Recently, long-standing finance minister Jim Flaherty announced that he is stepping down from his cabinet position in order to return to the private sector. Flaherty started in 2006 and has served the Harper administration for eight years, making him one of the longest serving finance ministers. Flaherty has been described as a “steady hand” through some of the toughest economic times since the depression.
When Flaherty started he had it pretty easy going. He inherited a long-standing surplus from the Liberals, courtesy of a Mr. Paul Martin who, in 1997, managed to create the first surplus in almost 30 years.
So when Flaherty stepped in as finance minister Canada was sitting on almost 10 years straight of surpluses, and with those surpluses came years of increasing spending. Instead of increasing spending as the L iberals did, Flaherty used the financial security of the surplus to cut corporate taxes and reduce the GST. These tax cuts were probably the most drastic changes Flaherty was expecting to do when he took the post of finance minister. That all changed two years later.
Once the 2008 financial crisis hit, the stress and difficulty of Flaherty’s position drastically increased. His plan for combating the recession was implementing his Economic Action Plan. This stimulus package put Canada’s budget deep into the red, but was well received by the International Monetary Fund who called it “timely and well-targeted.” That’s not to say the stimulus package was applauded by all. It received some harsh criticism and is thought by many to be a stain on his record. Going from a $9.6 billion surplus in 2007 to a $55.6 billion deficit in 2009 all in order to bail out the car companies and fund what may be considered unnecessary infrastructure projects can appear to some to be poor governance. But despite the criticism, Flaherty’s actions combined with Canada’s robust and stable financial system are the reasons that we have weathered the recession better than most countries.
Then when the G20 happened in Toronto in 2010 the leaders agreed to cut back the spending and reduce their deficits by fifty percent by 2013. Flaherty succeeded this agreement where many other countries failed, and now Canada is on the verge of having a balanced budget – a claim that only a few G7 countries can make. It may have taken six years, but Flaherty will have taken a $55 billion deficit and turned it into a surplus all while weathering one of the worst economic times in 80 years.
Along the way he has had his fair share of missteps. Flaherty has meddled in the banking sector when banks have lowered mortgage rates. Personally phoning banks like Manulife and BMO and telling them to raise their rates is definitely a hands-on approach that shouldn’t be seen in a free market economy and justifiably caused an outcry. The taxing of income trusts and changes to mortgage rules also drew their fair share of criticism from the financial sector.
With the faults also come the successes. The tax free savings accounts have universally been praised as a good decision. He also took a tough approach towards the provincial governments, who have historically milked the federal cash cow for all it was worth. Provincial responsibilities have been murky at best in the past. Many provincial and federal responsibilities overlap, causing conflict between the feds and provinces as to who has to pay for what. Flaherty changed this and set out exactly who was responsible for what, saving federal money and causing the provincial governments to increase efficiency.
As said before, Flaherty was the “steady hand” that brought us through the economic crisis. Sure he was dealt a pretty good hand in having one of the world’s strongest banking cultures and having a good set of books, but he did carry us through. This leads me, and others, to wonder; what legacy did he leave behind? Will he simply be known as the “steady hand” or the “caretaker”? Or will he be lauded as the man who saved us from the crisis?
I would probably say the former. His greatest accomplishment will be balancing the books. During his tenure there was no revolution or invention. Our finance system saw no great overhaul for the better. It was for the most part, status quo. Flaherty simply didn’t really do anything remarkable. Sure he gave us TFSAs and tax breaks, but nothing so revolutionary that his name will be written in any history books.
All in all, though, he showed the world that Canada is a model for fiscal discipline. Our peers on the world stage have commended our economic strength and predict that soon we will be in the forefront of the G7 and G20 and remain there for decades.
With Mark Carney’s departure from the Bank of Canada last year, Flaherty’s resignation means that Canada has lost the two main figures that allowed us to avoid the worst of the financial crisis. But despite the big shoes to fill, their replacements have it pretty easy compared to their predecessors.
Despite his lack of invention and progress in the finance ministry, Jim Flaherty still carried us through. And though his name won’t go down in history as one of Canada’s greatest finance ministers (if that is even a thing) he still did a pretty good job. Not too shabby Mr. Flaherty, you have served us well.
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