The new budget marks a tactical retreat from last year

Following a year of trouble.


(Photo: iStock)

This budget marks a tactical retreat by a chastened government whose recklessness a year ago bought it a year of trouble it did not want.

Advisors to Stephen Harper say most big departures from business-as-usual in his government come straight from the big guy. This includes both the exploits of diplomacy and the excesses of bitterness. His budget last year was an example of the latter Harper. My blog post a year ago called it A Very Political Budget: the document sought to institutionalize Harper’s sense of outrage at Barack Obama’s decision to delay approval of the Keystone XL pipeline project. That delay was announced in November. By December Harper was promising “major transformations” and a shift in Canada’s trade strategy from the U.S. to Asia. In January Harper visited China and delivered his Davos speech. In March the budget featured, for the first time, a chapter on natural-resource development and included language about reducing environmental protection, penalizing environmental groups that tried to meddle in resource extraction, and speeding the approval of big resource projects.

To press the point home, PMO staffers were on hand at the budget lockup for reporters, to point out the resource-export/ demonize-environmentalist parts of the big budget book.

It’s not too much of an exaggeration to say the 2012 budget was inspired by, and might as well have been written by, Ethical Oil, the oil-patch advocacy group inspired by an Ezra Levant book, and by Vivian Krause, a British Columbia blogger who spins tales of foreign meddling in Canada’s mineral wealth.

And what did it get Harper? A year of hellish relations with aboriginal groups; a possibly fatal public-relations cloud over the Keystone project, based precisely on the Harper government’s poor environmental record; serious opposition in Europe to any extension in Canada-EU relations at the very same time we’re trying to negotiate a trade deal; and a set of controversies that still motivate NDP supporters and the NDP caucus today, another year closer to a federal election. Meanwhile the Northern Gateway project is no closer to getting built; China remains a problematic trade partner; oil prices are depressed; and new technologies are transforming the U.S. from a ravenous energy consumer to a massive energy producer.

So much for major transformations. Today’s budget left skid marks across the Government Conference Centre lockup as Harper backtracked from almost all the most controversial elements of his 2012 budget. PMO staffers were thin on the ground at today’s lockup. They are in no mood to brag. Where the 2012 budget book had 12 pages on “Responsible Resource Development” and two more on “Investing in our Natural Resources,” this one has only four pages on “Responsible Resource Development,” none on “Investing in Natural Resources,” and six new pages on “Building Strong Aboriginal Communities.”

This retreat is highly characteristic of Stephen Harper. He likes the reputation he enjoys among his opponents, as a bruising fighter who single-mindedly pursues a lonely and extremist political vision. That reputation, frankly, helps him among his supporters, who wish he were that guy more often. (For all the fights the 2012 budget sought to pick with the Yankees and the environmentalists, there were a lot of hangdog expressions at Hy’s that night among Conservatives who had hoped for real small-government conservatism from a majority government and thought Flaherty had delivered thin gruel.) But in fact, Harper’s normal reaction to controversy is to seek calmer waters.

In 2005, he used the first policy convention of the then-new Conservative Party to take potentially divisive social-conservative issues like abortion off the party’s agenda. In November 2008, within 48 hours after Flaherty’s fall update sparked an opposition attempt to form a coalition that could take power from the Conservatives, Harper had sent his ministers to announce the cancellation of everything in the update that had upset the opposition — party financing, pay equity and more. It’s one of Harper’s best-kept secrets: if you push him, he steps back.

That’s because nothing matters to him more than political survival does. If he does not last he can’t do anything. If he survives he can do a little bit every year until his efforts begin to add up. This budget changes the government’s communications more than its direction. None of last year’s measures on resource extraction are cancelled, and the government has not seriously become more activist on the environment. It has simply buttoned its lip about activity that seemed worth advertising a year ago and has instead bought this government mostly trouble.

There are still surprises. Thirty-one pages into the budget chapter on “Supporting Families and Communities,” under the subhead for “Maximizing Opportunities for International Synergies” — still with us? — there are two sentences mentioning, in passing, the end of CIDA as a stand-alone government department. It will be rolled into Foreign Affairs to create a new Department of Foreign Affairs, Trade and Development.

Now it becomes clear why the government leaked all the stuff about tariff cuts for hockey equipment: it was a smoke screen.

Why survive? Why stay in power, beyond the fact that it is always more pleasant than being out of power? Our friend Stephen Gordon explains it in his own blog post tonight: because the Harper government has been able to progressively restrain the federal government’s scope and ambition for direct intervention into the lives of Canadians. Direct federal program spending is smaller, as a portion of the economy, every year. The decline is a little steeper every year. Federal taxes, as a portion of the economy, are lower than they have been for half a century. Last year Harper got too cute and he put all that in more jeopardy than he would have admitted, and a lot more jeopardy than he liked. This year he is not interested in messing around.

And next year? The first third of the budget is an ode to Canada’s sterling economic performance, based largely on comparisons to that notorious international 21st-century losers’ club known as the G7. (We’re doing better than Italy!) But at least by that palsied standard, we really are doing relatively well, and that’s better than if we were doing even worse than all those guys. So I was unsurprised to see that, after yesterday’s UK budget cut the Cameron government’s GDP growth projection by more than half, from 2.0 to 0.6, today’s Canada budget does not amend GDP projections at all.

Then I looked more closely. In fact, it’s the average for GDP growth over the next five years that is unchanged from the 2012 budget. GDP growth for this year, 2013-2014, the year we’re actually living through, is down a third from the 2012 projection. But growth for next year is actually projected to be up a touch.

That’s handy. We’re eight and a half billion dollars deeper in the hole today than Jim Flaherty expected to be only a year ago. But he expects the economy to get better all by itself, after it seriously didn’t get better this year. What if the incurably optimistic bank economists who were wrong about this year are wrong about next year too? Well then, Stephen Harper will need to cut billions from spending to meet the 2015 deadline for budget balance that Flaherty reaffirmed today. The big debate over government’s role that Harper sought to avoid for this year will be back, bigger than ever, just in time for a federal election.