Things were finally going in the right direction for Tories. Then ...

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For about a year, the Conservative government has had no real agenda or accomplishments to speak of. But in recent weeks Stephen Harper seems to have gotten things back on track. It may not matter. The Senate expenses scandal is drowning everything out.

Let's unpack that.

By its own definition of success, this government can be judged on its ability to strengthen the Canadian economy through increased trade. Up until very recently, it was doing a lousy job. The government at first refused, then had to scramble to join, the Trans Pacific Partnership talks.

The efforts to increase oil exports to the United States through the Keystone XL pipeline and to Asia through the Northern Gateway pipeline have been stymied, in part, by the government's ham-handed handling of the files.

And the December, 2012, deadline for signing a free-trade agreement with the European Union came and went. And then winter turned to spring, and spring to summer and summer to fall … But lately, things have started to turn around. Canada and the EU finally initialled the Comprehensive Economic and Trade Agreement. Canadian negotiators are fully engaged in the TPP talks. And the proposed west-to-east oil pipeline, while a long way from being approved, is not generating the intense heat that greeted Keystone or Northern Gateway.

Another signature priority for the government is balancing the budget by 2015. Many independent observers, including the Economist magazine, have scoffed at such a promise.

But we learned this week that the 2012-2013 deficit was $7-billion lower than originally projected, despite a weak economy, which means Mr. Flaherty should have no difficulty in meeting his 2015 target, at which point the Conservatives will launch a new round of tax cuts.

And although it gets little attention, the government is also moving forward with a new First Nations Education Act that aims to improve the quality of schooling on reserves – though whether it actually will is a matter for debate.

What we are seeing are signs of a government that is once again starting to govern. And the public has noticed. The Nanos Weekly Party Power Index, which tracks voter impressions of party brands, has shown the Conservative Party steadily improving in popularity in recent weeks, although it still trails the Liberals.

But that improvement is likely to evaporate. Senator Mike Duffy's damning allegations in the Senate on Tuesday, followed by Pamela Wallin's excoriation on Wednesday of her former colleagues, combined with NDP Leader Thomas Mulcair's ruthless cross-examination of Mr. Harper in the House of Commons, have returned the Senate expenses scandal to the front burner, where it is boiling furiously.

Mr. Duffy's testimony didn't contradict Mr. Harper's insistence that he had no idea his former aide, Nigel Wright, had paid Mr. Duffy's expenses – a claim that the Prime Minister strongly affirmed Wednesday when he told the House: "Any assertion that I was in any way consulted or had any knowledge of Mr. Wright's payment to Mr. Duffy is categorically false. Had I known about it, I would not have permitted it. As soon as I knew about it, on May 15, I revealed it to the public."

But it may not matter. No government has ever been so closely identified with its leader as the Harper government. Regardless of what he knew and when he knew it, Mr. Harper will be held responsible for every element of this tawdry affair. He appointed the disgraced senators; he initially defended them; when allegations arose of misspending, he completely mishandled those allegations. Now he is paying the price.

How high a price? We just don't know. Some people are certain that the scandal will either force Stephen Harper to resign or ensure his defeat in the next election. But the Conservative coalition of suburban Ontario and Western voters is powerful and entrenched. Any dispassionate observer – though there are few of them around – will tell you that it's simply too soon to say whether the fallout from this affair will carry into the next election.

What we do know is that three furious former Conservative senators and a brilliantly prosecutorial performance by the Leader of the Official Opposition are combining to make Stephen Harper's life utterly miserable. And he knows full well that he has only himself to blame.

John Ibbitson is the chief political writer in the Ottawa bureau.