Why Harper spilled the beans

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by L. IAN MacDONALD
National Post, Tuesday, January 27, 2009

There isn't much point in the government having a journalist lockup before the budget is released at this afternoon's 4 p. m. market close. Much of it has already been leaked with the markets open.

Financial reporters, hearing the news first at a 2 p. m. briefing on Thursday, instantly got on their BlackBerrys and filed confirmation of the deficit number --$64-billion over the next two years -- to their desks.

Leaking the deficit number was unprecedented in itself. But leaking it with the stock market open was unheard of. And leaking it from the Prime Minister's Office, rather than the Finance Department, was a stunning big-footing of one central agency by another. If a deficit number isn't market-sensitive information, nothing in a budget is. In the traditional Westminster world, there would be calls for the minister's resignation. In the normal world of Ottawa, Finance officials, not the PMO, would have conducted the briefing.

But in Stephen Harper's Ottawa, this sort of thing happens all the time. It's all about command and control from the centre. This would never have happened in Jean Chretien's or Brian Mulroney's time -- their finance ministers, Paul Martin and Michael Wilson, would never have permitted the Langevin Block to speak for them.

The strategy of leaking the deficit number was obviously to take the hit going into the budget, and take it out of the news cycle coming out of the budget. Indeed, the deficit number is itself a modest one, especially in the context of the global financial crisis and the imperative of securing the support of the Liberals to assure passage of the budget in a minority House.

Next year's $34-billion deficit forecast is only 2% of GDP in a $1.6-trillion economy, and pales beside the $38-billion -- 8% of a then-$480-billion economy -- left behind by the Liberals in 1984, or the $40-billion -- 5% of a $760-billion economy -- left behind by the Conservatives in

What makes the Tories nervous is the inconvenient truth of their own deficit denial 1993. And it's nothing beside the $1.2-trillion deficit inherited by Barack Obama, which amounts to about 9% of the U. S. economy.

When the Liberals took office in 1993, the debt had reached an alarming level of 70% of GDP. Since the budget was balanced in 1997, successive Liberal and Conservative governments have paid down $100-billion of debt, reducing the debt-to-GDP ratio to near target levels of 25%. Even giving back $100-billion in new debt between now and 2014 would result in a comparatively healthy balance sheet.

Except that a deficit is no longer considered an acceptable political outcome, not since Canadians were cured of it.

As recently as the October election campaign, and even the Nov. 27 economic statement, Harper and Finance Minister Jim Flaherty were in denial about the prospect of a deficit. This is what makes the Conservatives nervous: the inconvenient truth of their own deficit denial. That's why they went to such lengths to bury the number by leaking it last week.

As for the good news in the budget, they haven't just been leaking it -- they've been putting it out in a flurry of ministerial announcements and television appearances. There was Human Resources Minister Diane Finley on TV on Sunday announcing $1.5-billion to boost training for laid-off workers and another $500-million for older workers. There's also $600-million for aboriginal housing, $400-million for seniors' housing, $1-billion for small communities hit hardest by the downturn and $550-million for farmers.

The Tories even sent Heritage Minister James Moore into Quebec, ground zero of the cultural cuts, to announce $160-million of new arts funding. Add to this all $7-billion in shovel-ready infrastructure spending announced by Transport Minister John Baird yesterday (and he's just beginning to turn on the tap).

A Nanos poll for Policy Options magazine, released to the National Post yesterday, confirms that infrastructure is by far Canadians' preferred form of fiscal stimulus, supported by three voters in four. Personal tax cuts were next, supported by half the voters.

The size of the tax cut is about the only mystery left in the budget. A good thing, too. It will give Flaherty something of his own to announce.

 
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