As G7 finance ministers ponder the economic choices facing the world, all of them are no doubt thinking about domestic political consequences too. For Canada's Jim Flaherty, this next budget may be the most challenging one of his career to date.
The Prime Minister and the Finance Minister had been signalling they are anxious to unwind the stimulus spending programs that, alongside vaporizing tax revenues, took the country to the largest deficit we've ever seen. In January the signal to voters appeared to be "brace yourselves." More recently their line seems to be more like "we've got your backs."
The public might have accepted draconian spending cuts if that's what emerged in the next federal budget, but if so, it would be with scepticism, and not only from the left side of the spectrum. Across the country, Canadians are pretty evenly split on the merits of continuing stimulus spending to create jobs or controlling it to get us back to balanced budgets.
Choices of this type commonly reveal regional and partisan divides, but today is different, as the attached table shows. Sharp spending cuts would risk alienating roughly half of Conservative voters. Failure to rein in the deficit will make the other half anxious.
But if the politics of these choices are tough for Stephen Harper and Jim Flaherty, they aren't a slam dunk for Michael Ignatieff either. If he rails against spending cuts, almost half of his supporters will wonder if he cares enough about balanced budgets. If he tries to regain the upper hand by criticizing the government for spending too much, he risks the other half.
Alberta is traditionally home to Canada's most rock-ribbed fiscal conservatives, with Quebec and Atlantic Canada at the opposite end of the spectrum. But these differences are unusually muted at the moment. Finally, a too-conservative budget risks greater alienation among women, a hard choice for Mr. Harper to make, given the importance of women to his hopes of a broader, bigger coalition.
All in all, a recipe for one of the more high-stakes budgets, requiring thoughtful and persuasive leadership from all sides, and suggesting an audience more attentive and anxious than has been the case in years.
