a few years of turmoil. The eurozone crisis has already felled Silvio Berlusconi and George Papandreou, and its effects are only now starting to be felt on this side of the ocean – 54,000 jobs were lost last month, and there's no clear indication that they'll be coming back anytime soon. By hewing to "the radical centre," as Ivison calls it, the Tories give themselves enough wiggle room to either roll out more stimulus should the economy tank or, vice versa, redouble their deficit efforts. It's just like living under the Liberals, albeit with fewer platitudes to the success of multiculturalism and more vindictive justice policies.

What's been almost entirely overlooked by the editorial braintrusts in this country on this fiscal update, though, is how it undermines the credibility of the Tories' 'we're the stewards of the economy' campaign mantra. The two principle promises they highlighted at every possible opportunity were that they would reduce the deficit by 2014-15 and provide tax relief to families – relief which just so happened to be tied to the feds meeting that deficit target. As far as we can tell, only the Canadian Press' Bruce Cheadle has taken the time to reflect on those two promises after Flaherty's update. (Oh, and us, too.) At a stop early on in the campaign, Harper pulled the 2014-15 timeline seemingly out of thin air just weeks after the Tories' March budget had scheduled the deficit to be gone by 2015-16. The sprinkling of tax promises that came along with that revision – income splitting for families, fitness tax credits, doubling the amount of contributions to tax-free savings accounts, and more – were arguably the most integral planks to the party's platform, and certainly helped the Tories win over the suburban, family-heavy ridings throughout Ontario that delivered them a majority.

One is left to wonder why they bothered changing the timeline at all. Surely Harper and Flaherty must have known at the time that their counterparts in Europe and to a lesser extent, the U.S., were facing systemic debt crises with little relief in sight and that the ramifications of these plummeting economies would impact Canada's outlook, too. (If not, we need a new definition for "rose-coloured glasses.") So, then, it follows that the Tories recognized the huge near-term benefits of pledging tax relief to families knowing that those promises would almost certainly have to be delayed, at least by a year (or, if you take Parliamentary Budget Officer Kevin Page at his word, more like four years), and most certainly after the 2015 election. In other quarters, this is known as "writing cheques that your ass can't cash." No, Harper is not the first, nor the last, to play this kind of politics at election time. Doing so might have given the Conservatives a majority, but it came at the expense of misleading the electorate.