How long can Flaherty keep changing policy on the fly?

Finance Minister Jim Flaherty is wrestling with a sluggish domestic economy while riding a Six Flags-worthy roller coaster of a global economy. It doesn't look like much fun.

The perpetual uncertainty about the rest of the world is unlike anything his recent predecessors have had to contend with. Some of them presided over better economic times, some worse – but the inability to predict next week, let alone next year, is a new part of the job.

If it feels like incumbent governments are enjoying a remarkably long leash from voters, despite the economic anxiety, that’s true. This is happening for two reasons.

First, most voters believe they would be facing worse times if they lived in the United States, Britain, France, Italy, Spain – indeed practically any G20 country save possibly Germany.

Second, while those on the right and those on the left have firm views, most other voters aren’t sure they want different policies when it comes to economic and fiscal management. Our Harris Decima polling through the summer showed that people remain unsure about whether stimulus or spending reductions were more necessary. In essence, these voters are telling governments to be pragmatic and tailor policy to events as they unfold.

On Tuesday, Mr. Flaherty couldn’t have been more determined to make the point that his policy mix is not lifted from a conservative tablet; it is being crafted, tailored and tweaked on a continuous basis, taking into account constantly changing circumstances. He pushed back his timeline for a balanced budget. He dialed back his proposed EI premium increases. In my estimation, he correctly surmised that both of these changes to his plan will cost him few, if any, votes.

But apart from today, the question remains, how well will this approach work going forward? There are two answers to that question. First, it will work alright if conditions don’t deteriorate dramatically. At a certain point, too much pain and people want change, period. The country is not at that point yet and that’s why so many incumbents have been returned this year.

But succeeding with this approach also requires the government to pass a different test. The government could miss its deficit target by a few billion dollars and pay no penalty with voters. Except if the perception develops that the government is extravagant, careless, or partisan in its use of taxpayer money.

The G8/G20 mess was an important first strike against the Harper government’s reputation in this area. Among other consequences, it damaged the credibility of the Treasury Board President at the moment when the government most needs to look as though it is making thoughtful, rational, careful decisions about where to spend and where to cut.

Stories about the use of government aircraft, about travel expenses for ministers, about potential cost overruns of new fighter jets, about the process to purchase ships for the navy – all of these take on a heightened importance now. Because as of the new year, most days, the government will either be facing criticism for being unwilling to fund a new idea or taking money away from an existing program that someone somewhere believes should be spared.

So if it’s “no” to most everyone else, the government will want to work harder than ever to show how it is living with restraint when it comes to spending in general, and in particular when it comes to items like those in the defence, justice and cultural fields, that appear to be pet projects.

Origin
Source: Globe&Mail