One day over lunch in Ottawa, Ralph Goodale, the warhorse from the flatlands of Saskatchewan, was stomping all over the Conservative record on economic management. The battering the economy had taken in the early months of 2015 was further evidence for the steadfast Liberal that Canadians had been fooled all along into believing the Tories knew what they were doing.
When I pointed out that, compared to his time as finance minister under Paul Martin, the Conservatives had done quite well electorally with their economic record, Goodale's mood turned.
The difference, he grimly explained, was that Harper knew how to market his work but Goodale's own party didn't. The Liberals blew it, he conceded. The economy was blooming when they were beaten by the Tories in the 2006 election, he said. But in the campaign, the Liberals had barely even talked about it. "We didn't get the message out. We made the operating assumption that it was understood. That tactical decision was mistaken."
For the Conservatives, Goodale said, "Spin is the number one priority, policy secondary. It's been clear all along."
Clear all along?
"Look at the record. Not since the 1930s have Canadian economic growth numbers been so bad as this last decade under Harper." And no, Goodale argued, you couldn't blame it on "global conditions," as the Prime Minister liked to do. The downturn from the financial crisis ended several years ago.
Now, in 2015, as an election approached, there was a new downturn. The Tories' economic narrative turned sour. Where once Canada was doing better than all the G7 countries, now it was the only country among them with an economy sputtering out recession-like numbers.
The bad news kept rolling in. Oil prices had plunged. Growth numbers fell. Bank of Canada Governor Stephen Poloz called the country's economic performance in the first quarter "atrocious." Uncertainty prompted a delay in the budget delivery date. The country's merchandise trade deficit reached an all-time high. A balanced budget, the much-ballyhooed promise of the government, looked less and less likely, given revenue shortfalls. Labour union economists Jim Stanford and Jordan Brennan did a statistical analysis in which they examined 16 indicators of economic progress for all Canadian governments since the Second World War. Their conclusion: The Harper Tories ranked last.
It wasn't just labour economists who were doubting the Conservatives' record, but the Harper team blew off such studies as being biased.
The dogs barked, the caravan moved on. Through the run of bad news, Finance Minister Joe Oliver showed little concern, maintaining a low profile. When the 75-year-old did appear for Question Period in the House of Commons, pitbull Pierre Poilievre, 36, often stood in his place. The young enforcer had been named the new employment minister.
Poilievre, with scant life experience outside politics, had frequently been the subject of unflattering press reports. But he was regarded as one of the party's best pitchmen by the Prime Minister. Poilievre was not in the job long before it was revealed that he had used a team of public servants, who weren't supposed to engage in partisan activity, for overtime work on a Sunday. They were called in to film Poilievre glad-handing constituents and promoting the government's Universal Child Care Benefit plan. Not one to brook criticism, Poilievre then took things a step further, wearing a shirt with a Conservative logo on another round of promotion. His government, a Globe and Mail analysis found, funnelled 83% of the projects under its signature infrastructure fund to Conservative-held ridings.
While one wag suggested the Tories should be hit with a "crass-action" suit, they plunged ahead, eyes firmly fixed on the Oct. 19 rendezvous with voters. Their opponents could gripe all they wanted. They weren't going to change their ways. They would pound the airwaves with the message that they were doing great things for Canadians. If the experts were saying their balanced budget was not achievable, it didn't matter; they clung to the boast.
Economic performance, as Goodale noted, was highly susceptible to spin. Harper may never have worked as an economist, but his two degrees in the field taught him an important political truth: Statistics could be found to prove or disprove most any theory one wanted. It was all about who had the biggest megaphones.
In preparations for the 2011 budget, Alan Freeman, then-assistant deputy minister for communications at the Finance Department, noticed something odd. On the jacket design for the budget, he saw that the word "budget" was missing. In its place were the words "The Next Phase of Canada's Economic Action Plan: A Low-Tax Plan for Jobs and Growth."
Freeman wasn't opposed to the application of a little snake oil to fiscal proceedings. That, after all, was part of his job. But as a public servant rather than a member of the Conservatives' political operation, he viewed things in a broader perspective.
He went to take it up with Dimitri Soudas, who was then Stephen Harper's communications director. "Shouldn't we have the word 'budget' somewhere on this thing?" Freeman asked. The Prime Minister's top pom-pom shaker looked at him coldly. He explained how people like Freeman, formerly a journalist with The Wall Street Journal and The Globe and Mail, were caught up in old inside-the-beltway talk. Didn't he understand that regular Canadian people "didn't know what a budget was?"
Freeman wasn't sure he was hearing right. Did these guys in the Prime Minister's Office really think that way about the Canadian voter? Further conversation made it clear Soudas was not going to be putting the word "budget" on the budget. Freeman walked away, shaking his head.
For Freeman, the incident was a small illustration of the mindset of the governing team. Reflecting now from his perch as a senior fellow at the University of Ottawa, he is still shaking his head at how the Harper team worked the public-relations levers. "It was quite brilliant, actually. Anything they did that had something vaguely to do with the economy, they branded as part of an Economic Action Plan. In fact, there wasn't much of an economic plan, "just a political plan. All of their economic policies became instrumentalized toward getting them re-elected."
The Conservatives brought to Canada a style of government often described as the permanent campaign. Governing was turned into an around-the-clock marketing enterprise. Everything was about controlling the message. They changed the system so that all communications were centralized through the PMO and the Privy Council Office. Even the most minor of press releases—right down to one on the mating season of the black bear—had to be vetted by the centre. The PMO increased in size by 38% from the previous government. New limits were placed on media access. Public servants were muzzled. Conservative caucus members spoke not from their own scripts but from PMO talking points.
At the Finance Department, Jim Flaherty tried to hold his ground, recalled Freeman. But Flaherty too had to buckle under. "Harper would get involved in the most minute stuff. Flaherty would sign off on things he didn't think were major, but they would come back to us with the message that the big guy didn't want it."
Mark Cameron, who worked as a policy adviser at the PMO, came to see Harper and Flaherty as respecting one another. But Flaherty freelanced too much for the boss's liking. "He didn't necessarily check before he went out and made statements. That aggravated us."
It aggravated them to the point where Flaherty's office was not even allowed to write his own budget. In 2014, for Flaherty's final budget, over from the PMO came Scott Anderson, one of Harper's top speechwriters.
Harper wanted the system geared to elevating his own stature. He didn't appoint a deputy prime minister. He kept his caucus on a tighter leash than any previous prime minister. Documents and press releases that had once been issued under "Government of Canada" now came from "The Harper Government."
For the 2009 stimulus budget, Freeman was told by the PMO to prepare not only the usual documents but separate booklets on aspects of the stimulus plan. He did so, finding appropriate images of Canadians at work on infrastructure projects and the like, and sent them up for vetting. When the brochures came back, he noticed his pictures had been replaced by photos of Stephen Harper. Freeman went to Flaherty's deputy minister, Rob Wright, and suggested this was not a good idea. Wright protested and got most of the booklets returned to their original format. But at least some of the brochures, produced at whatever the cost, were never used. "PMO had clearly lost interest once the Harper pictures were gone," Freeman recalled.
Bureaucrats like Wright and Freeman didn't have the easiest of times with Flaherty. He could be the jolly Irishman at public events. With the twinkle in his eye and rapier thrusts in the Commons, he was an effective retail politician. But behind the scenes he was on edge, often in a state of irritation. Behind his back, members of his road team referred to him as Krusty. At his sessions with assistant deputy ministers, Flaherty would be flanked by a half-dozen young political aides. The ADMs would present their briefs and there was very little open discussion. They were supposed to know where Flaherty stood and not disagree.
On the broad outlines of policy approach, Flaherty and Harper generally saw eye to eye. They were at one with the underpinnings of conservative economic dogma—low taxes, open markets, smaller government, balanced budgets. That was the plan, said Cameron: "Sound economic fundamentals any free-market economist would support, with middle-class populist initiatives focused at the consumer and household level. A combination of the two."
But unforeseen developments and the ever-present pull of political self-interest demanded detours. The Tories had to zig-zag so much, said economist Donald Drummond, who prepared budgets for Paul Martin, that "it's hard to think of a philosophy in terms of what they've done."
The Conservatives' hand was forced over and over again. Their initial slowness in recognizing the sinking world economy in the fall of 2008 was mystifying. Drummond, by then chief economist at the TD Bank, recalled warning them at the time, as did Kevin Page, head of the Parliamentary Budget Office. But they remained obstinate. As Page recalled, their economic update that fall was authored primarily in the PMO, not by Flaherty. On the big decision to reverse the position taken in the document and go the Keynesian stimulus route, Flaherty was reluctant. Harper was the more avid of the two, according to Cameron.
In fact they had little choice but to reverse themselves. Not only had the government made commitments to the G20 on stimulus, but the opposition parties held a gun to their heads. If they didn't bring in a large-scale market intervention, their minority would be defeated. It would be "fair," Cameron candidly acknowledged, "to say events dictated our actions. But we could have screwed up and didn't, so we deserve credit for that."
Yet the Tories made great political mileage with the measure they were forced into. They could boast also—and they never let anyone forget it—that Canada did better than other G7 countries through the great downturn. But they had inherited a sound banking and regulatory system as well as a $13-billion surplus and the lowest debt-to- GDP ratio since the 1970s. Given Canada's positioning ahead of other countries at the outset of the global crisis, and given the good fortune of having resource prices remain high, doing better than other G7 countries—comparisons to the G20 weren't so flattering—was more a logical outcome than any great feat of governance.
Exceptionalism on the economic front served as a strong weapon in the 2011 election. At the same time he was spending great sums to spur the economy, Harper was able to hold to his promise to cut taxes—and to poison the atmosphere for anyone wishing to raise levies. Through history, the Liberals had used taxation to build their idea of an equitable Canadian society. They were now left spinning their wheels and tongues. In the 2011 election campaign, Michael Ignatieff couldn't put forward any big new national programs, like a high-speed rail system, because of the cost.
Yet the large deficit the Conservatives had run up, much of it a result of the GST cut and excessive spending in their first two years in power, hardly hurt them on the campaign trail. Nor did the Tories pay a price for Harper becoming the first PM in history to be found in contempt of Parliament. It was for excessive information control—his hiding from Parliament basic costing information on corporate tax cuts, combat jets and other programs.
In governance, the best communications plan is sometimes non-communication. The fewer details provided on financial management, Harper reasoned, the better. The PM had stoked a heated controversy when he killed the mandatory long-form census. Academics like Paul Saurette of the University of Ottawa theorized that today's Conservatives, unlike the Progressive Conservatives of old, suspected that too much information could too easily contradict gut-driven ideology.
Flaherty wasn't intellectually curious, recalled Freeman. With the odd exception, only the like-minded were invited to his policy retreats."The idea was you create your own truths. Don't be bogged down by studies." In keeping, the public service, which Harper suspected was overweighted with a Liberal mindset, saw its role changed: Now it would counsel on policy less, and simply follow orders more. Kevin Page noticed the switch right away. "There was a sea change with a capital C." Nuanced debate was discouraged. "You could see it, the lack of analysis, in the documents, in the language."
Harper created the Parliamentary Budget Office in 2006, appointing Page to head it in 2008. But when Page started challenging the government's numbers, Flaherty and the PMO tried to undermine Page's credibility, even as his numbers held up better to scrutiny than their own. In his book UnAccountable, to be published in September, Page writes that he was told that Harper operatives tried to find dirt in his background to discredit him. He was also brought before a parliamentary committee that, he said, was tantamount to a kangaroo court. "It became very personal," he writes. "Intimidation and fear-mongering were all-too-common tactics by the Harper government."
The PMO's control fixation brought on a marked reduction in parliamentary oversight. Flaherty's budget bills were turned into sweeping omnibus bills containing hundreds of clauses and measures, such as downgrading environmental oversight, that had little to do with a budget. On top of that, scrutiny at the committee level was further short-circuited by the Tories' use, in degrees rarely seen, of closure, time limitations, in-camera sessions and heavy-handed tactics to block witnesses.
Harper control required media control. Having spent many years in the media, Freeman now observed from the inside how the press and public could be easily hoodwinked. "One of the impacts of the new media is that nobody has any attention span," he said. "So the Harper people realized quickly that if they stonewalled or didn't answer questions, there was a good chance that within two or three days the story would be dead." The Tories put up any number of new roadblocks to reporters' accessing information. "Their goal was to make the media instruments of Tory propaganda."
In some respects, Freeman said, the Conservatives succeeded. When they took away most-favoured nation trading status for China, it meant prices were going to go up on a range of consumer products. "But they did an exception for hockey equipment. They leaked it systematically to the media: We are going to cut the tariff on hockey equipment. It was in the budget as a tiny part of what they were doing. But they spun it so that it became the big story. As a journalist, you should be asking, Do I really want to be used like that?"
With the recession over and with a majority government in hand following their 2011 election triumph, the Tories could return to core principles like budget-balancing. They began aggressively attacking a deficit that had topped $55 billion. A series of tight budgets would ensure the books would be back in balance by the 2015 campaign.
The trick was to do so while continuing with tax cuts and creating a good level of economic growth. As the Harper team discovered, however, this was no small challenge. The growth strategy became overly reliant on private-sector investment, which wasn't forthcoming. Bank of Canada then-governor Mark Carney chastised corporate Canada on this front, using the phrase "dead money" in reference to the lack of investment from Bay Street towers. Profits coming their way from Tory tax cuts weren't being re-invested.
The Harper tax scalpel was wielded widely. His government had brought in the two-percentage-point reduction in the GST, introduced the popular Tax Free Savings Account, sliced corporate taxes and given selective breaks to groups favoured in their electoral math. In addition, they broadly expanded the Universal Child Care Benefit and the Child Care Expense Deduction and they pledged to introduce the income-splitting tax bonus.
Progressives contended that most all of the tax breaks worked more to the benefit of the wealthier segments of society. Critics got a big boost when Flaherty, in an indication he had had enough of taking orders from on high, broke ranks on income-splitting, beginning 2014 by saying, "I'm not sure that over all it benefits our society." It was a rare example of a senior minister going off-message—on a major platform plank, no less. Shortly thereafter, Flaherty stepped down from the Finance post.
It wasn't just the left that questioned the wisdom of some of the cuts. The GST reduction was roundly denounced by mainstream economists, who favour cuts to income taxes rather than to consumption taxes. Political motivation was seen to be at the heart of many of the other cuts. The Tories sliced and diced a tax system that observers like Paul Boothe of Western University's Ivey Business School said needed simplification, not increased complication. Drummond was not on side either. "Our biggest problem in the tax system in Canada is the extraordinarily high marginal effective tax rates paid by people in low- and middle-income ranges." Referring to most of the Tory measures, he said, "None of that stuff does anything for that problem."
But with the opposition parties putting up only meek resistance, the Conservatives had made headway not just for the moment but in the long game, persuading Canadians that a smaller state was inherently virtuous.
Still, there were conspicuous weak spots, above all an energy file marred by declining oil prices and stalled pipelines. "The Conservatives had a three-pronged strategy," said Liberal Finance critic Scott Brison. "Oil, oil and oil." They were a one-trick pony, charged NDP Leader Tom Mulcair, and now they were paying the price, as were Canadians. The resource exploitation focus, he said, came at the expense of the environment and the country's manufacturing sector.
Conservatives, naturally, contested the interpretation. Finance committee chairman James Rajotte cited the auto bailouts, the Economic Action Plan and the Capital Cost Allowance program for manufacturers. "That's hardly ignoring manufacturing," Rajotte told me. He had done yeoman work for the party and was respected even by opposition critics. But on being overlooked yet again for a cabinet post as the PM turned to the likes of Pierre Poilievre in the lead-up to the election, Rajotte announced he was leaving politics. The Prime Minister also lost his Industry Minister, James Moore, who cited family reasons for stepping down.
With economic pressures piling up as 2015 began, Harper tried to turn some of the public focus away from the economy to the management of the terror file and to sabre-rattling abroad.
On the economy itself, he was not for turning. While economists suggested stimulus was needed for growth and while the Bank of Canada chimed in with rate cuts, team Harper held to a lean approach and pounded the airwaves in defence of it. And he could indeed point to some good markers: interest rates the lowest in many decades, inflation way down, unemployment below the average of the last 30 years, new free trade deals, middle-class incomes stable, a budget close to balance and taxes way, way down.
To Goodale, the record didn't sound so good. Under nine years of Conservative rule, job creation, he noted, was a mere half of what it was under the last nine years of Chrétien/Martin governments. The Liberals left office with nine straight years of the budget in surplus. There were seven straight deficits under Harper. The national debt went considerably down under the Liberals, considerably up under the Tories. Trade deficits were non-existent under the Liberals, but a common feature under Harper.
What concerned economists like Boothe, Drummond and McGill's Christopher Ragan was the long run of low growth, the continuing economic stagnation. Should the below-2% growth rate persist, there were a lot of emerging economies, they said, that could pass Canada by. Jobs would be harder to come by. Living standards would languish.
There are no easy solutions. "Our level of productivity is low relative to everyone else and our growth rate is one of the worst in the developed world," said Drummond. "It's not obvious how you tackle these problems." Ragan agreed, adding that the deficit obsession didn't make sense in a low-growth environment. Whether the budget was a few billion in surplus or deficit was "frankly immaterial," given that the debt-to-GDP ratio was in very good shape. Without a change of pattern, he was not optimistic the country could find its way out of the trough in the years to come.
Harper's "stay the course" rhetoric was mocked by Liberal Leader Justin Trudeau. He pointed out that "the course we're on has led us back into recession." The line had some bite. The opposition parties spotted vulnerability in Harper's economic armour. In response, he made an extraordinary move. Recent election campaigns had hewed close to the legislated miniumum of 36 days in length. Harper more than doubled the 2015 clash to 11 weeks. We're in the midst of the longest election campaign in 143 years.
No one was fooled as to the reason why. The Conservatives' purpose was to maximize, with their superior financial resources, their marketing advantage. The longer campaign would allow them to rack up the type of spending on a breed of attack ads and self-promotion spots that had never been seen north of the border.
They were confirming Goodale's postulate. Policy was secondary. It was primarily about marketing. You spin to win.