There has not been a great Conservative finance minister in modern times. All the great finance ministers, from Walter Gordon to Paul Martin, have been Liberal.
But Jim Flaherty, who has been in charge of the purse strings for five years, through good times and bad, can lay fair claim to at least being a successful Conservative finance minister.
Now he is in the final stages of preparing not one, but two budgets, to be delivered March 22. The goal of the first one is to exploit Canada's global comparative advantage as it emerges from recession.
The goal of the second is to get the Conservatives re-elected. We can only hope the second budget doesn't too badly undermine the first.
Compound interest isn't left wing or right wing. It just is, and it will wreck the finances of any government that ignores it. Paul Martin got that message through to Canadians in the 1990s, making the job of every subsequent finance minister much easier.
American and European governments struggle to come to grips with crippling deficits, terrified of voter backlash. But in Canada, at least at the federal level, governments are punished if they don't keep the books balanced.
That is why, compared with other countries, Canada's debt situation is eminently manageable. According to the Economist magazine – which last year calculated the combined government, corporate and personal debts of nations – Canada's aggregate debt represents 259 per cent of gross domestic product. That's better than Germany (286 per cent) or the United States (296 per cent) and vastly better than Britain (466 per cent) or Japan (471 per cent), which is why the Japanese and Britons are among the most downhearted people on Earth.
In fact a 2010 Ipsos Reid poll that measured consumer confidence around the world showed Canadians vying with the Chinese and Indians in their sunny optimism about the future, a stark contrast to the dire pessimism the poll found in Europe and the United States.
Maybe they should add a second C to the emerging markets known as the BRIC countries. Maybe it should be Brazil, Russia, India, China and Canada.
While the federal books are in comparatively good shape, personal and provincial debt are problematic. The Conservatives are combating the former by tightening mortgage-eligibility requirements. They should combat provincial debt — which is effectively guaranteed by the federal government — by making federal transfers contingent on deficit reduction, just as if Ottawa were the International Monetary Fund.
But that is too politically dangerous. So Mr. Flaherty will focus on getting the federal books into balance by 2015, while counting on voters to punish provincial governments that refuse to bring their deficits under control.
The greatest danger to a sound budget is political calculation. The Conservatives should ignore the NDP's demand for home heating oil subsidies, which would distort the market. Why not go all the way and combat rising food costs by subsidizing bread?
NDP demands and Conservative inclinations may coincide, however, on the pension front. Mr. Flaherty has sounded sympathetic to the idea of improving the Old Age Security supplement for low-income seniors.
We should also expect a good-news surprise: some bauble that will be made possible thanks to higher-than anticipated revenues in 2010.
The bauble will make little budgetary sense. But with an election almost inevitable, the bauble is almost inevitable too.
The Conservatives should be reducing the size and cost of government by aggressively chopping away at federal programs that have outlived their usefulness or that never worked well in the first place.
But all the evidence suggests Treasury Board President Stockwell Day will settle for savings through attrition. There is simply no political upside to going to war with the public service.
Despite these reservations, Mr. Flaherty deserves credit for managing the stimulus program that boosted the Canadian economy during the recession and that provided valuable improvements to infrastructure, with apparently a minimum of waste and pork barrelling. Now he has a solid plan to put the federal government back in the black.
Who knows: posterity may one day bestow on him the title of the first great Conservative finance minister.
But let's not forget: Canadians are in a good mood right now because our resource sector is humming, based on orders from the emerging Asian giants.
And it's the Liberals who put the country's finances on a sound footing and who prevented a financial crisis by not letting the banks overreach.
Just don't expect any Conservative finance minister to admit it.